PKN's Loss-Making Lithuania Refinery Seeks Govt Help

Poland's PKN Orlen asked Lithuania's government on Monday for lower rail transport costs and other help needed to restore its refinery in the Baltic state to full output and profitability.

The 200,000 barrel-per-day Mazeikiai refinery, PKN's second biggest, has been limited to 60 percent of capacity since posting a record net loss of $94.3 million in 2013.
 

"There is an urgent need for certain decisions to be made by both the Lithuanian authorities and other state entities cooperating with (PKN unit) Orlen Lietuva that will allow the Mazeikiai refinery to continue as a viable business," PKN said in a statement.

"At the moment, various further options are being reviewed, including a number of more far-reaching scenarios," PKN said.
 

Audrius Stasiulaitis, a spokesman at Orlen Lietuva, said the refinery's financial situation was "the most serious that it has ever been" and that it was still producing at a loss despite all cost-cutting measures.
 

"We need urgent and concrete actions from the government to lower our logistic costs," he said.
 

Orlen Lietuva is paying 30-40 percent more to transport its oil products on state-owned railways than rivals from Russia and Belarus, which also export their production to Western markets via Lithuania's Klaipedos Nafta oil terminal, Stasiulaitis said.

Lithuania Prime Minister Algirdas Butkevicius, who visited the refinery on Monday, said the situation was dire.

"The largest company in Lithuania faces serious problems due to decreased exports of oil products. We are ready to work together and we hope that we will find an optimal way to solve the current problems," Butkevicius told Reuters.
 

Crude oil imports to the refinery, which can process around 73 million barrels per year, fell to 11 million barrels in the first quarter, down 37 percent from a year earlier.
 

Klaipedos Nafta terminal loadings fell by 47 percent in the first quarter, mainly due to the cut in exports from the refinery.
 

PKN said it had spent nearly $4 billion on acquiring the refinery and related investments since 2006.
 

Refineries in Europe have been hurt by competition from plants in the United States and Asia, and declining demand at home.

Companies have mothballed around 1.8 million barrels per day (bpd) of capacity since 2009.

(Reporting by Andrius Sytas in Vilnius and Michael Kahn in Prague, writing by Nerijus Adomaitis)