No quick decision seen to sell PKN Orlen stake

Hungarian and Austrian oil groups MOL and OMV may have to wait until next year to know whether either will obtain a stake in Poland's top refinery Polski Koncern Naftowy Orlen (PKN Orlen), Poland's energy privatization chief said last week. The outcome and the timing of the sale of 17.6% of PKN Orlen - Central Europe's largest refining group - is seen as key for the three companies as they vie for primacy in the regional market. "The chance that we will return to talks over PKN Orlen with the two investors this year are very small," said Maciej Gierej, the head of the energy industry privatization agency Nafta Polska. "Also it is no secret that the new government has a very different approach to privatization as such, and certainly does not take this deal for granted." The sale, initiated by the former government, was to forge a Central European player capable of competing with global majors as regional markets open up ahead of the European Union's eastward enlargement set for 2004. But Poland's seven-month-old leftist government has put the tender on ice, saying the merits of the deal had to be carefully reviewed, especially in view of the ongoing sale of PKN Orlen's smaller domestic peer, Rafineria Gdańska.

Croatian bids The decision to put the sale on hold has left OMV and MOL second-guessing the fate of their bids and has made it more difficult for the three companies involved to plan new acquisitions, such as that of Croatia's Ina refinery. The three are among 10 bidders for the 25% plus one share in Ina, with the Croatian government expected to shortlist preferred partners for the refinery next month. Meanwhile, PKN Orlen is lobbying in favor of a merger with Rafineria Gdańska - plans so far opposed both by the smaller refinery's management and the Treasury Ministry. Nafta Polska, which wants to sell 75% of Gdańska to an Anglo-Russian consortium, said it would not make any decisions on the PKN Orlen stake before knowing the result of the ongoing negotiations. A group including U.K.-based Rotch Energy and Russia's largest oil concern Lukoil also was interested in the Baltic-coast refinery. A binding offer for the stake is expected later this month. "If we get the offer, we could close the Gdańska deal before the end of the year," Gierej said.

Expansion anyway Gdańska's partnership with cash- and oil-rich Lukoil would likely to boost the competitiveness of the 85,000-barrels-per-day refinery, whose operations are now squeezed by a much larger PKN Orlen. "If Gdańska gets an investor, the situation on the Polish market will change drastically, and I think that PKN Orlen's determination to strengthen not only domestically, but also regionally, will grow," Gierej said. Gierej said he also saw scope for PKN Orlen to boost its position as Poland's top petrochemicals producer - a sector where the country runs a significant trade deficit. PKN Orlen has hopes to finalize a partnership with Netherlands-based Basell Europe Holdings, a joint venture between Royal Dutch/Shell and BASF in the next few months. - Reuters