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Mazeikiu Nafta's Statement

Company operations have been organized to ensure petroleum product supplies

Mazeikiu Nafta's Statement

MAZEIKIU - Following an incident at refinery on October 12, 2006, Management of AB Mazeikiu Nafta has developed the action plan for emergency response.

Company operations have been organized to ensure petroleum product supplies to the Baltic markets (i.e. Lithuania, Latvia, and Estonia) with minimum impacts.

Crude oil refining is continued. The past incident capacity of Mazeikiu nafta refinery is 15,000 tons per day excluding the Vacuum unit.

Following the immediate incident, refinery operations will transition through two or more stages of recovery before returning to normal and optimal operations. The company estimates that it will take from 6 to 9 months until refinery can return to pre-fire daily throughput of 27,400 tons a day.

Financial impact
Based on the preliminary assessment, incident associated damages are estimated to be between 62 million and 131 million Litas (between 22.5 and 47.5 million USD). 2006 net profit of the Company is forecasted to be reduced due to the incident by 105 million Litas (38 million USD).

Insurance
As previously reported AB Mazeikiu Nafta has property and business interruption losses insured in the international insurance market via the broker AON Limited, London. The biggest insurance risk part (46.2 %) is shared among three companies: Liberty International Underwriters (London, UK), AIG Europe (UK) Limited and SCOR UK Company Limited. Property is insured under reinstatement value. AB Mazeikiu Nafta liability insurance is secured in the international insurance market as well.

2/2 Statement of AB Mazeikiu Nafta

Investigation
Currently the Company is involved in a thorough investigation of the incident supported by industry experts and including the involvement of state institutions. Upon completion of the investigation and more detailed assessment of the damage an adjusted estimate of greater accuracy will be developed and hopefully the true cause of the incident will be identified and understood with the ultimate goal of prevention of recurrence.


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