VILNIUS - The Lithuanian government and TNK-BP, a Russian-U.K. oil concern, forged ahead with negotiations on taking over Mazeikiu Nafta despite a rejection last month from oil company Yukos, the refinery's current owner.
The government has indicated that it prefers TNK-BP to the three other bidders for the 53.7 percent stake in the refinery, though Yukos has signaled that it favors KazMunayGaz, which reportedly submitted the largest bid.
According to reports, the state-owned Kazakhstan-based company bid $1.2 billion for the refinery, the only one in the Baltics, while TNK-BP offered only half that amount.
Indeed, Prime Minister Algirdas Brazauskas hinted that TNK-BP's offer was not good enough, which TNK-BP officials, who were in Vilnius last week, admitted.
"The government and all other parties are concerned with the price, which would be bid to Yukos, and we considered this matter today," Shawn McCormick, company vice president for international affairs, said on Dec. 2.
Economy Minister Kestutis Dauksys, who is leading the government's task group for talks on the Mazeikiu Nafta takeover, said the four potential investors 's which include Lukoil and Poland's Orlen 's might modify their prices in the second stage of bidding.
Speaking of KazMunayGaz, Dauksys said it was a good company with strong financial positions, but it could not guarantee a stable supply of crude, which for Lithuania is of utmost importance. Transneft, Russia's oil pipeline monopoly, abrogated a multi-year service contract with KazMunayGaz last month, a sign that many felt was Moscow's way of eliminating unwanted competition for the Lithuanian refinery.
As McCormick said, the issue of price for the government was "not as significant as compared with the supply of Russia's crude."
"We have signed a memorandum with 14 articles, which stipulates the further course of negotiations. The government has stated its clear position and is good willed. The authorities wish to secure a continuous and stable supply of Russia's crude, which is why we have been chosen as partners," McCormick said.
Meanwhile, the government still has not given up hope on buying Yukos' stake and then selling it to a strategic investor of its choice. As Dauksys said, "Lithuania's task is to acquire the stake from Yukos, thus preventing another buyer from gaining the rights to two options, through which we could lose some 20 percent in Mazeikiu Nafta."