Lukoil will rather close the Neftochim refinery in Bulgaria's Burgas than step back in its conflict with Bulgaria's government, Broker Credit Service analyst Andrey Polishchuk has stated.

The conflict between the Bulgarian customs authorities and Lukoil is partially connected with the efforts on behalf of the country's government to take over the fuel market and stop the price hike, according to the analyst.

However, he has pointed out that Lukoil would lose just 1% of its profits if the refinery does not start working again until the end of 2011, Kommersant says.

"Lukoil will not sell at a loss and would rather close the Burgas refinery, as it did with the one in Odessa," according to Polishchuk.

The conflict between the government, the Customs Agency and Lukoil Neftochim escalated Wednesday after the refinery ended up with a revoked fuel production and distribution licence.

As a result, the company was forced to start phasing out capacities and to halt supplies to the market.

The sanctions against Lukoil were imposed after it failed to install the mandatory measuring devices by June 26.

The new equipment is to allow the real-time electronic submission of information to the customs administration about the fuel volumes entering the processing plant and the fuel volumes released on the domestic and foreign markets.

This data is crucial for ensuring control over the payment of excise duty and VAT.

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