Governments from Europe to the Middle East are racing to guarantee that sprawling oil operations of Russian energy giant Lukoil PJSC can continue to function after the U.S. Treasury sanctioned the company and then quashed a key bid for its assets last week.
The second-largest oil company of Russia has an extensive international operation spanning oil fields to refineries and even filling stations. It was sanctioned last month by both the U.S. and UK, allowing for a small window until Nov. 21 to end current dealings with it.
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.
Bulgaria said it was proceeding with a measure that would in effect give the government full control of the country's biggest refinery, with the aim of keeping it operating and preserving jobs. In Finland, several filling stations are running out of fuel because a company owned by Lukoil stopped receiving deliveries, local media report.
Lukoil didn't immediately respond to a request for comment, made outside regular business hours.