(Adds comments by PKN Orlen in paragraphs 3 and 7-9)

By Narijus Adomaitis

VILNIUS, Oct 12 (Reuters) - A fierce fire on Thursday hit production at Lithuania's Mazeikiu Nafta <MNF1L.VL>, the Baltic region's only oil refining complex, which is being bought by Polish company PKN Orlen <PKNA.WA> in a $2.6 billion deal.

Lithuanian Fire and Rescue Department spokesman Giedrius Druktenis told Reuters a 50 metre (164 ft) tower caught fire and collapsed, after which a series of explosions were heard.

PKN said it would study the impact of the fire on Mazeikiu's profitability and hoped it would not disrupt finalisation of the purchase.

Lithuanian deputy Economy Minister Vytautas Nauduzas said his government and PKN were both extremely concerned about the blaze, which broke out in an important part of the complex.

"This is the heart of the refinery," Nauduzas said.

"Of course PKN is worried now and they want to know what damage has occured and who will pay for it," he told Reuters by phone from Warsaw, where he was meeting the group's management.

PKN said that although it did not yet own the refinery, it would try to help Mazeikiu liquidate losses caused by the fire.

"PKN is going to thoroughly analyse the impact of the accident on Mazeikiu's operating capacities and its profitability," the company said in a statement.

Mazeikiu Nafta -- a major outlet for Russian crude oil to European markets -- said in a statement the fire started at 2:34 p.m. (1134 GMT). No-one was seriously hurt.

Mazeikiu said the fire occured after a spillage of oil products at a vacuum distillation unit, a core section of one of three major production centres.

Production completely stopped at one of the three units and the others were on minimal processing capacity for the moment, Mazeikiu spokesman Giedrius Karsokas said.

HUGE DAMAGE

Lithuanian Prime Minister Gediminas Kirkilas told a press conference that he feared grave and costly damage.

"This is one of the main units. Damage could be huge, reaching millions," he said. "It's obvious that the company will have to bear the costs of repair."

He said he hoped the fire could be put out by Thursday night, but there was no guarantee.

A source at the fire department's co-ordination centre said 23 vehicles had been sent to tackle the fire, which initially engulfed 800 square metres (8,611 sq ft) of ground.

Poland's PKN bought control of Mazeikiu in May and the deal is awaiting approval by European competition authorities.

Since PKN won the international bidding race to buy Mazeikiu the refinery has been hit by crude oil supply problems after Russia cut its pipeline, following a reported minor leak.

Some analysts have suggested the interruption may be intended to punish the Lithuanian state for backing PKN's bid over those of competitors favoured by Moscow, or to press the Polish company into withdrawing from the purchase.

The pipeline has yet to be reopened and the complex is being supplied by ocean going tankers, which is more costly.

Mazeikiu, releasing its results in September, said operations had been hurt and it was looking at other suppliers.

Mazeikiu said 8.6 million tonnes of crude would be delivered to the refinery in 2006, compared with 9 million in 2005.

PKN has said previous news reports which quoted its management saying the company could walk away from its purchase under the contract terms -- if Mazeikiu's share price fell substantially -- had been misinterpretations.

On Thursday Lithuania's deputy economy minister told Reuters both sides were keen to push the deal forward to completion.

It is expected to get approval from Brussels in November.

(Additional reporting by Ewa Krukowska in Warsaw)

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