PROSECUTORS AND GOL WILL INVESTIGATE CAUSE OF

C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 000944 SIPDIS SIPDIS STATE FOR EUR/NB, EUR/NCE, EB/ESC STATE PLEASE PASS TO FEDERAL TRADE COMMISSION DOE FOR HARBERT DOC FOR 4231/IEP/EUR/BOHIGIAN NSC FOR GRAHAM, MCKIBBEN AND COEN TREASURY FOR LOWERY, LEE AND COX E.O. 12958: DECL: 10/12/2016 TAGS: ENRG EPET PREL LH RS PL SUBJECT: PROSECUTORS AND GOL WILL INVESTIGATE CAUSE OF LITHUANIAN REFINERY FIRE REF: VILNIUS 939 AND PREVIOUS VILNIUS 00000944 001.3 OF 002 Classified By: POL/ECON Section Chief Rebecca Dunham for reasons 1.4 (b ) and (d) 1 (C) Summary: Local prosecutors have launched an investigation into the cause of the October 12 fire at Lithuania's Mazeikiu Nafta oil refinery (MN). The GOL plans to open its own investigative commission as well. There is no evidence yet that the fire was set deliberately. Initial estimates of the amount of damage to the refinery vary wildly. There are no reports of deaths or serious injuries resulting from the blaze. The damage to the refinery may be restricted to the unit producing heavy fuel oil products, leaving gasoline, diesel, and jet fuel production largely unaffected. End summary. -------------- -------------- No evidence of foul play, investigation continues -------------- -------------- ¶2. (C) Jurijus Malininas, a senior prosecutor in the Mazeikiai District, told us October 13 that investigators currently "don't have a single piece of evidence" suggesting that the fire was the result of a deliberate act. He said, however, that his office would investigate all possibilities, including the possibility of deliberate sabotage. ¶3. (U) The prime minister's spokesperson told journalists October 12 that the PM will launch an investigative commission to determine the cause of the fire. The government's well-regarded Government Chancellor (akin to the USG's OMB Director) Valdemaras Serapinas will chair the commission, which will include representatives from several ministries (Interior, Environment, Economy, and Transportation),the State Security Department, MN, and independent experts. -------------- How much damage? Too soon to tell -------------- ¶4. (U) More than 100 firefighters battled the blaze on October 12, bringing it under control within two hours of its outbreak. Dozens of firefighters worked throughout the night battling hotspots and small flare-ups. MN has its own fire brigade, but the size of the conflagration -- flames shot up more than 150 meters, according to eyewitnesses -- required the response of fire services from around the region. There are no reports of injuries or fatalities. ¶5. (SBU) Dr. Vaclovas Miskinis, who heads the Energy Systems Research Laboratory at the Lithuanian Energy Institute, told us that the fire appears to have severely damaged only one part of the refinery, the distillation tower that processes heavy fuel oil into more refined products. He said that production of petroleum products such as gasoline or jet fuel that are not derived from heavy fuel oil should not be severely hampered, because they are distilled from the crude earlier in the production process. (NOTE: Dr. Miskinis does not work at MN and offered us this explanation based on his understanding from press reports of what happened. END NOTE.) ¶6. (U) An MN spokesperson told reporters October 13 that the fire will not affect the production of gasoline and that MN's night shift worked a full production schedule overnight in those production lines not affected by the fire. Local press reports that the PM's office indicated that damages to MN could reach USD 3.6 million to USD 7.2 million and take "months" to repair. These reports emphasized, however, the preliminary nature of these figures. -------------- Effect on PKN deal -------------- ¶7. (U) Local press reports that Poland's PKN Orlen announced on October 13 that the company was ready to cooperate with the GOL and Yukos International (MN's current majority shareholder) to resolve the situation and that the fire will not have a significant impact on its planned purchase of the VILNIUS 00000944 002.3 OF 002 refinery. Other press reports quoted MN's chairman, Nerijus Eidukevicius, saying that only the complete loss of one of MN's operating units, like the refinery or Butinge terminal, would allow PKN to cancel legally its contract to buy MN. A more pessimistic account appeared in the Russophilic daily Respublika. Its coverage emphasized the possibility that, in the fire's wake, PKN might insist on a lower price for the refinery or reconsider its offer entirely. -------------- Comment -------------- ¶8. (C) The MN blaze will continue to attract a great deal of attention: three ministers, including the PM, have already visited the refinery. These GOL officials are (responsibly) avoiding a rush to conclusions about the fire's cause. Somewhat surprisingly, so is the media, at least for now. All eyes will now turn to the investigations, which will take place under considerable public scrutiny. KELLY