Mažeikiu Nafta
Encyclopedia
ORLEN Lietuva is a company centered around the Mažeikiai oil refinery
and oil-processing plant in Lithuania
. It includes the only refinery in the Baltic States
.
, has a design processing capacity of 15 million tons of crude oil per year. However, it is more efficient to process around 8 million tons of crude oil, while using the remaining capacity for processing other feedstock. Historically, the primary feedstock has been Russian crude oil transported via the Druzhba pipeline
, however the relevant branch of this system has been closed in Russian territory since July 2006, ostensibly for repairs. Crude oil is now being supplied by the Būtingė Terminal (see below). The Mažeikiai refinery is the only oil refinery in the Baltic States
.
and another near Joniškis
, crude oil pipelines to the Mažeikiai
Refinery and Būtingė
Terminal, a crude oil pipeline leading to Ventspils
, and another products pipeline supplying diesel fuel to the same location.
Construction of pipelines in Lithuania started in 1966, with the first crude oil being put through them in 1968. In 1992, the company Naftotiekis was founded for the operation of Lithuanian pipelines, which became part of Mažeikių Nafta in 1998.
on the Lithuanian coastline near the town of Būtingė
, north of Palanga
. The project began in 1995 when the company Būtingės Nafta was established for the purpose of constructing and operating the Terminal. In 1998, Būtingės Nafta was merged into Mažeikių Nafta.
The first tanker was loaded in Būtingė in the summer of 1999 and took on board a shipment of YUKOS crude oil. The Terminal can export up to 14 million tons of crude oil a year but can also function as an import terminal.
During the construction of the facility, an environmental monitoring program was introduced that includes tests of sea and ground waters. With the start of the terminal operations, an expanded environmental monitoring program was launched. This included a computer-based leak detection system.
The complex of the Būtingė Terminal consists of a crude oil pipeline that connects the facility with the Mažeikiai Refinery inland, onshore terminal equipment and tanks at Būtingė, an offshore pipeline, and a single point mooring (SPM) buoy which lies 7km offshore.
The sales of Mazeikiu Nafta's products were split (by sales volume) as:
, a group based in the USA. Later, Williams ran into financial trouble, and their stake in Mažeikių Nafta was bought by the Russian company Yukos
.
However, in 2003 Yukos ran afoul of the Russian authorities and was required to pay billions of dollars in taxes. Facing bankruptcy, Yukos began to sell off its assets, including Mažeikių Nafta.
Several potential buyers from Russia
, Kazakhstan
and Poland
showed interest in acquiring the refinery, whose majority stakeholder was now Yukos International, a Yukos syndicate. After several months of talks the proposal from Polish company PKN Orlen
was found most lucrative and chosen. Additionally, it was deemed most desirable by Lithuania, which has been aiming to avoid the refinery and infrastructure being bought out by Russian interests.
The agreement between Orlen and Yukos International to buy out the latter's 53.7% stake in the company, was made in June 2006. Several weeks later, PKN Orlen signed a deal with the Lithuanian government to buy a further 30.66%. The European Union
's regulatory authority approved the deal on November 7, after ruling that it would not significantly harm competition in the European economic area or any substantial part of it. The buyout was finalized on 15 December 2006, with USD 1,492,000,000 being paid by PKN Orlen to Yukos International, and USD 851,828,900.31 to the Lithuanian Government.
n border. There were no casualties among personnel.
Damages incurred are estimated around 38 million Euro, as well as around 30 million in lost revenue due to production losses. While significant, when compared with the total output and profits of the plant, they are not as large as had been feared.
Initially, after the fire, serious doubts were raised by various media over whether PKN Orlen would go through with the deal to buy the company (although these were immediately denied by Orlen representatives). In the end, the blaze did not stop the takeover from going ahead.
Suspicions were raised by various high-profile persons as to whether the fire was an accident, or industrial sabotage on the part of the Russian energy companies in revenge for not being offered to buy the company. Notably, perhaps, the vice-leader of the Russian Duma, Konstantin Kosachev had said that "instability will continue to plague the refinery until the Lithuanians finally realize which partners one should choose" only a few hours before the start of the blaze. However, no evidence of foul play has been revealed since the blaze.
Oil refinery
An oil refinery or petroleum refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas...
and oil-processing plant in Lithuania
Lithuania
Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark...
. It includes the only refinery in the Baltic States
Baltic states
The term Baltic states refers to the Baltic territories which gained independence from the Russian Empire in the wake of World War I: primarily the contiguous trio of Estonia, Latvia, Lithuania ; Finland also fell within the scope of the term after initially gaining independence in the 1920s.The...
.
Refinery
The Mažeikiai refinery, located near the town of MažeikiaiMažeikiai
Mažeikiai is a city in the north-western Lithuania, on the Venta River. It has a population of around 45,300, making it the eighth largest city in Lithuania. The city is the administrative center of Mažeikiai district municipality in Telšiai County. It is the largest city that does not have its...
, has a design processing capacity of 15 million tons of crude oil per year. However, it is more efficient to process around 8 million tons of crude oil, while using the remaining capacity for processing other feedstock. Historically, the primary feedstock has been Russian crude oil transported via the Druzhba pipeline
Druzhba pipeline
The Druzhba pipeline is the world's longest oil pipeline and in fact one of the biggest oil pipeline networks in the world. It carries oil some from the eastern part of the European Russia to points in Ukraine, Belarus, Poland, Hungary, Slovakia, Czech Republic, and Germany...
, however the relevant branch of this system has been closed in Russian territory since July 2006, ostensibly for repairs. Crude oil is now being supplied by the Būtingė Terminal (see below). The Mažeikiai refinery is the only oil refinery in the Baltic States
Baltic states
The term Baltic states refers to the Baltic territories which gained independence from the Russian Empire in the wake of World War I: primarily the contiguous trio of Estonia, Latvia, Lithuania ; Finland also fell within the scope of the term after initially gaining independence in the 1920s.The...
.
Pipeline System
Mažeikių Nafta operates a system of pipelines with a total length of around 500 kilometers. This system includes two pump stations near BiržaiBiržai
Biržai is a city in northern Lithuania. Biržai is famous for its reconstructed Biržai Castle manor, and the whole region is renowned for its many traditional-recipe beer breweries.-Names:...
and another near Joniškis
Joniškis
Joniškis is a city in northern Lithuania with a population of about 11,150. It is located 40 kilometers north of Šiauliai and 14 kilometers south of the Lithuania–Latvia border...
, crude oil pipelines to the Mažeikiai
Mažeikiai
Mažeikiai is a city in the north-western Lithuania, on the Venta River. It has a population of around 45,300, making it the eighth largest city in Lithuania. The city is the administrative center of Mažeikiai district municipality in Telšiai County. It is the largest city that does not have its...
Refinery and Būtingė
Butinge
Būtingė is a small village at the coast of the Baltic Sea in the north of Lithuania, at the border to Latvia. It belongs to the municipality of Palanga, and is situated 17 km north of the town Palanga...
Terminal, a crude oil pipeline leading to Ventspils
Ventspils
Ventspils is a city in northwestern Latvia in the Courland historical region of Latvia, the sixth largest city in the country. As of 2006, Ventspils had a population of 43,806. Ventspils is situated on the Venta River and the Baltic Sea, and has an ice-free port...
, and another products pipeline supplying diesel fuel to the same location.
Construction of pipelines in Lithuania started in 1966, with the first crude oil being put through them in 1968. In 1992, the company Naftotiekis was founded for the operation of Lithuanian pipelines, which became part of Mažeikių Nafta in 1998.
Būtingė Marine Terminal
The Būtingė Terminal is a facility owned by Mažeikių Nafta, situated in an all-year-round ice-free area of the Baltic SeaBaltic Sea
The Baltic Sea is a brackish mediterranean sea located in Northern Europe, from 53°N to 66°N latitude and from 20°E to 26°E longitude. It is bounded by the Scandinavian Peninsula, the mainland of Europe, and the Danish islands. It drains into the Kattegat by way of the Øresund, the Great Belt and...
on the Lithuanian coastline near the town of Būtingė
Butinge
Būtingė is a small village at the coast of the Baltic Sea in the north of Lithuania, at the border to Latvia. It belongs to the municipality of Palanga, and is situated 17 km north of the town Palanga...
, north of Palanga
Palanga
Palanga and beautiful sand dunes. Officially Palanga has the status of a city municipality and includes Šventoji, Nemirseta, Būtingė and other settlements, which are considered as part of the city of Palanga.-Legend:...
. The project began in 1995 when the company Būtingės Nafta was established for the purpose of constructing and operating the Terminal. In 1998, Būtingės Nafta was merged into Mažeikių Nafta.
The first tanker was loaded in Būtingė in the summer of 1999 and took on board a shipment of YUKOS crude oil. The Terminal can export up to 14 million tons of crude oil a year but can also function as an import terminal.
During the construction of the facility, an environmental monitoring program was introduced that includes tests of sea and ground waters. With the start of the terminal operations, an expanded environmental monitoring program was launched. This included a computer-based leak detection system.
The complex of the Būtingė Terminal consists of a crude oil pipeline that connects the facility with the Mažeikiai Refinery inland, onshore terminal equipment and tanks at Būtingė, an offshore pipeline, and a single point mooring (SPM) buoy which lies 7km offshore.
Company
According to a recent report, results for the first nine months of 2006 were as follows:- 3,610 million $US revenue,
- 134 million $US net profit,
- Refined 6.77 million tons of crude oil and other feedstock,
- Sold 6.44 million tons of refined products,
- The Butinge terminal exported 2.93 million metric tons of crude oil, and imported 54 million metric tons.
The sales of Mazeikiu Nafta's products were split (by sales volume) as:
- 39% to Western EuropeWestern EuropeWestern Europe is a loose term for the collection of countries in the western most region of the European continents, though this definition is context-dependent and carries cultural and political connotations. One definition describes Western Europe as a geographic entity—the region lying in the...
- 22% to Lithuania
- 18% to the USA
- 7% to EstoniaEstoniaEstonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
- 7% to LatviaLatviaLatvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
- 5% to PolandPolandPoland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
- 2% to UkraineUkraineUkraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
and MoldovaMoldovaMoldova , officially the Republic of Moldova is a landlocked state in Eastern Europe, located between Romania to the West and Ukraine to the North, East and South. It declared itself an independent state with the same boundaries as the preceding Moldavian Soviet Socialist Republic in 1991, as part...
(combined)
Sale of the Company
The company was first privatized by the Lithuanian government in 1999, when it was bought by Williams CompaniesWilliams Companies
The Williams Companies, Inc. is an energy company based in Tulsa, Oklahoma. Its core business is natural gas exploration, production, processing, and transportation, with additional petroleum and electricity generation assets...
, a group based in the USA. Later, Williams ran into financial trouble, and their stake in Mažeikių Nafta was bought by the Russian company Yukos
YUKOS
OJSC "Yukos Oil Company" was a petroleum company in Russia which, until 2003, was controlled by Russian oligarch Mikhail Khodorkovsky and a number of other prominent Russian businessmen. After Yukos was bankrupted, Khodorkovsky was convicted and sent to prison.Yukos headquarters was located in...
.
However, in 2003 Yukos ran afoul of the Russian authorities and was required to pay billions of dollars in taxes. Facing bankruptcy, Yukos began to sell off its assets, including Mažeikių Nafta.
Several potential buyers from Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
, Kazakhstan
Kazakhstan
Kazakhstan , officially the Republic of Kazakhstan, is a transcontinental country in Central Asia and Eastern Europe. Ranked as the ninth largest country in the world, it is also the world's largest landlocked country; its territory of is greater than Western Europe...
and Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
showed interest in acquiring the refinery, whose majority stakeholder was now Yukos International, a Yukos syndicate. After several months of talks the proposal from Polish company PKN Orlen
PKN Orlen
PKN Orlen is a major European oil refiner, and petrol retailer. The company is Poland's and Central Europe's largest publicly traded firm with major operations in Poland, Czech Republic, Germany, and the Baltic States...
was found most lucrative and chosen. Additionally, it was deemed most desirable by Lithuania, which has been aiming to avoid the refinery and infrastructure being bought out by Russian interests.
The agreement between Orlen and Yukos International to buy out the latter's 53.7% stake in the company, was made in June 2006. Several weeks later, PKN Orlen signed a deal with the Lithuanian government to buy a further 30.66%. The European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
's regulatory authority approved the deal on November 7, after ruling that it would not significantly harm competition in the European economic area or any substantial part of it. The buyout was finalized on 15 December 2006, with USD 1,492,000,000 being paid by PKN Orlen to Yukos International, and USD 851,828,900.31 to the Lithuanian Government.
Major fire in October 2006
On October 12, 2006, a major fire erupted in the plant around 2:30 pm. The cause appears to have been a leak. The fire was extinguished after 8 pm the same day, although some spot fires were still being put out the next day. During the fire, a 50 meter height vacuum tower collapsed, oil products leaked out, and a series of explosions were heard; The blaze covered about 800 square meters at one point. 23 firefighting vehicles were brought into the scene of the accident and eyewitness accounts said that fires reached 150m in height and could be seen from several kilometers away. A Black cloud of smoke could be seen from a great distance, and drifted towards the nearby LatviaLatvia
Latvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
n border. There were no casualties among personnel.
Damages incurred are estimated around 38 million Euro, as well as around 30 million in lost revenue due to production losses. While significant, when compared with the total output and profits of the plant, they are not as large as had been feared.
Initially, after the fire, serious doubts were raised by various media over whether PKN Orlen would go through with the deal to buy the company (although these were immediately denied by Orlen representatives). In the end, the blaze did not stop the takeover from going ahead.
Suspicions were raised by various high-profile persons as to whether the fire was an accident, or industrial sabotage on the part of the Russian energy companies in revenge for not being offered to buy the company. Notably, perhaps, the vice-leader of the Russian Duma, Konstantin Kosachev had said that "instability will continue to plague the refinery until the Lithuanians finally realize which partners one should choose" only a few hours before the start of the blaze. However, no evidence of foul play has been revealed since the blaze.