Polish state oil giant sells assets to Saudi Aramco and Hungary’s MOL ahead of merger

Poland’s state-owned oil giant PKN Orlen has agreed to sell assets – including hundreds of petrol stations and a share in an oil refinery – from Lotos Group, a smaller state-owned rival that it is seeking to acquire, to Saudi Aramco and Hungary’s MOL.

The divestment is a regulatory requirement set by the European Commission to pave the way for a long-planned merger between the two Polish firms.

Supporters of that deal, including the current government, argue that it will help create a larger player that can better compete internationally. But the opposition has criticised the resultant sale of state-owned assets, with Donald Tusk claiming MOL has ties to Russia.

Saudi Aramco, which is the world’s largest oil producer and most profitable company, will buy a 30% stake in Lotos Asfalt for around 1.15 billion zloty (€243 million), according to the preliminary agreement announced by Orlen today. Lotos Asfalt owns the Gdańsk oil refinery.

Orlen’s CEO, Daniel Obajtek, hailed the fact that “Saudi Aramco will be a strategic partner”, noting that the firm “does not follow market trends, it sets them”. Orlen has also signed a long-term deal for Saudi oil supplies of 200,000-337,000 barrels per day.

Aramco’s senior vice president, Mohammed Al Qahtani, said that its agreement with Orlen “will enable the development of the petrochemical industry in Poland and in the whole of the Central-Eastern Europe region, while the oil supplies from Saudi Arabia will provide a significant boost to the Polish market”.

Meanwhile, MOL, which is Hungary’s largest company, will buy 417 of Lotos’s petrol stations for $610 million. Orlen will in turn buy 144 petrol stations operated by MOL in Hungary and 41 in Slovakia at a price of €229 million. Other Lotos assets will also be sold to Poland’s Unimot and Hungary’s Rossi Biofuel.

Orlen initiated the takeover process of Lotos in February 2018, with a subsequent due diligence process starting in April that year. In July 2020, Orlen formally requested the European Commission’s approval for the merger.

The commission approved the acquisition a year later, but with a series of caveats. Orlen agreed to conditions including selling 30% of its shares in the Lotos refinery and Lotos’s 50% stake in a jet fuel marketing venture with BP.

The company was also asked to sell 80% of Lotos’s petrol station network, and to let go of nine fuel storage depots and two bitumen production plants. Orlen had a decline – already extended – of 14 January to meet the conditions. Orlen says the Lotos takeover is set to be completed by late June or early July.

The merger is seen as part of a wider attempt by Poland’s government to foster national champions. Orlen is currently waiting for approval from the Polish anti-trust authority to also take over Poland’s largest oil and gas company, state-owned PGNiG. The combined value of the group would reach 70 billion zloty.

“We have made several acquisitions, but we still have a lot of acquisitions ahead of us,” said Obajtek at the news conference today. “Climate policy, regulatory and market pressure require us to transform, to take quick, decisive steps.”

Speaking alongside Obajtek, Jacek Sasin, a deputy prime minister who oversees the ministry for state assets, hailed the “historic merger of Orlen and Lotos”, which “we have been working on for many years”. It will not only allow the new group “to develop much faster”, but also boost “the might and wealth of our citizens”, he added.

Some opposition figures have, however, criticised the sale of assets to Aramco and MOL. When news of the deal first emerged last week, Donald Tusk, leader of the Civic Platform (PO) party, claimed that MOL is “politically linked to Moscow”.

Orlen’s spokeswoman, Joanna Zakrzewska, responded by pointing out that when PO was previously in power and Tusk was the prime minister, he had stated he was not opposed to the sale of Lotos to Russian buyers.

Market analysts speaking to Business Insider Polska also argued that Tusk’s invocation of Russia was a “political trick”, in the words of one, and that, while the Hungarian government is close to Russia on energy policy, this is unrelated to MOL’s acquisition of Lotos’s assets.

Main image credit: Krystian Maj/KPRM (under CC BY-NC-ND 2.0)

Maria Wilczek

Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.