Refinery rumors resurface

  • 2003-04-17

A consortium of international companies headed by one of the world's leading investment groups, Southern Cross (Crus del Sur), proposed to Latvian authorities in March to take part in construction of an oil refinery in Ventspils, a newspaper reported on April 15.

The daily Bizness & Baltija said it has obtained information suggesting documents to such effect were even transferred to Prime Minister Einars Repse.

Rumors about the construction of an oil refinery for Ventspils first surfaced a couple of years ago, but it "now looks as if potential participants' intentions for the grandiose (not only for Latvia's scale) project are rather serious," B&B wrote.

The newspaper said its sources claimed the total costs of the oil refinery construction could amount to $1 billion while a more specific business plan will be worked out later.

According to documents obtained by the paper, several companies are listed as having expressed interest in the project.

Parson, an international conglomerate and a leader in the production of equipment for oil and gas extraction, is first on the list.

Among Parsons' current projects cited in the paper are two in Kazakhstan worth $3 billion and another $1.4 billion for the renovation and modernization of Kuwait Oil Company's extraction equipment.

Willis, the world's leader in risk management in energy, as well as NBBJ, which specializes in architecture solutions for various industrial sectors, are also mentioned in the list of companies interested in the Ventspils oil refinery idea.

According to Bizness & Baltija's information, consortium representatives on March 14 sent to Repse a proposal to directly take part in the oil refinery construction.

The investors asked the Latvian government to define and provide its priorities regarding provisions under the contract, as well as to send an official invitation to the president of Southern Cross in order to discuss conditions and sign a preliminary agreement.

Project initiators said the proposed refinery would produce high quality oil products and sell them on European, U.S., Baltic and Russian markets.

Raw material for the refinery will be supplied from Russia, according to project designers.

During the first phase the refinery is expected to refine up to 125,000 barrels of oil per day, gradually raising this amount to 175,000 barrels.

The paper added that Southern Cross representatives are already ready to guarantee that a third of all contracts needed for the refinery construction will go to Latvian companies.

Construction financing is planned through both direct investment and loans.

Latvian premier's spokeswoman confirmed that the prime minister had received the documents about the oil refinery project and forwarded them to vice-premier Ainars Slesers for further examination.

The Ventspils port board has not received any official documents about proposed oil refinery construction projects that merited thorough consideration, according to port officials.

"There was only an inquiry lacking proper professional approach that did not give us the least reason to think this all was serious," Ventspils Mayor Ainars Lembergs told Baltic News Service.

What information we have is pretty unreliable, he said.

"I have seen only a single scrap of paper so far," stated Lembergs.

If, however, an application for oil refinery construction, backed by all the proper documents, is submitted, the port will review the proposal, but "at the moment there is nothing to review," said Lembergs.