State prepared to take over refinery

  • 2005-01-19
  • By TBT staff
VILNIUS - State officials have said that they are prepared to take over a controlling stake in Mazeikiu Nafta as a way of ensuring the continued operations of the refinery and that the company, Lithuania's largest taxpayer, does not fall into the hands of an undesirable investor. It was also reported last week that Mazeikiu Nafta was not receiving crude oil from its current majority owner Yukos, the crippled Russian oil major.

The Lietuvos Rytas daily reported that Yukos, which was recently stripped of its core production asset, Yuganskneftegaz, was currently selling all its crude to the domestic market since it lacked the working capital to pay export duties.

What's more, a company manager told the Lithuanian paper that Samaraneftegaz, another production subsidiary, was unable to fulfill its contractual obligation to supply 4.8 million tons of crude to Mazeikiu Nafta.

The paper reported that the refinery did not receive a delivery from Yukos for over a week. A shipment of around 100,000 tons was delivered to the refinery a week ago, after which further deliveries ceased until Jan. 13.

The company now receives 50,000 tons of oil daily.

Also, the paper wrote that it was unclear if Yukos would be able to resume supplies in the first quarter.

In the meantime, Mazeikiu has been importing from other Russian companies, and Yukos is coordinating the deliveries. Giedrius Karsokas, head of Mazeikiu Nafta's information office, told the Baltic News Service that crude oil deliveries are being coordinated by Yukos. He refused to disclose which companies were involved. "Crude oil is being supplied to the plant, and we are working at full capacity. Perhaps there will be no output records in January, however," he said.

Mazeikiu Nafta said it was targeting 9 million tons of refined oil this year, while another 5 million tons of crude is scheduled for export via the company's terminal in Butinge.

Lithuanian officials are increasingly worried by the situation, and on Jan. 17 the Economy Ministry said it would attempt to buy a 10 percent stake in Mazeikiu Nafta for $75 million via a new share offering. This would give it majority control over the company.

"We have submitted the proposal, and Yukos agreed to consider it," Economy Minister Viktor Uspaskich told the Baltic News Service after talks with Mikhail Yelfimov, president of Yukos RM.

"It means that the option will be transferred to the government, which could purchase 9.72 percent in new shares of the company and [thus] control 50 percent plus one share," said Nerijus Eidukevicius, deputy economy minister and Mazeikiu Nafta's chairman.

This outcome would benefit the refinery, Eidukevicius stressed. "A new share issue could strengthen Mazeikiu Nafta financially, as the company would find itself in a position to repay loans, settle advance payments for crude and lay foundations for further development," he explained.

Uspaskich said that the "precise proposal would be worked out and submitted to Yukos in about a week's time."

Eidukevicius predicted that a final decision would be made in one to two months.

Yukos Finance currently owns 53.7 percent of the refinery and terminal complex, but the demise of its parent company, Yukos, has begun in earnest. The company's December-November output fell 3.1 percent to 1.66 million barrels per day, putting it in second place after Lukoil, which extracted 1.72 million barrels of crude per day in the last month of the year (up 1.5 percent).

Also, the company's stock was delisted from the Russian Trade System's A List after turnover sunk 65 percent in the fourth quarter. During the last three months of 2004 the vertically integrated oil company saw its market capitalization plummet by 85 percent.

With a multibillion dollar tax bill still outstanding even after the sale of Yuganskneftegaz, it is unclear what will happen to Yukos' other assets, including the Mazeikiu refinery. Though Yukos managers are scrambling to salvage the company, most analysts believe that the company will cease to exist, meaning that the refinery, will soon have a new owner.