Lithuania: Mazeikiu Will Not Be Closed

Lithuania's economy minister on Wednesday rejected as "incomprehensible" a warning by Transneft that the oil pipeline feeding the country could be shut down, and the Mazeikiu refinery said it would be able to continue operations even if it had to switch to receiving supplies exclusively by sea.

"Mazeikiu Nafta is again operating at full capacity," refinery spokesman Giedrius Karsokas said by telephone from Vilnius. If Russia does not resume oil flows in the near future, "the refinery can be supplied with oil for at least another year by tankers via the Butinge oil terminal" on the Baltic Sea, he said.

Pipeline monopoly Transneft halted supplies to Lithuania two weeks ago after an oil spill on the Druzhba-1 pipeline route, forcing the refinery to operate below capacity and rely on supplies by sea.

In an interview with The Moscow Times published Wednesday, Transneft president Semyon Vainshtok said Russia could be forced to close down the ageing pipeline while it is being rebuilt. He could not say when Russia could resume pumping oil along the route.

Mazeikiu shares closed down 7.43 percent Wednesday.

Lithuanian Economy Minister Vytautas Navickas said Wednesday that it was unlikely the pipeline would stop operating, as it was profitable. "Russia is making money from this pipeline. Why would they shut down this business?" Navickas said, Lithuanian news portal reported. "Thinking logically, the closure of the pipeline is impossible."

A spokesman for Transneft said Wednesday that it had no plans to permanently shut down the route, and only in the worst-case scenario would it have to rebuild a short portion of the pipe, Reuters reported.

Mazeikiu's Karsokas said he could not say how much the switch to supplies by sea would affect the refinery's profitability but dismissed reports that it could fall by at least half.

Poland's PKN Orlen, which in June agreed to acquire Mazeikiu Nafta from Yukos and the Lithuanian government, said it reserved the right to pull out of the sale if the refinery fell in value this year, Polish media reported Wednesday.

Mazeikiu is the largest revenue earner for Lithuania's budget and is on the country's list of strategic assets. Market players have speculated the halt in oil supplies could be an attempt by Moscow to pressure the country after it chose a Polish buyer over a Russian one.