VILNIUS - In a surprise twist, Lithuania's government agreed to open negotiations with Kazakhstan's state-run oil company, KazMunayGaz, on a possible purchase of the Mazeikiu Nafta oil refinery.
The decision comes after the refinery's majority owner, Russia's Yukos, expressed interest in selling its 53.7 percent stake to the Kazakhstan company. Of the four companies that submitted bids, KazMunayGaz reportedly bid the most - $1.2 billion.
The decision is also a complete reversal of the government's previous stance, particularly after Russia's pipeline monopoly, Transneft, tore up a contract with KazMunayGaz on delivering crude via Russia to the Baltics and threw doubt on the company's capability to supply fuel to the Lithuanian refinery in a timely manner.
"This is a solid company that we can negotiate with, a solid bidder for the stake in Mazeikiu Nafta. We have not prevented talks with other potential buyers, and the developments have shown that we have to do that," Prime Minister Algirdas Brazauskas said after meeting KazMunayGaz President Uzakbay Karabalin.
Brazauskas admitted that KazMunayGaz's bid was of interest both to Lithuania and to the embattled Russia's oil company. Lithuania would have no objections provided that the agreement set out the guarantees of crude supply and certain sanctions, the prime minister added.
KazMunayGaz, which has vast upstream potential, is so eager to acquire downstream exposure in the Baltics that Karabalin even said the company would up the price to $2 per barrel provided that the supply of crude to Mazeikiu Nafta was effected via other routes.
"We have other possibilities for the delivery of crude to Mazeikiai refinery. If the price of that crude is higher, we will cover that difference so as to make the price correspond to the price of crude delivered via Russia's pipelines," Karabalin noted.
He expressed hope that Transneft's decision not to handle the company's oil was temporary, and that relations with the company would normalize. The two companies signed the contract in September.
Karabalin neither dismissed nor confirmed reports that KazMunay-Gaz bid $1.2 billion for Yukos' stake in Mazeikiu Nafta, which is registered in the Netherlands.
The government is hoping to sell half of its stake in the refinery, or 20 percent, for a windfall in cash.
As far as other potential investors, Brazauskas admitted that the talks with the Russian-U.K. oil venture, TNK-BP, would continue.
A senior executive of the U.S. oil group ConocoPhillips, which was removed from the list of potential buyers by Yukos, had planned to arrive in Vilnius this week in a last ditch attempt to revive the company's chances. The company is submitting a joint bid with its partner Lukoil, Russia's largest oil company.
Bidders for the Mazeikiu stake should submit their final bids for the second stage of the auction by mid-January, said Economy Minister Kestutis Dauksys. The government would then have approximately a month to decide whether it would acquire the shares from Yukos itself, or would agree with the bidder chosen by the Russian company.
The government holds the preemptive right to acquire the stake in Mazeikiu Nafta.