(Bloomberg) – Governments across Europe and the Middle East are rushing to ensure the sprawling oil operations of Russian energy giant Lukoil PJSC can keep running after the U.S. Treasury sanctioned the company and then quashed a key bid for its assets last week.
Russia’s second-largest oil company runs a vast international operation that includes oil fields, refineries and filling stations. It was sanctioned by both the U.S. and UK last month with a brief window — until Nov. 21 — to end current dealings with the company.
The problem appeared until last week to have a neat solution, with the energy merchant Gunvor Group having agreed a deal to acquire Lukoil’s international assets. But that process was thrown into disarray on Thursday when the U.S. Treasury called Gunvor the Kremlin’s “puppet.” The trader withdrew from the transaction, adding urgency to efforts to keep the Russian firm’s assets running.
“There’s quite a scramble going on to work out how to handle Lukoil’s overseas assets, particularly since the U.S. Treasury rejected Gunvor’s bid to take them all over,” said Richard Bronze, head of geopolitics at Energy Aspects Ltd., a consultant. “While global crude markets have a decent buffer available to absorb any supply disruptions, the picture is quite different for the refining sector.”
In recent days, the first signs of a pinch from sanctions have begun to emerge.
Lukoil has declared force majeure at an Iraqi oil field that accounts for about one in ten of all barrels pumped in the country while two state companies have taken over operations to ensure the deposit’s output can carry on.
Likewise, Bulgaria took a step toward taking full control of the country’s largest refinery in an effort to keep it running and protect jobs. In Finland, some filling stations are running out of fuel after a company owned by Lukoil stopped receiving deliveries, according to local media.
Lukoil didn’t respond to a request for comment, sent outside normal business hours.
