ECONOMY

HELPE considers pulling out from OKTA refinery

Refiner Hellenic Petroleum (HELPE) is considering its withdrawal from the Former Yugoslav Republic of Macedonia (FYROM) as there appears to be no way out of its deadlocked investment in the OKTA refinery in Skopje and the pipeline carrying crude oil from Thessaloniki, sources say. It now seems the Greek group will have no choice but to shut down the refinery in the neighboring country, in which it hastened to invest in 1999, only to find that FYROM’s political instability and its underdeveloped energy market hamper its business prospects. As the future of the pipeline depends on that of the refinery, HELPE managers now say that the only way for the pipeline to become operational is to have it transformed into a «byproduct pipeline,» which would demand additional investment and is viewed with skepticism. The dispute, regarding what the FYROM government claims are OKTA’s monopoly rights in the local market, is still in the process of international arbitration. After also seeking a friendly settlement to no avail, HELPE has now hardened its stance as a means of last resort for pressure on Skopje. It is now threatening to shut down OKTA, which has been in the red for the last two financial years, raising a major social issue for the FYROM government as the refinery employs 1,250 workers. The Greek group argues that the violation of terms of contract by Skopje, for which it is seeking redress through arbitration and compensation, is throwing the viability of the concern into jeopardy. The viability of the investment was indeed based on privileged contractual terms, which HELPE secured for a five-year period. These concerned a prohibition on the exportation of products produced by OKTA and the FYROM government’s commitment to buy 500,000 tons of fuel oil annually. Both terms were violated, as Skopje freed imports much earlier, leading to OKTA losing significant market shares, and purchased fuel from Makpetrol, a local petroleum marketing company. To be sure, HELPE’s investment of more than $190 million in OKTA had raised questions regarding its scope from the start, described as high-risk, at a time when the war in Kosovo was still raging. The deal also became the focus of political conflict in FYROM, with the then-opposition criticizing it as «colonial,» and violating its key terms when it came to power.