LUKoil Completed a deal with Italy's ERG S.p.A.

The company said in a news release that it had paid 600 million euros as the first tranche under a 1.347 billion-euro (excluding inventory) deal. The remaining funds will be paid in another three tranches by late September 2009.

ERG will retain 51%. The transaction also provides LUKoil with an option to increase its stake in the future, the Russian company earlier said.

The agreement on the JV to operate the ISAB refinery complex in Priolo, Sicily, was signed between LUKoil president, Vagit Alekperov, and ERG CEO Alessandro Garrone in Rome on June 23.

LUKoil secured a 400 million-euro loan last week to purchase the refinery. The loan was taken out through LUKoil's subsidiary, LUKoil Finance Limited, at an annual interest rate of 5.9% for a six-month term.

In addition, the company obtained a $280 million loan to finance refinery investment projects.

The ISAB refinery complex is one of the largest refineries in the region and is well positioned to meet the growing demand in Europe for middle distillates, mainly kerosene and diesel fuel. The refinery includes two sites united by a pipeline system and integrated in a single refining unit with total annual refining capacity of 16 million tons (117 million barrels).

Author: Ksenia Kochneva