"Lukoil submitted to Total a binding purchase offer for these shares (45%), which constitutes the development of a new partnership between the two companies," Total said in a statement.
The French company highlighted the importance of bringing in a major Russian oil producer like Lukoil as a partner, noting that Russian crude is one of the main feedstocks for the Vlissingen refinery, and also makes up a big proportion of the oil supply used at Total"s other European refineries.
Total owns the remaining 55% of the refinery at Vlissingen, also called Flushing, in the Netherlands.
Lukoil said the deal was expected to close before the end of this year, subject to necessary approvals.
LUKOIL EAGER TO EXPAND DOWNSTREAM
Lukoil, which has been trying hard, but with mixed success, to develop a downstream portfolio in Europe in recent years, said the transaction was part of the development of a broader strategic partnership with Total.
"A new downstream acquisition in Western Europe organically fits in our company"s strategy aimed at increasing oil refining capacities located in the immediate proximity to the markets where products with higher added value are sold," Lukoil president Vagit Alekperov said in a statement.
In 2007, Lukoil allocated up to $16 billion for potential downstream mergers and acquisitions in a bid to expand its downstream portfolio and double its refining capacity to 2 million b/d by 2017.
Outside Russia, Lukoil has refining interests in Ukraine, Romania and Bulgaria, but most of its previous attempts at downstream expansion farther west have failed.
In recent years Lukoil has either shown interest in or attempted to buy refineries in Greece, Turkey, Germany, the UK, the Netherlands, the Czech Republic and Lithuania, as well as the US.
But all these efforts came to no fruition, and its first successful refining acquisition in western Europe was concluded in 2008 when it took a 49% stake in ERG"s 320,000 b/d ISAB refinery in Sicily for Eur1.347 billion.
The Vlissingen deal was announced at the same time as a visit to the Netherlands by Russian president Dmitry Medvedev.
SETBACK FOR VALERO
The Russian company"s new deal with Total will come as blow to Valero, which had announced its planned acquisition of the Dow stake in the refinery in May this year.
"Total"s action clearly confirms our assessment that the TRN refinery is a world-class facility and our purchase price was attractive," Valero chairman and CEO Bill Klesse said in a statement. "Although we are disappointed about this result, we will continue to seek opportunities to acquire high-quality assets at attractive prices."
The refinery has a crude capacity of about 147,000 b/d but can also process other feedstocks, and Valero said in May its total capacity was 190,000 b/d.
The US-based refining giant had described the Vlissingen deal at the time as "an exceptional entry point" for Valero in the European refining sector, where it currently has no assets.
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