LITHUANIA: PKN Orlen may seek alternative oil supplies for Mazeikiu after Russia cuts crude oil flow

Record ID: 344064

  • Title: LITHUANIA: PKN Orlen may seek alternative oil supplies for Mazeikiu after Russia cuts crude oil flow
  • Date: 10th August 2006
  • Summary: (CEEF) VILNIUS, LITHUANIA (AUGUST 4, 2006 ) (REUTERS) LITHUANIAN MINISTRY OF ECONOMY BUILDING LITHUANIAN MINISTRY OF ECONOMY SIGN
  • Embargoed: 25th August 2006 13:00
  • Keywords:
  • Location: Lithuania
  • Country: Lithuania
  • Topics: International Relations,Energy
  • Reuters ID: LVACV8HSMMS19PNUO00DP5JAEXP7
  • Story Text: Lithuania met Polish oil company PKN Orlen on Wednesday (August 9) for talks on the future of the Mazeikiu oil refinery after Russian crude oil deliveries ceased due to pipeline damage near Belarus.
    PKN Orlen's Vice President Cezary Filipovich told reporters after the meeting the company was determined to complete its purchase of its 85 per cent stake from YUKOS despite the possibility of difficulties with supply.
    "I told the minister that the accident and subsequent problems with the crude oil supply to Mazeikiu Nafta will not influence our position. We will try to give as soon as possible the approvals (from EU authorities) and we would like to finish the deal (buying shares) as soon as possible," said Filipovich.
    YUKOS sold Mazeikiu Nafta to Poland's PKN Orlen after rejecting rival Russian bids.
    PKN Orlen, the largest fuel retailer in Eastern Europe, was quick to offer its assistance and said that the latest development will have no bearing on their decision to take over the refinery.
    PKN Orlen signed agreements for the purchase of some 85 percent of Mazeikiu Nafta and is now waiting for approval from the European Union.
    While Lithuanian supplies of crude oil were cut off, Belarus' Nafta chemical refinery, which is located on the same spur as Mazeikiu's Nafta, was still receiving its scheduled supplies.
    A failure to resume supplies soon would hurt the credibility of Russian pipeline operator Transneft, Filipowicz added, and mentioned that such situation could incline Russia's clients to diversify their oil supplies, which could hurt Russian oil companies.
    "Questions about the reliability of this company (Transneft) are being raised, because the question of the supply of crude oil is not only for the Mazeikiu Nafta refinery, but for other refineries in Europe, as well," said Filipovich.
    "Refineries in Europe could start looking for alternatives crude oil suppliers in this situation. And that (researching of alternatives supplies of crude oil) will not be good for the oil export companies in Russia," he added.
    Lithuanian Economy Minister Vytas Navickas said he hoped the supply of crude oil to the refinery via PKN Orlen would be effective in the future.
    "Given that they (PKN ORLEN) have a crude oil supply system already, I think that this system will be effective in future, and "Mazeikiu Nafta" will be put in this system. It's the centre for the crude oil supply (in PKN ORLEN) and it is not important which refinery: in Mazeikiai or in Czech Republic or in Poland buys crude oil. Also, there are possibilities to divert the crude oil supply in various directions, independent of situations and I hope that this system will work effectively in future," he said.
    Mazeikiu Nafta is the largest enterprise in the Baltics and accounts for some 10 percent of Lithuania's gross domestic product. The throughput of the Lithuanian refinery stands at 830,000 tons of oil and it planned to process 730,000 tons in August.
    PKN is likely to close the transaction of purchasing a majority stake in Mazeikiu from Lithuania and from Russian Yukos in Q1 2007.
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