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. Last Updated: 07/27/2016

Mazheikiu Nafta, LUKoil Close to Oil Supply Deal




VILNIUS, Lithuania -- Lithuanian oil firm Mazheikiu Nafta and Russian major LUKoil have announced good progress toward a key crude supply deal that would give the company - and the country - a firmer economic footing. "Commercial negotiations are making significant progress. ... It is the intention of both parties to come to a general agreement within the month," the two firms said in a statement Friday.


"The agreement is intended to be region wide and long term."


The two companies, which have been at odds in the past over supply issues, said they had already agreed on 90 percent of the outstanding issues but were still talking figures.


"We are talking about selling to Mazheikiu Nafta annually 6 million metric tons for 10 years, plus one to 1.5 million tons to be processed for LUKoil," LUKoil's local representative Ivan Paleichik said at a news conference with Mazheikiu Nafta.


The additional crude would be processed at Mazheikiu for a fee and then exported to St. Petersburg and Kaliningrad, he said.


LUKoil, Russia's crude export coordinator for the Baltic states, lost out in its earlier bid to privatize Mazheikiu Nafta to U.S. energy group Williams, which bought a one-third stake and operational control in October.


Patrick Viossat, Mazheikiu Nafta senior vice president and managing director for crude supply and marketing, said that LUKoil would not be taking an equity stake as part of the deal.


"This issue is not among the remaining 10 percent," he said.


Shares in Mazheikiu Nafta have risen 14 percent over the week on hopes it could seal a long-term crude supply deal.


A deal would put Mazheikiu - a joint refinery, pipeline system and oil terminal - on a surer economic footing as it was hard hit last year by several largely unexplained crude interruptions, resulting in a 33 percent drop in processing volumes.


In the nine-month period it posted a $40 million loss.


Mazheikiu Nafta and LUKoil have been at odds in the past, as refinery officials in December accused the Russian firm of blocking sealing supply deals with other companies.


LUKoil denied the accusation.


Lithuania's overall exports dropped 34.7 percent in the first nine months of 1999 largely due to shrinking oil product export, adding to the country's economic woes after a recession brought on by the economic turmoil in Russia.