Italy could nationalise Lukoil refinery, sources say

Italy may consider temporarily nationalizing Lukoil’s ISAB refinery, according to two government sources. This is in response to sanctions imposed on Russian oil.

One source said that Giancarlo Giorgetti, Industry Minister, plans to make the nationalization of ISAB an option at Thursday’s meeting of the Italian cabinet.

Giorgetti’s office stated that the nationalization of the ISAB refinery is not on the current agenda, but there was concern about the “social implications for the area” which was being investigated by the ministry.

ISAB, Italy’s largest oil refinery, was able to import 30-40% from Russia. The rest came from international markets.

One of the consequences of Russia’s invasion in Ukraine is that ISAB was forced to source almost all its crude oil from Russian owner Lukoil (LKOH.MM) because international banks have stopped providing credit.

Lukoil is currently not subject to sanctions.

Claudio Geraci, ISAB Deputy General Manager, stated to Reuters that because of lack of credit at the international level, he couldn’t purchase crude oil from other countries.

The company that owns the refinery employs around 1,000 people. It is part of the Swiss-based trading group and supply chain Litasco SA. They sell 89%.

An official of Lukoil-controlled Litasco could not be reached immediately for comment.

ISAB, which is responsible for around 22% of Italy’s overall refinery capacity, is located in Sicily. Its closure would have a devastating impact on jobs and growth in the region.

Geraci stated that banks cutting credit means ISAB companies have to wait longer for their payments.

Fiorenzo amato, a local representative at the CGIL union trade union, stated that there is currently no disruption, but admitted that the plant could face trouble if Russian oil imports stop.

Înaintea the COVID-19 pandemic, Italy’s energy needs were met by 10.6 million tonnes of ISAB’s annual output, which was 13% of its total.