RIGA - Lithuania's Mazeikiu Nafta oil refinery has established a trading house in Latvia, Mazeikiu Nafta Tirdzniecibas Nams [Mazeikiai Oil Trade House], for the direct supply of fuel to retailers and small wholesale companies,
Mazeikiai Oil Trade House representative Janis Blums said that, while cutting out middlemen in Latvia, the company would ensure that fuel supplied to Latvia will be of high quality.
He added that the producer intends to become more active in the Latvian market in the future.
Blums stressed that dealing with middlemen on the retail fuel market is not efficient for the Lithuanian refinery and limits its downstream potential.
Sarunas Klokis, chief executive officer of Mazeikiai Oil Trade House, said that the main aim of the new company was to raise fuel quality standards in Latvia. The company also intends to launch discussions with the Latvian government on raising these standards, which, in Klokis' opinion, the country currently lacks.
He said the move is in line with the business model applied by Mazeikiu Nafta's majority shareholder, Yukos.
According to Blums, the company is considering renting two oil terminals in Latvia, including one near Riga. A third terminal may be rented in future, depending on demand.
Blums said that a decision on the terminals would be made within a month. He added that the trading house aims to start supplying fuel to Latvia by the end of this year and working at full capacity the following year.
The Mazeikiai Oil Trade House representative said that fuel produced by Mazeikiu Nafta constitutes approximately 70 percent of all fuel sold in Latvia and that the company hopes to raise this to 75 percent next year.
Klokis said that the expected Latvian and Lithuanian EU accession was another reason for entering the Latvian market, as development opportunities will consequently increase. He noted that after EU accession other players might also join the Baltic market.
Mazeikiu Nafta, which refined 6.6 million tons of crude oil in 2002, has launched reorganization of its fuel sales in Lithuania, Latvia and Estonia, with similar trading houses established in all three countries.