The largest oil refiner in Poland and central Europe, PKN Orlen signed an agreement in May to buy 53.7% of shares in MN from Russia's bankrupt Yukos Oil Company [RTS:YUKO] for $1.49 billion, and the Lithuanian government has offered another 30.66% for $852 million. PKN Orlen is eventually seeking 100% ownership in the Lithuanian company.
"An official application to the European Commission will be made in the next few days, and we must wait for the Commission's decision and finalize a number of issues on the completion of the deal," Chief Executive Igor Chalupec told journalists after a meeting with Lithuanian Prime Minister Gediminas Kirkilas. "I do not think it will take much time, and we are planning to complete [the deal] in November."
The European Commission is the executive arm of the European Union.
The MN complex comprises the eponymous oil refinery, with an annual capacity of 12 million metric tons, an oil terminal at the port of Butinge with an 8-million-ton annual capacity, and an oil pipeline. Before the agreement with the Polish firm, Russia's LUKoil [RTS: LKOH], Anglo-Russian TNK-BP, and Kazakhstan's KazMunaiGaz had bid for the company.
After an accident on the Druzhba pipeline in western Russia in July, crude supplies to Mazeikiu Nafta were interrupted, and have not been fully resumed, which put the deal in doubt. Some analysts claimed the cutoff was Moscow's punishment for Lithuania's decision not to sell the company to a Russian producer.
Media reports appeared that the Polish company was looking to sell the stake to LUKoil, but Chalupec denied them Wednesday. "This is against our interests and an attack on our good name," he said, adding that the allegations aimed to hamper the "transparent" deal.
Russia's no.1 crude producer also refuted reports that the companies were in talks on a new deal. LUKoil Vice President Leonid Fedun said Monday, "It is true that LUKoil was at one point in talks with the Lithuanian government on buying a stake in Mazeikiu Nafta. But now no such talks on this company are being held with anyone, least of all with PKN Orlen, which has actually not yet closed the deal on buying shares in Mazeikiu Nafta, and so cannot be the seller of these assets."
Chalupec said he was looking to meet with Semyon Vainshtok, president of Russian pipeline monopoly Transneft [RTS:TRNF], to discuss a number of issues, including the technical condition of Transneft's pipeline system. He said he hoped oil supplies to MN would resume soon.
"We hope these are technical problems that Transneft will solve properly," Chalupec said. He mentioned that his company could provide oil supplies to the MN from its storage facilities.
The leak on the Russian pipeline forced Mazeikiu to switch to supplies via sea and the Butinge terminal, but supplies ended after repair works started on the terminal and the refinery has only used oil in its storage since then.