Russian pressure shuts down refinery

  • 1999-02-04
VILNIUS (BNS) - The Mazeikiai Oil refinery had to shut down temporarily Jan. 29 due to shortage of crude oil. Russia's LUKoil has been holding off oil supply for the refinery in an attempt to get a 33 percent stake in the Lithuanian company.

The plant's specialists said the refining of heating oil was halted Jan. 29, while refining of other oil products was ceased on Saturday morning.

The plant has emptied it reserves, refining around 390,000 tons of crude oil in January. It has been operating in a circulation regime since Saturday.

"A technological regime has been maintained because a complete closure is impossible due to the cold weather. If we stop it completely, we will be unable to put the facilities back in operation until it gets warmer," a refinery specialist said.

It is still unclear when Mazeikiai Oil will resume operation. Mazeikiai Oil's Director General Gediminas Kiesus said the plant would be able to resume operation shortly after receiving crude. He said, however, he had no news about crude supplies.

Kiesus said he did not know if he would go to Moscow to negotiate for additional oil quotas. This will depend on whether crude oil, to be supplied under earlier agreements, starts flowing in this week, he said.

The company's specialists say it is not worth relaunching the plant with only 50,000-60,000 tons of crude available. It is necessary to refill tanks with some 160,000 tons and to be sure that more crude will flow in shortly, they say.

"We need other guarantees that we will receive more crude because you can do nothing with 60,000 tons," Kiesus told BNS.

The Lithuanian government is drafting a letter to the Russian government asking to explain why it's not selling oil to the Mazeikiai plant.

Representatives of Williams, Lithuania's strategic oil sector investor, are considering various plans how to help the company.

"Williams is now weighing real steps in order to assist Mazeikiai Oil. They will also assess possibilities of Butinge's terminal to import oil," said Darius Silasa, Williams' Lithuanian spokesman.

The U.S. company, which had no import plans earlier, had announced plans to start oil export through Butinge on Feb. 22.

The Russian Fuel and Energy Ministry approved a 150,000 ton quarterly quota for Lithuania after Russia cut down its exports of oil this year.

Mazeikiai Oil, which needs 1.5 million tons quarterly, has agreed with some Russian oil companies on additional purchases of crude, but the oil is not flowing to Mazeikiai as the LUKoil concern, coordinating the oil supplies to Lithuania, has not signed the quotas.

Mikhail Mikhailov, LUKoil International's spokesman, said LUKoil was coordinating only one-third of oil supplies to Lithuania.

The Mazeikiai plant will be supplied with 60,000 tons from Tatneft in February, he said. Mikhailov said it was the ministry which had not allotted oil to Mazeikiai.

Mazeikiai Oil's specialists say that LUKoil is blocking the supply of oil to Mazeikiai from all Russian companies.

It is viewed as a thinly-veiled attempt by the concern to exert pressure on the Lithuanian government to sell it a 33 percent stake in Mazeikiai Oil and grant favorable tariffs for oil export through the newly-built terminal at Butinge.

"The Russians are playing hardball over oil export tariffs ahead of the opening of the terminal in Butinge," one Western oil analyst said in Moscow.

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