Bulgaria's oil refinery halts production over lost licences

27th July 2011, Comments 0 comments

Bulgaria's sole oil refinery, Russia-owned Lukoil Neftochim Burgas, said on Wednesday it was halting production after the customs agency stripped it of two key licences necessary for its operations.

"We are... following the (agency's) instructions. We have put the refinery on an emergency operations regime and lowered production with a view to halting it for the time being," Neftochim supervisory board member Valentin Zlatev told journalists.

Bulgaria's customs agency said in a statement on Wednesday that it had withdrawn the company's licences to operate its two so-called tax warehouses, where excise goods such as oil and fuels can be produced or stocked before being subjected to a duty.

The decision, which entered into force late on Tuesday, was prompted by Neftochim's failure to install important online connections between the fuel metres at the warehouses and the Bulgarian revenues agency by mid-June.

As a result, "the company no longer has the right to refine oil and sell fuel on the Bulgarian market," customs chief Vanyo Tanov explained.

However, it can still process crude oil already in the refinery, he said.

Neftochim is Bulgaria's leading producer and supplier of fuel with a 40-percent market share and a capacity of 142,00 barrels per day, finance ministry data shows.

The company, which has one of the largest petrol station chains in Bulgaria with about 200 branches, makes up 9.0 percent of Bulgarian gross domestic product (GDP) and also exports fuel to neighbouring Serbia, Macedonia, Greece and Turkey.

Finance Minister Simeon Djankov assured journalists before meeting Lukoil officials in Sofia on Wednesday: "There will not be a (fuel) shortage."

"We have to show that both the large and the small companies are equal before the law and have to abide by its requirements," he added to explain the licence decision.

According to Tanov, Neftochim could have its licences back "within the next two, three months" if it links its meters to the revenue agency soon.

The finance ministry required this from all petrol station owners to better monitor the payment of excise duties and taxes.

Dmitry Dolgov, a spokesman for Russia's Lukoil, told national radio from Moscow that the company thought it had until the end of the year to install the links.

"We were mistaken... We are now in talks with the Bulgarian authorities on finding a solution," he said, adding he hoped normal production could resume on Thursday or "Friday at the latest."

© 2011 AFP

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