Mazeikiu Nafta slammed with 9 million euro anti-trust fine

  • 2006-01-04
  • By TBT staff
VILNIUS - The Competition Council ruled in December that Mazeikiu Nafta violated fair competition rules and ordered that the refinery pay a 32 million litas (9.3 million euro) fine, while the situation with the company's sale failed to gain any clarity in the closing days of the year.

Council chairman Rimantas Stanikunas said on Dec. 22 that the council's experts determined that Mazeikiu Nafta, the only refinery in the Baltics, had breached both Lithuania's Competition Law and provisions of the treaty establishing the European Community.

"Mazeikiu Nafta continues these practices. Nothing will change in principle until a final decision is taken," Stanikunas said. "I imagine that the company will go though all the procedures and appeal to court. But it will have to stop these practices once a final decision is made," he said.

The anti-monopoly authority announced its verdict after a year-and-a-half of investigation.

Officials from Mazeikiu Nafta, which is majority owned by Russia's Yukos, said they would challenge the decision in court. Prior to the council's decision, executives said that the investigation should be stopped, claiming that the council's findings contained fundamental errors.

Mazeikiu Nafta has been penalized on two previous occasions, with fines amounting to 100,000 litas on each occasion.

The company has reportedly earmarked 10 million litas for a possible fine.

Meanwhile, the government is still bogged down in details over an imminent ownership change at the refinery. Four companies have bid for the stake 's Russia's Lukoil and TNK-BP, Poland's Orlen and Kazakhstan's KazMunayGaz 's though the Lithuanian government is also interested in buying the 53.7 percent interest so that it could resell the stake to an investor of its choice.

KazMunayGaz reportedly bid the most for the stake 's $1.2 billion 's while Yukos managers announced that Lukoil and TNK-BP, two favorites thanks to their extensive production capabilities, were all but out of the running.

As of Dec. 30, Lithuanian officials were unsure whether Lukoil, Russia's largest oil producer, and TNK-BP, a Russian-British joint venture, would raise their bids.

"I have no confirmation as to whether TNK-BP and Lukoil, together with ConocoPhillips, have improved anything. We expect to have more information next week," Economy Minister Kestutis Dauksys, who heads the government's negotiating team, said.

The bidders must submit their final bids by mid-January. Yukos is then expected to present its chosen buyer to the Lithuanians, who will have to decide whether they will accept the buyer or exercise their preemptive right to acquire the shares.

Dauksys also said that the government's negotiating team had not yet presented their position on the two Yukos-held options to buy more shares in Mazeikiu Nafta, although they had intended to do so by the end of the year.

The government wants to cancel the options, part of its 2002 agreement with the Russian investor. The simplest way to do that would be for Lithuania to buy the majority stake in the crude refinery, the country's largest corporation.

Specifically, the government would like to sell an additional 20 percent along with the Yukos stake, which would grant state coffers some 200 's 300 million euros. Parliament has authorized the government to borrow up to 3 billion litas for that purpose, though Prime Minister Algirdas Brazauskas said on Dec. 22 that the government might ask lawmakers to raise the borrowing limit.

The price of shares in the Lithuanian oil complex had increased since the launch of talks over the buyout of controlling interest in Mazeikiu Nafta, Brazauskas told the MPs.

PKN Orlen said it was still in the race to buy the majority stake. The company recently launched an expansion plan in Germany and the Czech Republic and has become one of the largest companies in the oil industry in central and eastern Europe.

In the words of CEO Igor Chalupec, "Orlen's presence in Mazeikiu Nafta would have a positive impact on the national security because the management of the company, which is of great importance to the economy, would be entrusted to a country that is a strategic partner of Lithuania, and with which it shares common interests both in the EU and a broader geopolitical territory."

He said Orlen would expand its chain of filling stations into the Baltics if it buys the Lithuanian refinery.

"We have some new ideas, too," Chalupec said. "We would offer to start producing household chemicals from oil by-products. Also, we would go ahead with the plant's modernization and increase crude refining," he said.