YUKOS suspends some oil export contracts

YUKOS's Geneva-based trading unit Petroval declared force majeure under a contractual clause that covers circumstances outside its control.

Bailiffs sold YUKOS's main production unit last month, leaving the firm without oil to meet export obligations.

"We have issued force majeure notices against some old long-term Russian crude oil contracts ... starting from January," a Petroval representative told Reuters. "It does not involve all contracts."

Russia has been keen to stress that YUKOS's problems will not lead to a drop in export supplies and within hours of the announcement YUKOS's rivals had begun to carve up the company's pipeline contracts in Eastern Europe.

Hungarian oil and gas group MOL said it had signed a five-year supply contract with LUKOIL for the shipment of 5 million tonnes of crude yearly to Hungary and Slovakia.

"We had to ensure safe supplies for Hungary so we had to take a step in the YUKOS issue," a MOL official told Reuters.

YUKOS supplied Slovakia and Hungary with over half their oil imports, or 350,000 tonnes a month each, and Poland with a third of its imports, or more than 500,000 tonnes a month.

"Up until now MOL has been trying to link up with YUKOS," said one London-based industry analyst. "But this strategy has been abandoned and today's deal with LUKOIL is only the first step."

"The way things stand, LUKOIL is for the moment the strongest partner in Russia ... and stands to gain most from dealings with central European firms such as MOL and (Poland's) PKN."


SUPPLIES SEEN STEADY

The shrinking of YUKOS's export programme is the latest chapter in the demise of Russia's one-time largest oil firm under a judicial crackdown widely seen as Kremlin punishment for the political ambitions of its founder Mikhail Khodorkovsky.

In December, YUKOS lost 1 million barrels per day, or over 60 percent, of its oil output when bailiffs auctioned off its main production unit Yuganskneftegaz to recover some of the company's $27.5 billion back-tax bill.

Yugansk is now controlled by state oil firm Rosneft, but YUKOS and its shareholders have vowed to challenge the sale in international courts.

Confusion around one of the world's largest energy firms has helped boost world oil prices in the past year, but traders said the force majeure move only reflected the inability of YUKOS to punch at its former weight.

"The overall volume of Russian exports won't be affected as Yugansk's oil will in any case be exported by Rosneft. It won't affect seaborne exports at all," a trader at a Western major said.

But the MOL contract is unlikely to be the last pipeline export deal to be seized by rivals.

Traders said YUKOS's supplies to Poland were proceeding as normal, but officials in the Baltic state of Lithuania said on Wednesday they were searching for new suppliers to ship to the Mazeikiu refinery as YUKOS was falling behind with deliveries.

Mazeikiu Nafta is controlled by YUKOS and the Russian firm supplies over 80 percent of Lithuania's oil imports. YUKOS's refined oil product exports were still loading from Baltic ports as usual, traders said.

But Austria's OMV said it would get oil from other Russian sources if YUKOS failed to honour a 10-year supply deal due to start in January 2006. (Additional reporting by Krisztina Than in Budapest, Wojciech Moskwa in Warsaw, Louis Charbonneau in Vienna and Stefano Ambrogi in London)

Source: Reuters