Refinery prefers to buy crude on spot contracts 's for now

  • 2007-08-08
  • By TBT staff
VILNIUS - Polish owners of Lithuania's Mazeikiu Nafta refinery have said they remain sanguine about a renewal of pipeline oil supplies from Russia, though they continue to work on various supply alternatives, including tankers from Venezuela.
PKN Orlen, Eastern Europe's largest downstream oil enterprise and owner of 90 percent of the refinery, is currently supplying crude to Mazeikiai by tanker on a spot basis 's i.e., without a long-term contract with a single supplier, the company's vice-president, Cezary Filipowicz, told The Wall Street Journal.
"We do not want to sign a long-term contract for such oil because we are still counting on the Druzhba pipeline being reopened sooner or later," he said.

He also said that if PKN Orlen were to sign a long-term supply contract with a non-Russian supplier, Moscow would have another excuse not to repair the damaged pipeline in Belarus that has caused Mazeikiu Nafta's current supply woes.
According to Transneft, Russia's monopoly pipeline oil system, a spur of the Druzhba pipeline burst last July, forcing the company to shut it down indefinitely. Company officials have said that repairing the pipeline, which is some 43-years-old, is too expensive and funds would be better spent on building new pipelines and export terminals.
PKN Orlen, which took control of Mazeikiu Nafta in December, is now forced to supply the refinery by tanker, which is considerably more expensive than pipe-based supplies.
The refinery, which is the largest corporation in the Baltics, was expecting a crude tanker from Venezuela in the beginning of August.
Filipowicz said the company wouldn't wait forever. "If this time prolongs then we will have to think about a long-term contract," he said.

Meanwhile, a Ukrainian analyst has warned that the situation may only get worse for Mazeikiu Nafta.
In the words of Sergiy Korsunski, an official with Ukraine's Foreign Ministry, "In the not too distant future, Russia will put its Baltic Sea ports in full operation, with plans to ship around 150 million tons of oil by tankers annually. Ensuring crude supplies to Mazeikiu Nafta by sea in the opposite direction will be very difficult."
Lithuanian politicians and oil experts claim that Russia's decision to cease supplying Mazeikiai is political. They argue that Russia has not allowed them to inspect the damaged pipe in Belarus and that Moscow was angered by Lithuania's decision to sell the refinery, which Russia coveted, to the Poles.

In recent years Russia has not shied from using its energy exports to apply pressure on neighboring countries.