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PKN Orlen signs five-year delivery deal, promises investment for Mazeikiu Nafta

  • 2007-01-24
  • By TBT staff
VILNIUS - Poland's PKN Orlen has once again stressed that it intends to keep its strategic plans and invest in Mazeikiu Nafta, the Baltics' only refinery, as well as ensure stable oil supplies and increase sales.

Piotr Kownacki gave the assurances to Prime Minister Gediminas Kirkilas during their meeting in Mazeikiai on Jan. 22.
Kownacki was recently appointed CEO of PKN Orlen, the largest fuel refiner and retailer in Central and Eastern Europe. He takes the place of Igor Chalupec, who helped oversee the takeover of Mazeikiu Nafta, Lithuania's largest corporation.
The visit took place three days after PKN Orlen announced that it had signed a five-year crude oil supply contract with Petraco Oil, a Guernsey-based oil trader.

According to the contract, Petraco guarantees the delivery of 3.36 million tons of crude via the Druzhba (friendship) pipeline until Dec. 31, 2011. The value of the deal is $6 billion at current market prices, PKN Orlen said.
Petraco Oil will act as a middleman in the deal, while the actual crude, according to reports, will come from Rosneft, Russia's state-owned vertically integrated oil company that has risen rapidly in the ranks thanks to strong Kremlin backing.
For Lithuania, the deal underscores the nation's hope for a steady stream of crude for Mazeikiu Nafta, which in the past has suffered from multiple supply disruptions.

To be sure, it is unclear how the crude that is to be supplied by Petraco will actually make its way to Mazeikiai. A spur of the Druzhba pipeline in Belarus that supplies the Lithuanian refinery with crude ruptured in July, forcing a shutdown.
Russia's pipeline operator, Transneft, has refused to announce when it would repair the pipe. Mazeikiu Nafta, as a result, has been forced to import crude via the Butinge terminal on the Baltic Sea in order to keep the refinery running.
Regardless, the deal states that any delay or shortfall in delivery can be penalized by a minimum 200,000 euros.
Former CEO Chalupec was sacked by PKN Orlen's board in favor of Piotr Kownacki, who is a friend of Polish President Lech Kaczynski. Prime Minister Jaroslaw Kaczynski, the president's brother, said Kownacki was better suited for the job for reasons of energy security.

Kownacki worked together with Lech Kaczynski in the 1990s at the Supreme Chamber of Control, Poland's state auditor.

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The equal opportunities office in Lithuania has begun a probe into alleged discrimination at Mazeikiu Nafta, the Lietuvos Zinios daily quoted the refinery's trade union leader, Virginija Vilimiene, as saying.
Vilimiene claimed that Lithuanians employed at the refinery earn considerably less than Polish staff despite identical job descriptions. "For example, a [Lithuanian] welder is paid 16 litas [4.6 euros] per hour, while a Pole earns 16 euros," she said.
Asked about labor issues, Kownacki said the foreigners working at the refinery would be paid higher wages than locals, since the average wage in Poland and Lithuania was similar, the Baltic News Service reported.