Lithuania to negotiate with Russia's LUKoil on stake in Mazeikiu Nafta

VILNIUS - Lithuania intends to negotiate with the Russian oil giant LUKoil over the sale of shares in Lithuania's national oil company Mazeikiu Nafta.

Lithuanian officials plan to discuss the issue with Vagit Alekperov, head of LUKoil, who is expected to visit Lithuania in May.

"Lithuanian President Valdas Adamkus has received a letter from Alekperov in which he said that LUKoil wants to discuss crude supplies to Mazeikiu Nafta. And I think the sale of a stake in it will be discussed as well," Prime Minister Rolandas Paksas said in a news conference on April 6.

"I can't tell now, and wouldn't like to do it, what percentage of Mazeikiu Nafta shares could be sold to LUKoil and at what price. This should be discussed with the shareholders of Mazeikiu Nafta, the U.S. company Williams International. Trilateral negotiations on the issue should be held, and the first talks have already started", Paksas said.

Williams owns 33 percent of Mazeikiu Nafta's shares, and the Lithuanian government owns approximately 60 percent.

Long-term crude supplies is another urgent issue for Mazeikiu Nafta that will likely be discussed during Alekperov's visit.

At present Mazeikiu Nafta receives crude only on the basis of short-term agreements.

After a year and a half of negotiations, Mazeikiu Nafta and LUKoil failed to reach an agreement on the establishment of a joint alliance. The cooperation agreement would have ensured long-term crude supplies to Mazeikiai.

At present a long-term agreement only covers oil exports through the Butinge oil terminal owned by Mazeikiu Nafta. In September 2000 Mazeikiu Nafta signed a 5-year agreement with YUKOS, the second largest Russian oil company, which promised to export 4 million tons of oil through the terminal annually.

Mazeikiu Nafta is also negotiating with the Kazakhstani oil exporters. Kazakhstan President Nursultan Nazarbajev, on a visit in Lithuania this week, said that cooperation between the oil companies has been given political approval. However, much will depend on negotiations with Russia on the transit tariffs and quotas for the export of oil through Russian pipelines.

The Lithuanian and Kazakh presidents instructed the transportation and economy ministers of both countries and the Kazakhstani energy minister to urgently seek agreement on the conditions of Kazakhstan's oil supplies to Lithuania.

Last year Mazeikiu Nafta refined a total of 4.9 million tons and exported 3.5 million tons of raw materials through the Butinge terminal.

Last year Mazeikiu Nafta lost about 213 million litas ($53.52 million) under the Lithuanian accounting standards. Under the United States' GAAP accounting standards, the company posted a loss of 179 million litas for the year.

Mazeikiu Nafta reported a loss of 159 million litas for 1999 under the U.S. standards. The loss for the year was 131 million litas under local standards.