Official: Ventspils refinery project doubtful

Plans for building an oil refinery at Latvia's largest port of Ventspils are nothing new and are currently considered with certain skepticism, said the head of the Latvian Transport Ministry's transit policy department, Andris Maldups.

He said that information on the investment plans of Southern Cross*Crus del Sur and another Korean company was scanty, while the assessment of previous plans for such a refinery "make us look upon such projects rather skeptically, because no one really earns much from refining oil."

Maldups said that both offers are currently lacking specifics, and that the oil refining sector is quite competitive.

"If they plan to produce the same products as, for example, in Mazeikiai or in Belarus, then it probably won't be profitable. Maybe if they find their own niche and plan to produce something specific" they could turn a profit said the ministry official.

Maldups said that the eased regulations at ports had initially been established to create opportunities for value added products, but "how real such a project actually is, is still a tough question."

Last month a report in the local press that the government had received documents from a foreign investor proposing the construction of a 175,000 barrels per day oil refinery in Ventspils sparked massive speculation both in the government and on the markets.

Interest in constructing an oil refinery in Ventspils has recently been voiced by the LG International Corp. and the Southern Cross*Crus del Sur consortium.

Transport Minister Roberts Zile refrained from commenting the plans yet, adding that he has not yet got acquainted with official information on the oil refinery proposal.

The Economy Ministry said it believes that the LG International project could boost the importance of Latvia on the oil products market and also help solve crude oil supply issues from Russia, even though the planned capacity of the oil refinery - 1 to 3.5 million tons of crude oil per year - is only a small part of the capacity in the pipeline leading to Ventspils.

The Economy Ministry and the Latvian Development Agency are offering to authorize the development agency to continue negotiations with LG International, with a decision on this to be made by the government in the beginning of May.

The Latvian government does not plan to look at the offer made by Southern Cross*Crus del Sur until the investor has submitted a precise project and specific calculations on project implementation and the planned financial sources.

The project has been criticized by Ventspils Mayor Aivars Lembergs.