Romania: Authorities fear that Lukoil will leave Romania

, SEE Energy News

The authorities fear for the future of Petrotel refinery, which is controlled by Russian giant Lukoil, given that the company owns refinery in Bulgaria, in the port of Burgas, whose production potential is nearly equal to the entire processing capacity in Romania, and it is much easier to transport raw materials there than to Ploiesti. Besides, officials fear that refineries will become uncompetitive compared to the Middle East, especially because of the EU regulation on environment.

This fear is expressed in the working session report “Crude oil, oil derivatives and natural gas” within the process of drafting the Energy Strategy by the Ministry of Energy, as well as in the Minutes of the discussion held at the session.

The company Lukoil Romania is already importing oil from Iran for the needs of the refinery in Ploiesti. The question is whether in the future the refinery in Bulgaria will become more attractive for processing oil from Iran and will Lukoil continue to deliver crude oil into central Romania for the needs of the relatively small refinery or will it focus on the plant in the Bulgarian port of Burgas, states the Minutes.

Refinery Petrotel Lukolil in 2015 made net profit of EUR 3.35 million, after accumulating losses of EUR 752 million over the years and found itself facing the charges for tax evasion, money laundering and misuse of company loan, and damage caused is estimated to be over EUR 1.7 billion.

The risk that Lukoil will leave Romania has been a topic for discussion for a while now.

Earlier this year the Austrian Investment Fund AMIC Energy Management purchased Petrom and reached an agreement with Lukoil on taking over 230 gas stations in Poland, Lithuania and Latvia. The Agreement was signed with the Lukoil branch registered in the Netherlands, Lukoil Europe Holdings BV, which is also the majority owner of Romanian refinery Lukoil Petrotel.

After closing down several refineries, Romania has the processing capacity of about 12 mt annually, in four refineries, out of which three with the high utilization level. Domestic demand is about 9 mt annually, therefore the surplus is exported into the countries in the region.

In the medium and long term there is the risk of the refinery becoming uncompetitive compared to the refineries in the Middle East, states the report.

The report in this phase does not state strategic position of the competent Ministry.

The study conducted by the Joint Research Center (JRC, European Commission research service) in 2015 shows that in the period 2000 – 2012 the deficit compared to the average profitability of the competition amounted to 2.1 dollar per barrel. EU has relatively high energy expenses compared to the Middle East, Russia and USA, because of the high share of diesel in transport sector and strict environmental regulations. The impact of the number of strict regulations in the processing industry is estimated to be 0.5 dollars per barrel, representing the quarter of the mentioned profit loss.

Meanwhile, Romania remains the important exporter of oil derivatives, with the export more than twice the volume of import, transmits