RIGA - A bitter dispute between Ventspils businessmen and top politicians has led officials to cut off Ventbunkers, a stevedoring company, from the lucrative oil products pipeline that feeds the Ventspils port.
Ventspils Naftas Terminals, a subsidiary of Ventspils Nafta, which controls the pipe, refused to sign a new agreement with Ventbunkers, which by contract has handled diesel products in the Baltic Sea port town since 1998.
In a letter to Ventbunkers, VNT explained that it was restructuring its business model due to the arrival of a new strategic investor and intended to boost its diesel storage and trade business.
The divorce of the two long-standing partners came after Ventbunkers recently made an offer to buy Ventspils Nafta from Latvijas Naftas Tranzits, which owns a 49 percent stake and is the largest shareholder in Ventspils Nafta.
Ventbunkers executive Martins Kveps announced in the beginning of November that the company had offered to buy LNT's entire stake in Ventspils Nafta as a means to prevent the disintegration of Ventbunkers, which itself owns 51.9 percent of LNT.
Still, media reports have suggested that Ventbunkers was severed from the pipeline due a bitter conflict between Ventspils Mayor Aivars Lembergs, who is also chairman of the board of Ventspils Free Port, and Ventbunkers owners. The exchange of accusations has spilled onto the pages of Latvian papers and reached a peak in the lead-up to the sale of the government's stake in Ventspils Nafta.
For its part, Ventbunkers is owned by several foreign and local entities, several of whom are shrouded in secrecy. The company posted over 100 million euros in sales in 2005.
In the beginning of October Vitol, an oil and commodities handler based in Rotterdam and Geneva, bought 34.7 percent of Ventspils Nafta for approximately 100 million euros at an open auction. The Vitol Group, which has operations around the globe, posted some $80 billion in revenues in 2005 and is a major player in international oil markets.
After a visit to Ventspils by Vitol managers in October, a Ventspils Naftas Terminals officials said that the investors wanted to boost the terminal's reloading capacity and expand the range of fuel products it handles.
Mamerts Vaivads, chairman of Latvijas Naftas Tranzits, the largest shareholder in Ventspils Nafta (49 percent), was quoted at the time saying Ventspils could become the "Rotterdam of the Baltic Sea" if Vitol applied its experience in Western Europe to the Baltic state.
Vitol, he said, was particularly interested in fuel oil. "If Ventspils Nafta starts operating in this segment, considerable investments will be needed," he said, adding that Ventspils' reservoir park should be enlarged.
With Ventbunkers out of the picture, Ventspils Nafta began handling oil products delivered via the products pipeline. Company spokeswoman Gundega Varpa told the Baltic News Service that Ventspils Nafta Terminals loaded some 50,000 tons of diesel into a tanker last week and another 55,000 onto a tanker this year.
Deprived of a pipeline, Ventbunkers is scrambling to keep from losing its market share. The company is looking to utilize Latvia's railroads. Olaf Berkis, a shareholder, said the company was busy trying to conclude contracts with suppliers who would deliver by rail. He admitted that the volume of cargo handling would inevitably decline, but that the business was still lucrative enough to pursue.
Cargo handling at Ventspils Free Port, the largest port in Latvia and the second largest in the Baltics, amounted to 29.1 million tons in 2006, down 2.7 percent year-on-year. Ventspils Mayor Aivars Lembergs said general cargo handling increased while liquid and bulk cargoes declined.
According to port data, Ventbunkers handled 9.2 million tons of oil products in 2006, up 1.3 million tons year-on-year.
