ERNEST SCHEYDER AP Energy Writer - June 19, 2009

NEW YORK (AP) — European oil giant Total S.A. blocked Valero Energy Corp. from buying Dow Chemical Co.'s stake in a Dutch refinery on Friday, instead choosing Russia's Lukoil Co. for the lucrative venture.

The move dents San Antonio, Texas-based Valero's plans to grow in Europe, a market consistently hungry for diesel, jet fuel and other refined products.

While the sale to Valero was first announced last month, it still needed Paris-based Total's approval, which was thought by many to be a foregone conclusion.

Yet Total — which owns 55 percent of the Vlissingen, Netherlands, refinery, compared with Dow's 45 percent — opted to bypass Valero in favor of Lukoil, already a major supplier to the facility.

Both Dow and Valero were aware Total had a right of first refusal, Dow spokesman Bob Pliska said.

Financial terms of the deal — roughly $725 million — remain the same, which is positive for cash-strapped Dow Chemical.

Dow bought rival Rohm & Haas earlier this year for more than $16 billion. Dow had tried to scuttle the deal, citing the recession and a separate failed joint venture. But Rohm sued, arguing that its contract was ironclad. Rohm ultimately prevailed, but the buyout added roughly $9 billion in debt to Dow's balance sheet.

Since the deal closed on April 1, Dow has been moving aggressively to cut costs, save cash and pay down debt by laying off thousands of workers and selling assets.

For its part, Valero said it will continue to poke around for other investment opportunities.

"Although we are disappointed about this result, we will continue to seek opportunities to acquire high-quality assets at attractive prices," Chairman and CEO Bill Klesse said in a statement.

Shares of Valero rose 43 cents to $17.85 in premarket trading, while shares of Total rose 70 cents to $54.80. Dow shares closed Thursday at $16.15 and Lukoil closed Thursday at $48.03.