VILNIUS - The search for a new investor at Mazeikiu Nafta, the Baltics' only oil refinery, has begun in earnest, with government officials talking to interested Russian companies.
"We have been visited by Russian oil companies that want to buy Yukos' shares and need our approval," Prime Minister Algirdas Brazauskas said during a news conference March 24. "Our prime concern is that Mazeikiu Nafta is stable."
The prime minister said the government was dissatisfied with Mazeikiu Nafta's current owner, Yukos. The beleaguered Russian oil company has lost its main production unit and is unlikely to supply its Lithuanian subsidiary with crude supplies in the second quarter.
Economy Minister Viktor Uspaskich told a news conference last week that the government was unhappy with Yukos, which owns 54 percent of Mazeikiu Nafta, which also includes the Butinge oil terminal on the Baltic Sea and a distribution/marketing unit.
"As to whether we're happy with Yukos' work as manager of Mazeikiu Nafta, today the answer is not really," Uspaskich said. "It's hard these days even to locate Yukos representatives, without whom we can't make any important decision about Mazeikiu Nafta." And if Russia won't let Yukos deliver crude to the refinery, Lithuania's largest taxpayer, then the government has a crisis on its hands.
Regardless who might take over Yukos' stake, any investor would not only have to guarantee supplies for five years, but cover losses connected with supply disruptions and take on loans from the state, Uspaskich said.
The government owns only 41 percent of Mazeikiu Nafta, but it still has an effective veto on any sale of Yukos' stake.
"It is up to Yukos to decide whether to sell the shares in Mazeikiu Nafta. But yes, buyers must also meet with members of the Lithuanian government," Saulius Specius, advisor to the prime minister, was quoted by Reuters as saying.
Interfax, citing Yukos deputy chief executive Alexander Temerko, reported last week that Lukoil and TNK-BP, two of Russia's largest oil producers, have offered to buy Mazeikiu Nafta from Yukos.
"If we receive an official offer to buy shares in this plant, we will study it with great interest," Lukoil spokesman Dmitry Dolgov told Bloomberg last week. He declined to say whether there have been any negotiations.
Lukoil owns the largest chain of gas stations across the Baltics but has no refining operations in the region.
Meanwhile, the Lietuvos Rytas daily reported March 25 that the Lithuanian government itself was considering an offer from Yukos. Under the existing agreements between Lithuania and Yukos, the investor must first offer to sell its interest to the state on the same terms and conditions as to other buyers. The paper speculated that informal talks between Yukos and potential buyers appear to have headed in a direction favorable for Lukoil.
But Yukos' Temerko was quoted as saying, "We have been told that Rosneft will mainly replace us on the route to Mazeikiu in the second quarter. Of course it will. They first grab our oil assets but are now struggling to refine the crude."
Rosneft is a fully-owned state oil company that is about to merge with Gazprom, Russia's gas monopoly. This merger will control Yugansneftegaz, the former Yukos production unit that was seized by the state to cancel outstanding tax debts.
Russian oil authorities have said that Yukos can export 340,000 tons from the Butinge terminal, or around 4 cargoes over 3 months,
Finally, Mazeikiu Nafta officials said they would forgo dividends for 2004 despite the record profits. The company's board will propose that shareholders transfer 5 percent of net earnings to a mandatory reserve and retain the remaining profits. Shareholders will vote on proposals April 29.
Mazeikiu Nafta posted earnings of 721.8 million litas (209.2 million euros) under U.S. GAAP for 2004, a surge of 3.3 times year-on-year.
Since 1996, Mazeikiu Nafta has paid dividends only once.
