Courtesy of Orlen

State-controlled refiner Orlen has officially acknowledged that it might sell its loss-making Orlen Lietuva refinery in Mažeikiai, Lithuania. It has hired Japanese investment bank Nomura to advise it on how to proceed.

“One scenario sees a total or partial sale of the refinery,” Sławomir Jędrzejczyk, Orlen's deputy president, told daily Puls Biznesu. “The decision will be made in the fourth quarter.”

Nomura has been chosen to research all possible scenarios concerning the future of the refinery, before presenting them in the fourth quarter. The bank will look into offers from potential investors, see what packages interest them and what they are willing to offer.

“The task of the adviser will be the verification of possible realizations of different scenarios – from upholding the present ownership situation and continued building up of the Lithuanian company's worth, to scenarios of partial or total sale of the shares,” Orlen said in a press statement.

Recent media reports have suggested the refinery could be sold to a Russian concern, a scenario that has worried the Lithuanian government.

The management said that the company is not, however, currently holding talks of a specific nature and will not politicize the decision. “Presently, no scenario is preferred – the choice will be determined only by business conditions,” Jacek Krawiec, Orlen's president, said in the statement.

Speculation has been building for months that Orlen would eventually tire of the unwillingness of Lithuanian authorities to help it improve operating conditions, and will as a result offload the refinery.

According to daily Dziennik Gazeta Prawna, Orlen has invested a total of $3.7 billion in the refinery since 2006. Its value is presently assessed at $1.6 billion, but Orlen has not been able to make it profitable.

The refinery has to be supplied with fuel by train, after the necessary raw materials have been shipped in to the Lithuanian port of Klaipėda. The process is expensive and Lithuanian authorities have not met Orlen's demands to help it lower transshipment costs.

The refiner had asked for a 19 km rail connection to be built by September between Mažeikiai and the Latvian border, which would allow it to transship raw materials at significantly lower rates. Lithuania, though, says it will only be able to build the tracks by 2012.