At the center of the storm is Mazheikiu Nafta, the largest oil refinery in the Baltics. It's fate hangs in the balance until Monday, when Lithuanian ministers are expected to approve the sale of 28.6 percent of the refinery to Russian No. 2 Yukos.
According to the deal struck last week between energy multinational Williams and Yukos, Yukos will pay $75 million for the stake and contribute another $75 million toward refinery modernization. Yukos would also provide 4.8 million tons, or 35 million barrels, per year under a 10-year supply agreement.
Williams' stake ?€” now at 33 percent ?€” would decrease to 28.6 percent, putting it on an equal footing with Yukos.
Lithuania's Cabinet was supposed to give the nod Wednesday, but the resignation of Prime Minister Rolandas Paksas precluded such approval. Interim Prime Minister Eugenijus Gentvilas ?€” currently the economic minister ?€” said he would push approval of the Yukos deal through the government.
"Everything has been prepared and proposed," wire services quoted Gentvilas as saying Thursday.
But when a disgruntled LUKoil, Russia's No. 1 oil company, is involved, anything is possible, said Daries Silas, spokesman for Williams' Lithuanian division. In 1999, Williams ?€” an energy and telecommunications company based in Tulsa, Oklahoma ?€” bought 33 percent of Mazheikiu Nafta for $75 million in a controversial privatization and became the refinery's operator.
LUKoil and Williams spent all of last year negotiating a partial sale of the stake, but talks broke down in December when the oil company reneged on earlier agreements, said Stan Polovets, an advisor to Williams.
But the relationship between the two had soured long before then, after LUKoil interrupted crude oil supplies to the refinery. Not only was LUKoil the main supplier, it also coordinated crude oil shipments from other oil companies.
Polovets said that consequences of last year's supply interruptions cost Mazheikiu Nafta $38 million.
LUKoil has long denied such charges, and LUKoil Baltic division head Ivan Paleychik said the company will not give up on the refinery so easily.
"The stance of the Lithuanian government is improper," Paleychik told reporters. "Yukos is taking a great risk."
LUKoil wants a tender be held for the stake, with open participation for all Russian companies.
LUKoil can offer better terms: It is ready to offer $5 million more for the stake. And it says it can supply 6 million tons of crude oil per year, compared to Yukos' 4.8 million tons, Paleychik said.
"Yukos has proved to be a reliable partner," Polovets said. "Williams manages Mazheikiu Nafta, and a new, undesirable partner can't be forced on the managers." The relationship between the two companies strengthened when Yukos signed a series of supply agreements with Mazheikiu Nafta last year.
Yukos has no problems with LUKoil coordinating crude supplies and is ready to work with its domestic rival, Yukos CEO Mikhail Khodorkovsky said.
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