Midad, backed by Saudi Arabia, signs agreement for sanctioned Lukoil assets
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Enerdealers Editorial
Saudi-backed Midad Energy has signed a term sheet to acquire the sanctioned foreign assets of Russian oil major Lukoil, positioning itself in a high‑stakes contest with U.S. private equity group Carlyle for control of one of the largest energy portfolios put up for sale since Western sanctions were tightened against Moscow.
Saudi-backed Midad’s term sheet
Midad Energy, backed by Saudi investors, signed the term sheet in late January for Lukoil’s foreign assets that are subject to U.S. sanctions. The agreement covers the full package of targeted international holdings and is structured as an all‑cash offer that Midad has committed to place in escrow while the parties seek regulatory approvals, including from the U.S. Treasury’s Office of Foreign Assets Control (OFAC).
People familiar with the talks say the bid is viewed as a high‑stakes strategic move supported by strong political links in Saudi Arabia, underlining growing Middle Eastern interest in acquiring discounted global energy assets affected by sanctions. Neither Midad nor Lukoil has commented publicly on the negotiations so far.
Competing for a $22 billion global portfolio
The assets at stake form a diversified portfolio of upstream and downstream operations spanning Europe, the Middle East, Africa, and the Americas, with an estimated value of around 22 billion dollars. They include refineries in Bulgaria and Romania, a large stake in Iraq’s West Qurna‑2 oilfield, equity interests in projects across Kazakhstan, Uzbekistan, Azerbaijan, Mexico, and parts of Africa, as well as a global network of fuel stations.
Carlyle has separately notified Lukoil of its interest and is exploring a rival bid for most of the same overseas assets, reflecting private equity’s appetite for undervalued energy infrastructure amid sanctions‑driven divestments. Earlier, Lukoil signalled that it would continue talks with multiple potential buyers, keeping the process competitive and allowing room for overlapping offers.
Regulatory hurdles and sanctions constraints
Lukoil and fellow Russian producer Rosneft were brought under expanded U.S. sanctions in October 2025, forcing a restructuring of their international operations and triggering plans to sell foreign subsidiaries to non‑sanctioned buyers. OFAC has issued a series of temporary general licenses that allow companies to negotiate with Lukoil International GmbH and enter into contingent contracts for asset sales, while prohibiting the transfer of funds to Russia and requiring strict compliance conditions.
The latest U.S. license extension authorizes negotiations and provisional agreements over Lukoil’s foreign assets until 28 February 2026, but any actual sale or transfer of ownership will need a specific OFAC authorization. U.S. officials have stressed that any approved transaction must fully sever the divested assets from Lukoil, escrow any payments owed to the Russian parent under U.S. jurisdiction, and avoid providing a financial windfall through upfront value or asset swaps.
Washington has already signalled a tough stance by blocking a proposed purchase of the portfolio by Swiss trader Gunvor, which U.S. authorities characterised as too closely aligned with Kremlin interests, and by declining other structures viewed as inconsistent with sanctions objectives. These decisions underscore the political and regulatory risks faced by both Midad and Carlyle as they seek to structure bids that can withstand scrutiny in an environment shaped by the ongoing war in Ukraine and wider geopolitical tensions.
