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Lukoil to Buy Stake Dutch Refinery & Blocks Valero

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    LUKoil to Buy Stake in Dutch Refinery
    22 June 2009By Melissa Akin, Tom Bergin / Reuters
    LUKoil will buy a stake in a Dutch refinery from France’s Total, gaining a foothold in northwest Europe and blocking a bid by the largest U.S refiner, Valero, to enter the region.

    Friday’s deal, which expanded the company’s refining presence in Western Europe, coincided with a state visit to the Netherlands by President Dmitry Medvedev.

    The move was blow to Valero’s efforts to win a stake in Europe, where it has said it wished to buy refineries and take advantage of cross-Atlantic trading opportunities with its U.S. fleet of plants. LUKoil said it expected to pay about $725 million, matching the price that Valero was expected to pay Dow Chemical for the stake.

    Total, which has won positions in some of the most prized oil projects on former Soviet territory, hailed a new era in its relationship with LUKoil, which is 20 percent owned by ConocoPhillips.

    “Russian crude oil, for which LUK-oil is one of the major suppliers, represents one of the main sources of the Vlissingen refinery,” Europe’s largest refiner, which retains a 55 percent stake in the plant, said in a statement. “More broadly, this type of crude oil represents a significant portion for the supply of Total’s European refineries.”

    In Russia, Total holds a coveted stake in Gazprom’s huge Shtokman gas project in the Barents Sea. It is a LUKoil partner in the northern Russian Kharyaga field and in Azerbaijan’s Shah Deniz Caspian Sea gas field.

    Irene Himona, oil analyst at Exane BNP Paribas, said the deal was intended to secure cheaper crude for the refinery.

    “LUKoil is in a position to more or less guarantee crude supplies from Russia, which tend to be cheaper, heavier crudes,” she said.

    European refiners invest heavily to process more Russian crude and benefit from its discount to lighter, sweeter North Sea oil. Russia’s Urals crude was trading at about $70.35 per barrel Friday, compared with $71 for benchmark Brent.

    Total said it had exercised pre-emptive rights to buy Dow’s stake in the refinery, Total Raffinaderij Nederland, and sold it on to LUKoil. A Total spokesman declined to say why the company had engaged in the transaction. Dow Chemical, which has been raising cash through asset sales to help pay down debt, said Total’s move would not affect the amount it was paid or the timing of the transaction.

    The Dutch purchase was LUKoil’s first success after years of failed attempts to acquire downstream assets in northwest Europe, a key market for the crude extracted from its fields in the Timan-Pechora area in Russia’s north.

    It was seen as a potential buyer for Germany’s Wilhelmshaven refinery, eventually bought by ConocoPhillips, BP’s Coryton, ultimately sold to Petroplus, and several plants in the Amsterdam-Rotterdam-Antwerp oil hub.

    LUKoil has invested heavily in a new Arctic terminal at the Barents Sea port of Varandei and even built a special fleet of ice-class tankers to carry its crude oil to northern Europe.

    LUKoil officials have long said they were seeking downstream assets in strategic locations with strong distribution networks. Last year, LUKoil bought 49 percent of Italian refiner ERG’s Isab di Priolo refinery, paying 1.35 billion euros ($1.88 billion) in a deal allowing it to break into the western European refining business and expand its portfolio in the Mediterranean market.


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