RG/Lukoil deal still unclear

Treasury Minister Wiesław Kaczmarek last week gave the strongest signal yet that a local refinery's sale to Russia's Lukoil may be in jeopardy, saying that no decision would be made until the ministers discussed alternatives. Kaczmarek said that the leftist cabinet would soon debate changes to an oil-sector restructuring program, which may open the door for a domestic tie-up involving Rafineria Gdańska (RG), currently pursued by Lukoil. Kaczmarek also said that a decision on the future of the Baltic-coast refinery - whose sale to a consortium of Lukoil and U.K.-based Rotch Energy has been described by the government as potentially risky - would likely be made soon. "A decision on the sale will be made (soon), during which time I expect the cabinet will debate a revision of the sector's restructuring program," Kaczmarek said. He would not say whether approval of the new program would dash chances of the Lukoil-Rotch consortium closing the deal to buy control of RG, which has a production capacity of 85,000 barrels per day. The cabinet appears increasingly worried that it could jeopardize the country's energy security by allowing a Russian oil firm to buy a fifth of Poland's refining capacity. "Today we have a tough choice to make," Kaczmarek said. "We have to decide whether to sell the refinery or revise the sector strategy and allow for the creation of a national operator."

A potential change in the sector's privatization program would allow market leader Polski Koncern Naftowy Orlen (PKN Orlen) to seek the acquisition of the smaller RG - an option that has been touted for months by PKN Orlen's management. That option has so far been given a cold shoulder from the Treasury Ministry, which signaled it was worried that PKN Orlen could cannibalize its smaller competitor. A tie-up between RG and PKN Orlen would create a national champion with more than half of the country's retail oil market. But politicians counter that the new entity could not operate like a cartel given Poland's no-tariff fuel imports policy. Kaczmarek also criticized recent comments by the chief executives of PKN Orlen and Lukoil, who publicly raised the ante in a bid for control of RG. In a recent newspaper interview, Lukoil chief executive Vagit Alekperov said Lukoil would pay $274 million in cash for the refinery and invest a minimum of $330 million over five years to upgrade it. That offer drew a quick response from PKN Orlen's chief executive officer Zbigniew Wróbel, who said that his company - of which the largest stake of 28% is owned by the state treasury - was ready to match the bid made by the Anglo-Russian consortium. "Two chiefs of publicly listed firms outbidding each other in public just lacks taste and raises the question of whether they have a mandate from their shareholders," Kaczmarek said. Analysts say that much of the recent surge in PKN Orlen's shares, which have jumped nearly 15% since mid-August, have been powered by market speculation - skillfully fueled by public remarks of company officials - of a looming merger with RG. Almost 72% of PKN Orlen's shares are free-floated. - Reuters