Exclusive-Russia’s Lukoil lends Socar $1.5 billion in deal to supply its Turkish STAR refinery –sources

By Dmitry Zhdannikov

LONDON/MOSCOW (Reuters) – Private Russian oil producer Lukoil will lend Azeri state oil firm Socar $1.5 billion as part of a broader deal that will allow Socar’s 200,000-barrel-per-day Turkish STAR refinery to process Russian crude again, three industry sources familiar with the deal said on Thursday.

The deal will give Lukoil another customer in close proximity to Russian ports after most European refiners stopped importing its crude to comply with European Union sanctions imposed after Moscow launched what it calls a “special military operation” in Ukraine in 2022.

Turkey has not imposed sanctions on Russia and continues to import Russian oil and gas.

The STAR refinery, however, had to cut Russian crude imports this summer due to complications arising from international financial restrictions on business with Moscow.

The refinery decreased imports of Urals oil earlier this year before completely suspending purchases in August-September, replacing it with Kazakhstan’s KEBCO oil which is of a similar quality and still loaded from Russian ports, according to LSEG Eikon data.

STAR purchased an average of 100,000 barrels per day (bpd) of Urals in 2022 but below 50,000 bpd so far this year, LSEG data shows.

Lukoil will start delivering Urals to STAR from October and is expected to supply some 100,000 bpd, equivalent to half of the plant’s capacity, the sources said.

Three tankers sourced by Lukoil – Azure Celeste, Ocean Faye and Sea Fidelity – are heading to Turkey from Primorsk after each loading 100,000 tonnes of Urals at the end of September and early in October, LSEG data shows. The tankers are the first shipments under the new supply deal, one of the sources said.

Lukoil will also provide Socar with a $1.5 billion loan, the sources said. Socar has borrowed heavily to build STAR over the past decade.

Neither Lukoil, Socar nor STAR responded to requests for comment. The sources did not know the duration of the supply deal or the loan terms.

Lukoil has been subject to some U.S. sanctions on the Russian energy sector since 2014 but has avoided the harsher measures imposed on its peers since 2022. The company’s trading arm Litasco still supplies oil to its EU refineries in Bulgaria and Romania and has offices in Dubai and Geneva.

STAR, commissioned in 2018, was designed to primarily refine sour oil like Urals or Kirkuk. Since cutting imports of Russian oil, it has relied on Kazakh, West African and Iraqi oil grades, according to LSEG data.

(Reporting by Dmitry Zhdannikov in LONDON and Reuters reporters in MOSCOW, additional reporting by Nailia Bagirova; Editing by Kirsten Donovan)