Mazeikiu Nafta Going Down the Pipes
// PKN Orlen may decline it
The Polish PKN Orlen concern has announced that it may decline to acquire Mazeikiu Nafta from YUKOS if it losses more value. After Russia stopped pumping oil to Lithuania, Mazeikiu Nafta stock fell from $3.19 to $2.71. PKN Orlen will buy them for a third more. It is not yet known whether oil deliveries to Mazeikiu Nafta will be resumed, but Transneft, the Russian oil transport monopoly, has announced that it is stepping up the capacity of the Baltic Pipeline System, an alternative route for Russian oil to reach the Baltic, from 65 million metric tons to 70 million tons per year.
Chairman of PKN Orlen Igor Halupec stated that the company “has the right refuse to acquire Mazeikiu Nafta until December 31 if the value of the asset lowers significantly.” PKN Orlen agreed to buy the shares in Mazeikiu Nafta belonging to YUKOS and the Lithuanian government (84.36%) for $2.34 billion, that is, $3.927 per share, which is much higher than the current market price of the stock after the price fell when the company's supply problems arose. Until recently, the plant received oil from Rosneft and LUKOIL in Russia. Now the company is forced to buy oil for higher prices at the Lithuanian sea terminal of Butinga.
Mazeikiu Nafta's oil supply was cut off at the end of last month by an accident in Bryansk Region on the Friendship pipeline. Although the pipeline was quickly repaired, the full flow of oil was not restored. Rosprirodnadzor, the Russian federal ecological service, discovered 487 safety problems on the stretch of the pipeline where the accident occurred. The load on the pipeline will remain at a minimum until those problems are eliminated. It now carries 800,000 tons of oil per month, less than half its previous load, and that oil is supplied to the Novopolotsky refinery in Belarus. Repairs have yet to begin on the pipeline, and Lithuanian politicians have accused Transneft of intentionally cutting off supplies as punishment for selling Mazeikiu Nafta to Poles and not a Russian company.
It is possible that oil supplies will not be restored. On Friday, Stroineft, a subsidiary of Transneft, expects to begin work in the middle of next month.
Vladimir Vodo, Warsaw; Denis Rebrov
All the Article in Russian as of Aug. 14, 2006
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