Mazeikiu Nafta announced on Tuesday that it had imported 100kt of Urals crude oil via its Butinge terminal to complement crude oil feedstock purchases via pipeline. Reflecting to the news, Mazeikiu spokesman insisted that it way always possible to supply the refinery by sea if needed. Mr Karsokas added that Mazeikiu plans processing 8.6m tonnes of crude oil this year, without explaining how much would arrive via pipeline and how much via the sea.
Our view: Although it is definitely an option for Mazeikiu to buy Urals through the Butinge terminal, the cost of this crude is much higher. Due to the twice loading of crude the difference could reach US$ 2-3 per barrel, which lowers profitability of the refinery substantially. Please note that last year Mazeikiu reached US$ 4.5 profit per barrel, so crude purchases via the see terminal could cut deep into profits. We see this news as slightly positive for PKN group, as it highlights the option of Mazeikiu to secure feedstock supply. However, we do not believe that it is an option for PKN to fully supply Mazeikiu refinery through the Butinge terminal.