Klesch deal on Milford Haven refinery annulled

(Recasts lead with Murphy statement on deal annulment, adds background)

LONDON, Nov 4 (Reuters) - The sale of the Milford Haven refinery and terminal assets to Klesch Refining Limited has been cancelled, according to a statement by Murco Petroleum, a subsidiary of the U.S.-based Murphy Oil Corporation (NYSE: MUR - news) .

"The parties are not engaged in further discussions," the statement added.

Sources familiar with the matter said earlier on Tuesday that Gary Klesch and Murphy Oil had extended a deadline to later this week to negotiate the U.S. oil entrepreneur's purchase of the Milford Haven refinery in Wales for an undisclosed amount.

One source said that an Oct (HKSE: 3366.HK - news) . 31 deadline had been missed and that an announcement on the future of the plant would be made this week. The 135,000 barrel per day refinery employs about 450 people and refines gasoline, diesel, fuel oil, jet fuel, LPG and propylene.

The European refining industry has suffered from years of negative profit margins and faces competition from a surge of U.S. products following the U.S. shale boom.

Some players, however, have seen opportunities to snap up struggling refineries.

The Western Telegraph reported on its website that refinery staff were emailed on Friday evening to say the sale would not go ahead according to the planned timing and that the deadline had been extended to Thursday.

Klesch declined to comment.

Murphy has been trying to sell the plant for more than two years. Klesch agreed in July to buy it, but the deal is contingent on a combination of government support and private financing from banks.

A second source said the delay was due in part to concerns that a proposed 100 million-pound ($160 million) loan guarantee from the Welsh government could contravene European Union state aid rules. (1 US dollar = 0.6250 British pound) (Reporting by Simon Falush, Ron Bousso and Anupam Chatterjee; editing by Jane Baird and Alan Crosby)