Friends in need are friends indeed

Apr 20, 2000
By Peter J. Mladineo

This was followed by a report in the Lithuanian daily Lietuvos rytas claiming that a possible joint venture regarding the sale of oil was in the works for the two oil interests. While this report was denied by Mazeiku Nafta and LUKoil, the largest Russian oil company and chief supplier for the Lithuanian oil interest, the agreeable spirit of the London meetings puts a more optimistic spin on long negotiations that have often resulted in disagreements and competitive acrimony.

"I would say that a good understanding was reached by all the parties and they will be meeting again in the first half of May," said Alan Henderson, Mazeikiu Nafta spokesman.

The players are now talking confidently about the possibility of a 10-year supply arrangement between LUKoil and Mazeikiu Nafta.

"Everybody is looking for an instant breakthrough, but what we're looking for is an agreement for a long-term, 10-year supply of crude. It's a case of all sides wanting to make absolutely sure that positions are clear. We've come away from a meeting last week with a much deeper, much better understanding of each other," Henderson added.

The good sentiments were echoed at a joint press conference with the leaders of Mazeikiu Nafta and LUKoil.

Ivan Paleichik, chairman of LUKoil Baltija, the Lithuanian-based daughter company of LUKoil, promised a supply deal this year.

"We spoke like two old partners about how to combine our interests in this market. We will make a 10-year agreement this year."

Paleichik said that LUKoil has all but scrapped its desire to buy shares of Mazeikiu Nafta. If the supply deal happens, Mazeikiu Nafta would become the first refinery receiving LUKoil products in which LUKoil did not own a stake.

"Negotiations moved more to a positive direction and both sides made some concessions," said Aleksandras Juozapaitis, spokesman for Lukoil Baltija. Mazeikiu Nafta was able to convince LUKoil Baltija to sell oil to the concern at $1 less per barrel. Previously, oil prices had been a major sticking point in the negotiations.

Another mini-agreement was made: LUKoil will ship 375,000 tons of crude to Mazeikiu Nafta in April.

Still, the London meetings may only constitute the beginning of a new phase in improved relations between Mazeikiu Nafta and LUKoil.

"The main reason for the meeting was so that all parties could get to know each other better, understand the general areas of interest on all sides so that we have a better understanding of where everybody is coming from and where everybody is going to go," said Henderson. "This is all premised on the idea that with Lukoil we already have a good relationship in product off-take and marketing. We were setting the scene for taking things forward."

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