Kazakhs, Poles step up lobbying efforts

  • 2006-01-25
  • Staff and wire reports
VILNIUS - Executives from Poland's PKN Orlen and Kazakhstan's KazMunayGaz have intensified their efforts to sway Lithuania's leadership in the run-up to the application deadline for the sale of Mazeikiu Nafta, the Baltics' only oil refinery complex.

PKN Orlen has promised to pay generously for the 53.7 percent stake in the refinery, which is owned by Russia's moribund Yukos, while KazMunayGaz negotiated with the Kremlin on transit issues and said it would hire Western executives to run the Lithuanian refinery if it were to become majority owner.

Wojciech Wroblevski, an adviser to PKN Orlen's president, said during a visit to Vilnius, "We intend to keep the price, which we offered at the initial stage, unchanged. I may only confirm everything that was said before."

Reports indicate that PKN Orlen offered more than their Kazakh competitor in the first round of bidding that took place late last year, or $1.5 billion versus some $1.2 billion. However, these bids are unconfirmed.

PKN Orlen has also vowed to acquire additional shares from the government at the price per share offered to Yukos, which for Vilnius is crucial in that it will allow the government to harvest a windfall in additional revenue.

"We confirmed that officially in our December letter addressed to Prime Minister Algirdas Brazauskas. This is a sign of good will," Wroblevski noted.

Meanwhile, KazMunayGaz, a state-owned oil and gas company, said it was close to finalizing a transit deal with Transneft, Russia's state-owned pipeline, that would allow it to supply millions of tons of crude for the Lithuanian refinery. An earlier agreement between the two sides fell apart after Transneft suddenly backed out, which signaled alarm bells in Lithuania.

Lithuanian officials are concerned about a repeat of the Williams International history, when the U.S. investor was unable to supply crude to the refinery due to Russian intransigence.

Romualdas Visokavicius, Lithuanian ambassador to Kazakhstan, said last week, "The Kazakhs are working on crude transit matters very intensively now."

The Kazakhs are also making arrangements to meet the requirement of high-level management at Mazeikiu Nafta, as spelled out by Lithuania's negotiators, the envoy said, adding that KazMunayGaz would probably hire a team of Western managers and appoint a Kazakh representative to take up the duties of chief executive officer.

Should the Kazakhs manage to strengthen their position in the Baltic state, they would consider the possibility of setting up a bank in Lithuania or taking over a current player.

Lithuania's leadership is in a precarious position. On the one hand, the sentimental choice would go with PKN Orlen, given the close relations with Poland and the country's EU membership. Yet PKN Orlen lacks sufficient upstream operations to guarantee the amount of crude Mazeikiu Nafta requires 's up to 15 million tones of crude 's something that the Kazakhs have in abundance.

Indeed, KazMunayGaz will only work as a strategic investor if the Kremlin wants it to. But considering that the Moscow-friendly president of Kazakhstan, Nursul-tan Nazarbayev, was recently re-elected, opposition to the deal in Russian circles is likely to fade.

Two other potential bidders, Russia's Lukoil and TNK-BP, appear to be out of the running, though it is unclear whether they would increase the size of their bids in this second round.

Final bids should be submitted to Yukos by Jan. 27.