The tough Kazakh connection

As part of its effort to expand into upstream production, as well as to diversify Poland's energy supplies, PKN Orlen sent its president to Astan, Kazakhstan, last January.

The oil giant was hoping to begin talks that would eventually lead to PKN Orlen's purchase of oil deposits in the country - especially in its oil-rich Caspian Sea shelf. So far the visit has borne little fruit, as Orlen's spokesperson, Dawid Piekarz, admitted to the Polish press last week that no follow-up meeting has been scheduled. A spokesperson for KazMunaiGas, the dominant player in Kazakhstan's oil sector, claimed that talks between his company and Orlen "were still on the level of declarations."

However, a source close to the talks later told the Polish Press Agency (PAP) that: "There is a possibility for cooperation between PKN and KazMunaiGas."

Both Orlen and KazMunaiGas have declared their interest in participating in the extension of Ukraine's Odessa-Brody oil pipeline though Poland to the Baltic Sea coast to carry Central Asian crude oil to Europe.

Both companies have successfully made it through to the second stage of a tender to buy a majority stake in Lithuania's Mazeikiu refinery. However, fuel sector analysts say that PKN Orlen's chances are fading, as the decision will be based not on the best price offered but on the reliability of the company and the lowest risk of the transaction. Some say, however, that the decision will be based mostly on political grounds.

"PKN's efforts to buy Mazeikiu, the potential search for access to oil deposits in Kazakhstan, and the plan to extend the Odessa-Brody line could all be complementary," the source added.

Both companies declined to comment on the report. (Reuters)