October 8, 2018 / 7:39 AM / in 14 days

Polish refiner PKN Orlen expects shipment of Nigerian oil this month: CEO

WARSAW (Reuters) - Polish oil refiner PKN Orlen expects to receive a first ever shipment of Nigerian crude oil next month, its CEO said, as Poland seeks to reduce its reliance on Russian supplies.

FILE PHOTO: PKN Orlen CEO Daniel Obajtek visits Orlen Lietuva oil refinery in Mazeikiai, Lithuania, June 3, 2018. REUTERS/Ints Kalnins

State-run PKN Orlen, Poland’s biggest refiner, and smaller rival Lotos, which it is taking over, rely mostly on Russian oil delivered via pipelines built in the 1960s but both have increased purchases from other sources.

“Nigeria is our new source of supplies we are exploring. Currently, a batch of 130,000 tonnes of Nigerian oil is on its way to Poland. It is expected to arrive at Naftoport (in Gdansk) in mid-October,” PKN’s Chief Executive Daniel Obajtek told Reuters in an interview last week.

“If tests confirm the assumed yields structure and margins, further oil supplies from Nigeria will be a viable option,” he said.

PKN Orlen signed a long-term agreement on regular oil supplies with Saudi Aramco in 2016 and since then both PKN and Lotos have also purchased oil from Iran and the United States.

Oil supplies from Russia account for around 70 percent of all oil deliveries to PKN, down from around 90 percent in 2015.

“There are also tankers sailing to us from other new directions, but at this stage it is too early to talk about it. We are holding discussions on medium- and long-term oil supply contracts with a number of parties, including US partners,” Obajtek also said.

Obajtek said that the deteriorating quality of Russian Urals crude was also prompting PKN to diversify its supplies.

“Generally, the lower quality may impact contract prices, as it affects our yields,” Obajtek said but declined to comment on whether PKN is negotiating new contract prices.

LOTOS TAKEOVER

PKN Orlen is taking over Lotos as part of a plan announced in February to improve its negotiating position in oil purchases and to increase investment capacity.

Obajtek said that he hoped to obtain clearance from the European Commission by mid-2019.

“We are in the pre-notification phase and we are preparing to submit a merger clearance application, with some guidance already in place. We intend to file a draft application by the end of the year, which will formally trigger the process of negotiations with the European Commission,” Obajtek said.

“We are not a threat to the European market. We have a market share of around four percent in Europe, while companies like Shell, BP or Total have much bigger market shares. And these companies obtained clearance for various mergers,” he added.

PKN plans to buy 32.99 percent of Lotos shares from the state, possibly in the third or fourth quarter of 2019. Then, most likely by the end of 2019, PKN will announce a tender offer for up to 66 percent of Lotos shares.

“Of course, the greatest synergy opportunities will come after the consolidation is complete and after we have taken full control of Lotos,” Obajtek said.

PKN Orlen has been working on the construction of 1.2 gigawatt (GW) offshore wind farms, at the Baltic Sea.

“However, our experience in this area is limited, and we want to avoid costly mistakes. Therefore, we do not rule out cooperation with a partner that would bring the know-how,” Obajtek said.

“I would rather not specify whether we are considering a Polish or a foreign partner, but it is worth mentioning that there is no Polish company that could offer much valuable experience in this respect”.

Obajtek, a former chief executive of state-run utility Energa, was appointed PKN Orlen CEO in February and says the company is buying a greater share of products from Polish manufacturers.

“Being a champion of the economy is a commitment,” Obajtek said, “as we seek to build our business in a way that would strengthen the economy of our country”.

Writing by Agnieszka Barteczko; Editing by Susan Fenton

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