VILNIUS, Feb 8 (AFP) - Embattled Russian oil company Yukos has agreed to start talks to cede control of Mazeikiu Nafta, which operates the only oil refinery in the Baltic states, to Lithuania, the economy minister said here on Tuesday.
"We have agreed to establish a working group and to start negotiations on our offer to execute the option for Mazeikiu Nafta shares, to cancel the agreement on management rights and to appoint two more Lithuanian representatives to the Mazeikiu Nafta board," Lithuanian Economy Minister Viktor Uspaskich said.
He was speaking after meeting a high-level delegation from Yukos.
The chairman of the Yukos board Steeven Theede, finance director Bruce Misamore, and the president of Yukos RM Michail Elfimov are in Vilnius for a series of talks on Mazeikiu with high-ranking government officials, including Uspaskich, Prime Minister Algirdas Brazauskas adn President Valdas Adamkus.
On the agenda are an option for Yukos to increase its stake in Mazeikiu by exercising its right to purchase a new share issue, which Vilnius has opposed.
Also under discussion is the weekend cut-off of crude supplies from Yukos to the Baltic refinery.
The talks come against the backdrop of a long-running campaign by Moscow to reclaim back taxes from Yukos, which is being slowly dismantled to pay a tax bill that stands at more than 10 times the company's market capitalisation.
Yukos currently holds a 53.7-percent stake and management rights in Mazeikiu Nafta, while the Lithuanian government controls 40.6 percent of shares in the company.
The Lithuanian government wants to regain a controlling stake in Mazeikiu Nafta and last month offered to buy a nearly 10 percent new issue in the refinery which Yukos has an option on.
The price for the Mazeikiu Nafta stake during the option would be considerably lower than its current market price, which rocketed by about 25 percent last month in anticipation of dividends after reports of record profits of some 600 million litas (173.7 million euros) last year.
Analysts say Yukos, in seeking an escape hatch from its financial strains, could sell its stake in Mazeikiu Nafta and bring in a much-needed 850 million dollars (643 million euros) to its depleted coffers. Vilnius is interested in acquiring the stake because it would boost its share of Mazeikiu to more than 50 percent.
The refinery, meanwhile, has not received oil since Saturday, after supplies of crude from Yukos -- which provides more than 60 percent of the oil refined by Mazeikiu -- were cut off.
Since Saturday, the refinery has been operating on the so-called "hot regime", which costs the company about 1.0 million litas (289,620 euros) per day.
Under the "hot regime", all equipment at the refinery continues to operate, but without oil. The operating regime is put into effect when there is a break in supplies of crude that is expected to last only a short while, since it is much more expensive to shut down the refinery entirely and restart it when supplies resume.
But after talks with the the Yukos delegation earlier on Tuesday, Brazauskas said: "Crude is to come on Tuesday in a matter of hours.
"The supply of crude to Mazeikiu has been confirmed for the whole first quarter and recent interruptions are related only to technical problems. This is not a political decision to halt the supply of oil," said Brazauskas.
The last time the refinery's oil supply was cut off was in 2002, before Yukos took control of Mazeikiu Nafta from US firm Williams.
Last year Yukos provided Mazeikiu Nafta with 8.66 million tons of crude, and Mazeikiu exported 7.2 million tons via the Butinge off-shore terminal, which the company also runs.
The Mazeikiu Nafta complex includes a refinery, the Butinge offshore terminal and a pipeline.
The company last year earned some 600 million litas (173.7 million euros) and predicts profits of 244 million litas (70.7 million euros) this year.
02/08/2005 12:57 GMT - AFP