Russian energy giant Lukoil said it plans to resume refining Iranian oil on the Italian island of Sicily.
Lukoil Chief Executive, Vagit Alekperov said his group will now resume processing Iranian oil at the ISAB refinery in Sicily where Russian Urals was used during years of sanctions on Iran.
“At the moment Urals is more expensive than the Iranian oil. Today, we are placing it at other refineries very effectively,” Russia’s Sputnik news agency quoted Alekperov as saying.
Oil from Iran is the best option for the ISAB, because it is designed for 70 percent of heavy oil from Iran and 30 percent of light oil from Libya, he added.
An expected decline in Russia’s crude production and lower oil prices has prompted Lukoil to redirect its operations, dropping some of its costly exploration projects and moving to cheaper places such as Iran.
Early this month, Alekperov met with Iran’s Minister of Petroleum, Bijan Zangeneh who said it was very lucrative for international energy companies such as Total, Lukoil and Eni to invest in Iran.
“Oil production in our region is very low. In Iran, it costs a maximum of $10 per barrel,” Zangeneh said.
Lukoil has yet to return to Iran where it had been a key player before sanctions were imposed and catch up with other key oil companies such as Total which quickly struck up a deal this year to take Iranian crude.
“We are working on studying Iran, there are territories that are attractive to us, there is preliminary agreement,” Alekperov said last week.
“We have two memoranda on zones of interests that we’re analyzing. At this point we’re just analyzing the data. Of course we are interested in returning to the Anaran project that we used to work on with Statoil,” he added.
In January, a National Iranian Oil Company official said his company had signed a deal with Lukoil for two exploration projects in the oil-rich Khuzestan province.
Russia’s second biggest oil producer had an exploration contract dating back to 2003 for Iran’s Anaran block and the company struck oil jointly with Norway’s Statoil at the Azar and Changuleh fields.
Both companies, however, pulled out of the project in 2011 after the US and Europeans intensified sanctions on Iran.
Alekperov has said he had discussed Lukoil’s return to Azar. Another Lukoil official has said the group was also studying geological data so it could take advantage of opportunities in Iran.
Lukoil’s use of Iranian crude instead of Urals is another major boost to Tehran’s bid to regain its market share after the lifting of sanctions.
The country has successfully expanded output to reach its pre-sanction market share, signing new contracts with Asian customers even as Saudi Arabia has tried to undercut Iran’s return.
Iran is already shipping its oil back to Europe after signing a deal in April to sell up to 700,000 barrels of oil per day.