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. Last Updated: 07/27/2016

Lithuania Seeks to Alter Privatized Refinery Deal

VILNIUS, Lithuania -- Lithuania wants to renegotiate key terms of a privatization deal to sell oil concern Mazheikiu Nafta to U.S. energy group Williams - a move that sources say threatens a deal that was almost closed.

"This could be a watershed. This is the breaking point of the deal, one way or another," a source close to the talks said.

In a letter obtained by Reuters dated Aug. 12, the Economy Ministry says it wants to renegotiate several provisions agreed to by the previous government to give Williams greater responsibility for ensuring the effective management of Mazheikiu.

The changes suggested by the ministry would also decrease protection of Williams' investment.

Williams officials and an Economy Ministry spokesman declined to comment on the letter.

In April, Williams sealed a deal with the government to buy 33 percent in and operational control of majority state-owned Mazheikiu for $150 million. It was also given a seven-year, two-tiered options plan to double its original stake.

However, that government resigned in May amid widespread dissatisfaction over its handling of the Mazheikiu privatization, which politicians and the media said forced too much risk on the government and gave Williams too many benefits.

The new government took office in June and began reviewing the agreement. Negotiations have been under way since early 1998.

Sources close to the talks said that the Economy Ministry's new proposals would put new strains on already tense negotiations between the government and Williams.

The new approach would also force a planned Aug. 31 close to the deal - a deadline agreed to at the start of this week - to lapse, the sources said.

Among other issues, the government wants to revise its current obligation to take sole risk for problems associated with the potential cutoff of crude oil supplies from Russia, the refinery's primary source.

Mazheikiu Nafta was forced into two costly shutdowns earlier this year due to unexplained interruptions of Russian crude supply. Lithuanian politicians linked the cutoffs to Russian oil firms' interest in the Mazheikiu privatization.