"In order to maintain the refinery, we need [tax] benefits that are generally applied in Kaliningrad," LUKoil Vice President Leonid Fedun said. "It is unlikely that we will get these benefits, so there will be no refinery, at least with our participation."
At the same time, the company is considering alternative sites for a plant, following acquisitions made by the firm's strategic partner, US oil major ConocoPhillips, Fedun said.
LUKoil initially announced its plans to build a refinery in the Russian Baltic exclave of Kaliningrad as far back as in 2000. The development of the plans were regarded mostly as a strategic move to put pressure on Lithuania's Mazeikiu Nafta refinery, in which LUKoil has long been interested as a gateway to European market, than a concrete and economically viable project.
In a December 13, 2005 article, Lithuania's Litovskaya Narodnaya Gazeta newspaper quoted Kaliningrad Governor Georgy Boos as saying: "LUKoil Baltija head Ivan Paleichik has not ruled out the possibility that LUKoil may decide to build a refinery if it fails to get the shares of the Lithuanian oil complex. 'If the refinery is built, Mazeikiu Nafta will be of no interest."
A 53.7% stake in Mazheikiu Nafta, currently owned by Russian oil firm Yukos, is up for sale as Yukos attempts to pay off its multi-billion dollar back tax bills.
