VILNIUS - Poland's PKN Orlen and Mazeikiu Nafta, the Baltics' only oil refinery, announced on Jan. 5 that they had signed a five-year supply agreement worth some $19 billion.
The deal comes after months of negotiations on PKN Orlen's takeover of the refinery and signifies a major victory for Lithuania, where officials are fretting over disruptions of oil deliveries to Mazeikiu Nafta.
The agreement gives PKN Orlen, the largest fuel and gasoline retailer in Central Europe, the exclusive right to supply Mazeikiu Nafta, the largest corporation in the Baltics, with crude oil.
The Polish company said in a statement that the signing of the agreement was also "connected with the centralization of crude oil purchases of the PKN Orlen Capital Group, including supplies to refineries in Poland, the Czech Republic and Lithuania."
Interestingly, the agreement states that crude oil deliveries pursuant to the agreement will be realized "with the use of the Druzhba pipeline and through the maritime terminal in Butinge."
The Druzhba pipeline, however, was shut down this week following a bitter dispute between Russia and Belarus over energy prices. What's more, Mazeikiu Nafta has not received crude oil through the pipeline since last July, when a leak in a spur of the pipe that feeds Lithuania forced Russian authorities to cease pumping oil.
The event appeared to be politically motivated, as the Kremlin had wanted a Russian oil company to take over the Lithuanian refinery and was miffed that the Lithuanians approved of a Polish buyout. But Transneft, Russia's pipeline monopoly operator, denied any ulterior motive to the accident.
Transneft has not announced when oil deliveries to Mazeikiai could be renewed.
For its part, PKN Orlen confirmed on Jan. 8 that crude oil supplies via the Druzhba pipe were disrupted but that the company has operational reserves at its Plock and Solino facilities. If necessary, the company said it would appeal to the Economy Ministry to utilize mandatory reserves, which would be enough to secure 80 days of operation.
"PKN Orlen stresses that there is a possibility of rearranging the entire supply needs of the Polish refineries via the marine facilities of Naftoport in Gdansk," the company said in a statement.
PKN Orlen owns 84.36 percent of Mazeikiu Nafta and is currently in the processing of buying shares from minority owners. o
