Murphy Oil agrees to sell UK's Milford Haven refinery to Klesch-MP

(Updates with Murphy response in 3rd and 4th paragraphs.)

LONDON, June 29 (Reuters) - Murphy Oil has agreed to sell its Milford Haven refinery in south west Wales to oil entrepreneur Gary Klesch, the local member of parliament told a regional newspaper.

"I am delighted with the breakthrough in negotiations over the sale of the Murco oil refinery in Milford Haven," Stephen Crabb, MP for the area where the refinery is located, told the Western Telegraph.

A Murphy Oil spokesman said a deal had yet to be signed.

"Murphy feel that solid progress has been made in negotiations, but caution that substantial work remains to done. If the past has taught us anything, it is that these sales are especially challenging and we are not assured of success," a Murphy spokesman said.

The plant is currently not buying crude oil, but recycling oil products to keep it operational.

Murphy started a 45-day consultation period in April with staff and unions, which it has left open since it lapsed in May.

A source told Reuters on Thursday that any deal would likely value the plant at close to zero, but any sum paid for the plant would include oil inventories.

The Klesch Group is a global industrial commodities business, with three divisions specialising in the production and trading of chemicals, metals and oil.

Nobody at Klesch was immediately available to comment on Sunday.

The roughly 500 workers at the plant will be relieved if the deal does go through, as it was widely thought the plant was heading for closure. Refineries in Europe are being squeezed by high crude prices and low refining margins due to weak demand for fuel. (Reporting by Simon Falush; editing by Keiron Henderson)