LONDON (Reuters) - European energy firm Varo Energy is in talks to acquire Preem's two Swedish refineries in a bet on growing demand for low-carbon biofuels, four industry sources told Reuters.

Varo has been expanding fast in Europe's refining and fuel trading in recent years. The company is backed by private equity giant Carlyle Group ( CG ) and the world's biggest trading house Vitol, which has enjoyed record profits in recent years.

Varo could buy the Gothenburg and Lysekil plants from Corral Petroleum Holdings, which owns Preem, the sources said.

A Varo spokesperson declined to comment. Preem declined to comment.

The sources said the value of the possible deal wasn't clear as the downturn in Europe's refining margins has made transactions more complicated, one of the sources said.

Preem's adjusted earnings fell 15% to $1 billion in the first nine months of 2024, but plunged 94% to $28 million in the third quarter alone.

Varo already has stakes in refineries in Germany and Switzerland and is expanding in sustainable fuel and trading. It plans to invest around $3.5 billion between 2022 and 2026, with two-thirds committed to sustainable energies.

Preem aims to increase production of renewable fuels to 5 million cubic metres by 2035, the company has said. It also has a network of over 500 petrol stations in Sweden.

($1 = 10.8499 Swedish crowns)

(Additional reporting by Ron Bousso and Dmitry Zhdannikov. Writing by Ron Bousso. Editing by Mark Potter)