Oil and Gas News

Questions over oil supply persist at Lithuanian-Polish refinery

Aug 4, 2006, 17:15 GMT

Vilnius/Warsaw - Questions over the supply of crude oil to the only refinery in the Baltics remained on Friday despite confident statements from the refinery and its Polish buyers.

The questions follow the news that the main supply pipeline from Russia to the Mazeiki oil refinery in Lithuania is still shut off following a weekend fault in the pipe in Russia.

'Due to a leak in the Russian region of Bryansk on July 29, deliveries were stopped. How long for is currently unknown, (but) all Lithuanian and Baltics fuel demands will be satisfied,' Giedrius Karsokas of Mazeikiu Nafta told Deutsche Presse-Agentur dpa.

Crude supplies can also reach the refinery by sea, and work is continuing at a slightly reduced capacity, he added.

'We do not consider the current circumstances as a blockade, we do not dramatize the situation. The reasons are said to be technical,' added Lithuanian Prime Minister Gediminas Kirkilas, according to Baltic News Service BNS.

However, leading Lithuanian newspaper Lietuvos Rytas claimed Thursday that repairs to the pipeline could last up to a year. The newspaper suggested that the halt in supplies could be an attempt to pressurise Orlen.

Orlen officials were unavailable for comment, saying only that the company and the Lithuanian government were 'confident' about crude supplies to Mazeikiu Nafta.

Orlen, which is minority-owned by the Polish state, is the largest refiner in Central and Eastern Europe. It won the right to purchase Mazeikiu Nafta in May, beating rivals including Russia's Lukoil and Kazakhstan's KayMunayGaz.

However, Orlen itself owns no oil production facilities, and is Europe's largest buyer of Russian oil. It is widely believed that Orlen's offer won Lithuanian approval because Orlen, unlike its rivals, is headquartered in a fellow-member of the EU and NATO.

'Mazeikiu Nafta is important for national security,' admitted Lithuanian economics ministry spokeswoman Orijana Jakimauskiene.

Energy security has become an increasingly acute concern in the region since Russia's Gazprom cut gas supplies to Ukraine during a dispute in January. Lithuania's premier recently invited Poland to join the construction of a new nuclear power station in Lithuania.

Orlen's purchase of Mazeikiu Nafta will not be complete until it is approved by competition regulators in the EU, USA and Ukraine.