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. Last Updated: 07/27/2016

Lithuanian Refinery Offers LUKoil Premium for Crude

VILNIUS, Lithuania — Lithuanian oil concern Mazheikiu Nafta, one-third owned and operated by U.S. Williams International, has offered to pay a premium to Russia’s No.1 oil firm , LUKoil, for extra crude deliveries.

In May, 59 percent state-owned Mazheikiu, a combined refinery, crude terminal and pipeline transport system, signed a protocol to form several supply and marketing joint ventures with LUKoil, which would ensure annual crude supply of 6 million tons.

"In the long term, Mazheikiu has planned to bring production levels at its refinery up to its maximum levels and utilize the terminal at Butinge at its highest throughput," Jim Scheel, Mazheikiu managing director, said in a statement.

Mazheikiu, the sole refinery in the Baltic countries, has a designed capacity to refine 15 million tons of crude but operates at around 40 percent of its capacity. Butinge’s annual export capacity is around 8 million tons.

"Mazheikiu Nafta presented a detailed proposal to LUKoil this summer that includes financial premiums for the successful supply of guaranteed amounts of crude oil to Mazheikiu," Scheel said.

The statement did not provide any concrete financial details, but local media reported Mazheikiu offered to pay an annual premium of $5 million if aggregate crude deliveries to Mazheikiu and Butinge came to 20 million tons a year. The premium for 14 million tons of crude deliveries would involve a $1 million premium and $3 million for 16 million tons, media reported.

Securing Russian crude supplies is crucial to Mazheikiu as the refinery was forced into several costly shutdowns last year due to interruptions of Russian crude.

"We are still waiting on an official reply from LUKoil as to when we can meet to discuss both this issue and others that remain to be solved," Scheel said.

Mazheikiu already clinched a three-year deal with a Kazakh oil producer to supply the refinery with some 1 million to 1.4 million tons a year and is also in talks with Yukos.