Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Polish Firm Buys Yukos' Mazeikiu Refinery

Pipeline monopoly Transneft questioned whether Russia's oil producers would supply Lithuania's Mazeikiu Nafta refinery after it was bought on Friday by PKN Orlen, Poland's largest oil refiner.

But PKN Orlen said it had secured sources, and Lithuania's government also said the Polish company had received several offers of supplies. If necessary, the refinery could receive oil by sea rather than via pipeline.

Political relations between Warsaw and Moscow are strained. Moreover, the Polish firm beat Russian rivals to acquire Mazeikiu from Yukos, which has been crushed by back tax demands from the Kremlin -- leading some observers to say Russia may halt supplies.

"We really don't know who they [PKN Orlen] are," said Sergei Grigoryev, vice president of Transneft, which now supplies all of Mazeikiu's crude. "I suppose they should talk to Russian producers about supplies and then only come to us. We know their rivals -- LUKoil, TNK-BP and KazMunaiGas. We have met them many times. But we have never met PKN or Russian producers who are willing to supply them with crude."

PKN Orlen will pay Yukos $1.49 billion for its 53.7 percent stake in Mazeikiu. Lithuania's government will sell its 30.7 percent stake to Orlen for $851.8 million, once the Yukos sale is approved by EU regulators and Lithuania's parliament.

A U.S. bankruptcy court on Thursday lifted an order blocking Yukos from carrying out the sale.

Mazeikiu was crippled in the 1990s by interruptions to its supply of crude oil after Lithuania sold control to Williams Cos. of the United States, rejecting an offer from LUKoil.

The Polish company has a plan to ensure oil supplies for Mazeikiu and may use a Baltic Sea coast terminal if supplies from Russia are cut off, said Orlen deputy chief executive officer Cezary Filipowicz. He declined to provide further details.

PKN has said in the past that its present crude suppliers, which include units of Rosneft and Polish-based trading firm J&S, have guaranteed enough oil to supply Mazeikiu.

The transaction with Yukos should be completed by the first quarter of 2007, Orlen said. The Lithuanian government has a five-year option to sell an additional 10 percent stake to Orlen for between $278 million and $284 million.

Should Mazeikiu have five consecutive years of losses, the owner will have to sell its stake, Lithuanian Economy Minister Kestutis Dauksys said. The government would then have the right of first refusal to buy the stake, he said.

The government could also take back the stake if more than $200 million in Mazeikiu assets are collected as part of the Yukos bankruptcy procedure or if an investor who threatens the national security of Lithuania takes control of Orlen.

(Reuters, Bloomberg)