Lukoil urged to keep Sicilian refinery running as talks drag on

(Reuters) - Italy is urging Lukoil to keep supporting its refinery in Sicily until the government brokers a sale, two sources close to the matter told Reuters on Thursday, as looming European Union sanctions against Moscow threaten the plant's survival.

A European embargo on seaborne Russian oil comes into effect on Dec. 5 and the Italian government pledged to rescue the ISAB plant, which accounts for a fifth of Italy's refining capacity and employs about 1,000 workers.

The plant has had to rely solely on Russian oil provided by Lukoil after its creditor banks halted financing and stopped providing guarantees needed to buy oil from alternative suppliers.

As talks to sell the plant to a non-Russian buyer drag on, sources have said Rome is pushing on Lukoil's Litasco, which owns the refinery, to provide oil and financing beyond the December deadline.

Reuters reported last month that Litasco had moved part of it operations to Dubai in an effort to elude sanctions that will soon prevent European and Swiss entities from buying Russian seaborne crude oil.

A third source said the ISAB refinery is not planning to halt operations on Dec. 5, though time is running out. The plant refines about 1 million tonnes of crude a month and would not be able to carry on for long without fresh oil supplies.

State-backed financing to support the refinery is still an option being discussed, but banks remain reluctant to deal with a Russian entity, one of the sources said, despite Lukoil and Litasco not being subject to European sanctions.

A meeting involving refinery and government representatives will take place in Rome on Friday, with unions warning a shutdown of the plant would have devastating effects on one of Italy's most depressed regions.

"We will ensure that the plant remains operational," Industry Minister Adolfo Urso said on Thursday without detailing the government's plans.

Litasco this month rejected a preliminary bid from U.S. fund Crossbridge.

Urso said the government would be ready to use its special powers to block a foreign takeover of the refinery to protect national interests.

Lukoil did not respond immediately to a request for comment. (Reporting by Giuseppe Fonte and Angelo Amante Editing by David Goodman)

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