Kazakhs cut deal with Moscow, continue to lobby Vilnius

  • 2005-12-21
  • Staff and wire reports
VILNIUS - KazMunayGaz, the Kazakhstan state-run oil company aspiring to buy into Mazeikiu Nafta, has claimed to have reached an agreement with Russia on the supply of Kazakh crude to Lithuania, the Lietuvos Zinios daily reported this week.

"Russia's energy ministry has approved the transit of 4.2 million tons of crude for the first quarter of 2006," Dias Suleimenov, CEO of KazMunayGaz Trade House, said.

He added that the agreement was the best proof that the plan on the transit of 12 million tons of Kazakh crude via Russia in 2006 would be fulfilled.

Last month it was reported that Transneft, Russia's pipeline monopoly, had cancelled its agreement with KazMunayGaz, signed in September. No reasons were cited for the move, but for Lithuanian officials, including Prime Minister Algirdas Brazauskas, the development was a frightening portent as the government attempts to find a new strategic investor for the oil refinery, Lithuania's largest enterprise.

The Kazakh company aims to submit its final binding bid on the purchase of 53.7 percent in the sole Baltic oil refining and transportation complex in mid-January after a thorough evaluation of the complex's technical and financial state.

Advisers to the Kazakh company paid a working visit to Mazeikiu Nafta last week.

KazMunayGaz has been lobbying Vilnius intensively in an effort to win over skeptical politicians who fear a repeat of the Williams International debacle several years ago when Russian pressure forced the U.S. company out of the refinery.

"Our advantage is that we have crude oil, which we are exporting. We also have the possibility of exchanging crude with other companies," KazMunayGaz CEO Uzakbay Karabalin was quoted by the Lietuvos Rytas daily as saying. "A trading house owned by KazMunayGaz is already involved in crude exchange operations. We can supply our oil to a customer in the Black Sea region and receive it from other customers elsewhere in the world. So, we can offer flexible supply solutions."

Kazakh officials have reportedly placed the highest bid 's $1.2 billion 's for the refinery with officials from Yukos, the Russian company that owns a majority stake in the refinery. They have also promised to invest $400 's 600 million in the refinery, the only one in the Baltics, and even promised to consider cooperating with Lithuania in some upstream operations in Kazak-hstan.

The company currently lacks refinery and retail capacity and desperately wants exposure to this side of the market.