KazMunayGas Is Said to Be Among Bidders for Lukoil’s Bulgaria Refinery
(Bloomberg) — Kazakhstan’s KazMunayGas National Co. JSC is bidding to purchase the Bulgarian refinery of Russia’s Lukoil PJSC, according to two people familiar with the negotiations.
Litasco SA, the main shareholder of Lukoil Neftohim Burgas AD, and its affiliate have already accepted binding offers from several potential buyers, with KazMunayGas among them, the people said, asking not to be named because the talks are private. The Kazakh state company is discussing financing for the potential acquisition with Vitol Group, the world’s biggest independent oil trader and a major player in Kazakhstan.
Since Russia’s invasion of Ukraine, European refineries have boosted imports of Kazakh crude. They currently buy around 80% of the oil shipped through the Caspian Pipeline Consortium, compared with about half before the war, according to ship tracking data compiled by Bloomberg.
In 2023, Bulgaria decided to ban imports of Russian oil, in line with similar moves across Europe. As a result, the share of crude from Kazakhstan processed in the country grew to around 40%, with the rest coming from the Middle East.
KazMunayGas, which already processes Kazakh crude in its Petromidia refinery in neighboring Romania, expects the sale process to take about a month, one of the people said. The price could be around $1 billion, and even though Litasco is not sanctioned, a condition of the sale is a guarantee that the money won’t be transferred to Russia, the person said.
KazMunayGas, Lukoil and Bulgaria’s Energy Ministry didn’t respond to requests for comment. A spokesperson for Vitol declined to comment.
KazMunayGas’ purchase of the Bulgarian refinery would be positive, according to Wood & Co. analyst Jonathan Lamb.
“There are great synergies in the regional downstream and also for processing its own crude,” Lamb said in a note to clients. The move would benefit KMG because refining margins in Kazakhstan are set by the government, according to Lamb.
The deal would more than double the Kazakh company’s European refining capacity, along with its Petromidia plant, Lamb said. The reported sale price of about $1 billion “looks cheap,” Wood told its clients, adding that the Burgas oil refinery has a residue hydrocracker, commissioned in 2015 following a $1.5 billion upgrade.
Lukoil, Russia’s second-largest oil company, has been considering the sale of southeastern Europe’s biggest refinery and the associated fuel-retail business in Bulgaria since 2023, citing “discriminatory laws and other unfair, biased political decisions toward the refinery.”
Hungary’s Mol Nyrt. is also bidding for the Bulgarian plant, Hungarian Prime Minister Viktor Orban said in December. Mol declined to comment on his statement.
KazMunayGas is seeking support for its bid from the Bulgarian government, arguing that the refinery was designed to process Russian oil of a similar quality to Kazakh crude, the people said. Should its bid be successful, the company says it will provide Kazakh oil to the refinery on the best possible terms, arguing that other proposals can’t offer such stable supply, according to the people.
The Bulgarian government “is monitoring the process closely, but it cannot have a direct involvement in the change of ownership, as at the moment there is one majority private owner,” Energy Minister Vladimir Malinov told reporters on Dec. 23.
KazMunayGas and Lukoil earlier agreed to invest in the development of oil fields in the Caspian Sea. Lukoil also holds a 5% share in the Chevron-led Tengiz oil venture, Tengizchevroil, and a 13.5% stake in Karachaganak Petroleum Operating B.V. in Kazakhstan.
–With assistance from Nariman Gizitdinov, Veronika Gulyas, Slav Okov, Archie Hunter, Rachel Graham and Sherry Su.
(Updates with Wood & Co. comments in the seventh paragraph.)
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