Italy issues 'comfort letter' to stave off Lukoil refinery's shutdown
(Reuters) - Italian authorities have provided Lukoil with a "comfort letter" to help a refinery it owns in Sicily get bank financing to buy non-Russian oil and remain operational, two people familiar with the matter told Reuters on Friday.
The move is aimed at staving off worries that Lukoil's ISAB refinery, which accounts for around 20% of Italian refining capacity, stops working due to an embargo on seaborne Russian oil that comes into force on Dec. 5.
ISAB has been forced to rely solely on Russian oil after creditor banks halted financing and stopped providing guarantees needed to buy oil from alternative suppliers.
Though Lukoil has not been hit by international sanctions against Russia, ISAB's suppliers and creditor banks have been wary of dealing with a Russian entity.
The letter says that Lukoil should not be restricted in its operations given that it has not been sanctioned, in a bid to reassure ISAB's suppliers and creditors.
The government's safe pass comes from the Financial Security Committee, which is run and chaired by the Italian Treasury and is responsible for enforcing sanctions against Russia.
Lukoil was not immediately available for comment.
The ISAB plant directly employs some 1,000 workers in the southern island of Sicily and unions welcomed the government's move.
"The plant is an important pillar of the local economy and it's reassuring to know that it can keep functioning," Fiorenzo Amato, a local leader of the CGIL union, told Reuters.
With the letter, the new government of Prime Minister Giorgia Meloni tries to buy time to agree the sale of the plant. U.S. Crossbridge Energy Partners, an investment platform specializing in energy transition projects, is among parties interested in buying the refinery.
Antonio Nicita, a senator with the opposition Democratic Party who had urged the government to act swiftly, said the letter would allow banks to open credit lines to ISAB.
"I hope the banks will immediately provide funding to ISAB," Nicita said, adding the government should also consider taking control of the plant.
ISAB discussed the issue with government authorities in an Oct. 17 meeting, which included representatives from Intesa Sanpaolo and UniCredit banks, with state-owned export credit agency SACE also present.
Talks centered around the possibility of state-backed financing from Intesa and UniCredit with guarantees from SACE.
(Additional reporting by Angelo Amante in Rome and Francesca Landini in Milan; editing by Valentina Za and Tomasz Janowski)