PKN Orlen heads for Baghdad
By Karol Chlipalski
As Poland prepares its peacekeeping mission in Iraq, PKN Orlen, the country's top oil producer, is trying vigorously to enter the Iraqi market to ensure access to oil reserves that would guarantee the company's further growth, industry experts said.
"The lack of access to oil pools is the weakest point of (PKN Orlen)," said Sebastian Słomka, an analyst at PKO BP brokerage house.
The oil giant is trying to put together a group of Polish companies that would compete for post-war reconstruction contracts. Among the companies willing to work with PKN Orlen are Polimex Cekop, Budimex, Alstom, Energomontaż-Południe and Energobudowa.
"The agreement (between the companies) has an open character, which is why we will warmly welcome all companies that have potential, experience and the desire participate in the undertaking," said Mirosław Wróbel, PKN Orlen's president.
If PKN Orlen wants to play a strong role in central Europe, it must ensure that it has access to oil pools, Słomka said, since oil extraction is much more profitable than processing.
"Companies like Austrian OMV and Hungarian MOL make 60%-70% of their profit from oil extraction while oil processing amounts to 20%," said Słomka.
OMV and MOL are PKN Orlen's main competitors, as it is expected the strongest of the three companies will soon dominate the central European market.
"Until now, the profits of OMV and MOL have been greater thanks to oil extraction," Wróbel said.
At the same time as it seeks access to Iraqi oil fields, PKN Orlen is positioning itself as a contractor in the United Nations' oil-for-food program for Iraq. Following a presentation by Wróbel, which took place at the international body's headquarters in New York, the oil producer was registered by the UN's Iraq office as a national supplier in the oil-for-food program for the last six months of the program's operations. Details concerning the specific form of PKN Orlen's participation are unknown at present, but will be shaped by Iraqi needs.
"If there is a need for any sort of food, for example, Iraq would announce it, and registered companies like PKN Orlen would bid for it. Remuneration will consist of a certain quantity of oil," said a spokesperson at PKN Orlen's press office. The exchange will be based on the rules of the tender. The chosen contractor will be the company that is able to propose the best exchange conditions.
PKN Orlen is working with the agriculture ministry, which is acting as an agent between food producers and the company.
According to the agriculture ministry, Poland has spare amounts of wheat, sugar and powdered milk that could be exchanged for oil.
"Their prices are competitive on the international market, so PKN Orlen has a chance to sell them," said Andrzej Chodkowski, undersecretary of state at the ministry, explaining that powdered milk and sugar are traditional Polish exports to Arab countries.
Chodkowski added that there are large amounts of porcine meat that could be exchanged for different kinds of food from third world countries, if the company succeeds in making such a transaction, as Iraq would not be interested because of religious reasons.
Under the auspices of the Security Council's United Nations resolution 1486, the oil-for-food program started in 1996 and will continue for another six months. UN representatives estimate the value of orders at €846 million ($1 billion).
