Crude deliveries to Mazeikiu start to slide

  • 2006-07-19
  • Staff and wire reports

NOW AN IMPORTER: The arrival of a strategic investor at Mazeikiu Nafta means stability at the Butinge terminal and Klaipeda port, which will allow Lithuania to import more crude via tankers.

VILNIUS - Lithuania's worst fears about the recent change of ownership in Mazeikiu Nafta, the nation's largest corporation, appeared to come true, as crude oil deliveries from Russia to the refinery have gradually begun to decrease. If at the beginning of July the refinery was receiving 38,000 tons of crude per day, which is less than usual, then that amount shrank to 32,000 tons by mid-month.

In previous months, the supply of Russian crude to Lithuania amounted to some 42,000 tons per day, though occasionally rising to 50,000 's 52,000 tons.
However, the situation changed upon the announcement that Mazeikiu Nafta would be taken over by Poland's oil concern PKN Orlen, as Russian oil majors and Moscow bristled at the sale. Both public and private officials stated their dismay at Lithuania's decision to approve the sale 's the majority stake in the Lithuanian refinery was sold by Russia's Yukos 's to a company that has no crude production capabilities.

The decision to select a non-Russian company coincides with an ever increasing assertiveness on the part of Moscow concerning energy affairs, a point that was repeatedly brought out by foreign media on the eve of the Group of Eight summit in St. Petersburg.
Still, Giedrius Karsokas, Mazeikiu Nafta's communication director, mentioned that the refinery was implementing its plans to process 8.6 million tons per year.

The refinery processed 4.7 million tons of crude and other feedstock in the first half of 2006, a rise of 280,000 tons year-on-year, Karsokas noted.
Dawid Piekarz, a PKN Orlen representative, refused to comment the fall in deliveries until the transaction on the purchase of Mazeikiu Nafta is finalized. He noted, however, that the data available to him proved that the Lithuanian oil complex should get enough crude in the third quarter.

PKN Orlen, which has become the largest processor of crude in Eastern and Central Europe after the purchase of Mazeikiu Nafta, is hoping that by sheer size alone it will be able to maintain leverage against hawks in the Kremlin who are ready to cut off supplies to the Lithuanian refinery. Company officials have also stressed that crude oil can be delivered to the refinery from the west as well.
Indeed, last week Mazeikiu Nafta launched imports of crude at its Butinge terminal, which it owns and controls. A tanker hauling 100,000 tons of Urals crude unloaded at the terminal on July 18, Karsokas said. The last time Mazeikiu Nafta imported crude by sea was in December 2000.

In general, now that the deal with PKN Orlen is set, the Port of Klaipeda and Butinge, as well as other companies in the transit industry, are expecting higher revenues 's particularly on taxing vessels.
In line with the agreements signed by the government with the U.S.-based Williams International and then with Yukos in 1999 and 2002, respectively, the country could not levy any taxes on tankers sailing to Butinge even though they made use of navigation and other services. Lithuania lost some 6-9 million litas (1.74 's 2.6 million euros) per year owing to those provisions.
"Regulatory institutions incur costs while checking the tankers that shall be inspected in line with international conventions. Moreover, these ships use our radars for navigation. We have made preliminary estimations on the basis of incoming tanker flow. Although the tonnage charges are highly unlikely, we could impose a navigation charge, perhaps some other charge, and the revenues would be some 6-9 million litas," said Arvydas Vaitkus, Transport Ministry secretary.

Nerijus Eidukevicius, deputy minister of the economy, confirmed that the new agreement on the purchase and sale of shares in Mazeikiu Nafta contained no provisions that would prevent Lithuania from imposing any levies on ships mooring at Butinge.
"All obligations forced by the agreements of 1999 and 2002 will disappear with this transaction finalized. The new agreement does not stipulate any advantages with respect to railways or other areas. The charges shall be paid if the legislation requires the charges to be levied at the Butinge port," he added.

Mazeikiu Nafta refined 4.7 million tons of crude in the first half of 2006, a rise of 6.4 percent year-on-year. The handling at Butinge terminal declined by 2.7 percent, to 2.5 million tons, from 2.597 million tons in January-to-June of 2005.
The oil complex seeks to process 8.66 million tons during 2006.