POLAND TO PRIVATIZE DOWNSTREAM ASSETS

Poland will place all its downstream petroleum assets on the auction block early next year. Polish authorities have approached 26 international oil companies and state companies from members of the Organization of Petroleum Exporting Countries about participating in the bidding. Most of the 26 companies showed interest in the Polish market. Structured horizontally with each segment of the industry controlled by a single state entity, the market requires 334,000 b/d of crude oil.

Nov. 18, 1991

4 min read

Poland will place all its downstream petroleum assets on the auction block early next year.

Polish authorities have approached 26 international oil companies and state companies from members of the Organization of Petroleum Exporting Countries about participating in the bidding.

Most of the 26 companies showed interest in the Polish market. Structured horizontally with each segment of the industry controlled by a single state entity, the market requires 334,000 b/d of crude oil.

A number of companies said they will be prepared to offer as much as $800 million for various interests in refining and gasoline marketing assets. The offers were made in response to a request for nonbinding expressions of interest from potential foreign investors.

Purchase of state assets will involve foreign companies in sizable spending programs to bring the entire system up to general European standards.

Jacek Siwicki, Polish secretary of state for privatization, said the government estimates that $3 billion needs to be spent to modernize the system. Potential foreign investors said that is a conservative figure.

FREE MARKET GOAL

Siwicki said international companies are being encouraged to invest in several segments to create vertically integrated structures similar to those in European Community members.

To establish free market principles, it will be necessary for at least four or five investors to acquire interests in the segments, he said. Individual companies will not be allowed to dominate any of the country's pipelines, wholesale distribution centers, or major refineries.

Poland has approached privatization with an open mind, he said.

International companies had been asked for their views of the best way to introduce free market principles to the Polish system. There also had been contacts with the EC and World Bank.

The final Polish government decision on the structure and timetable for privatization will be made after a study from World Bank is available. This will make recommendations on key issues such as the future regulatory environment for the petroleum sector, tax structure, and price policy.

INDUSTRY PROFILE

The Polish industry is split into a number of state companies. Centrala Importowo-Eksportowa Chemikalii imports and exports crude oil and chemicals and is involved in domestic distribution and trading.

Przedsiebiorstwo Eksploatacji Rurociagow Naftowych is responsible for all crude oil and product pipelines, including the Friendship line from the Soviet border to the Plock refinery with an onward spur to the Gdansk refinery.

Dyrekcja Eksploatacji Cystern, part of the state owned distribution company CPN, leases trucks for transport of crude oil and products and owns 12,500 rail tank cars.

Polskie Gornictwo Naftowe i Gazownictwo is responsible for exploration and production, as well as the import and distribution of natural gas from the Soviet Union.

The company's production meets only 2% of Poland's energy requirements.

Siwicki said the downstream oil business has priority at this stage. However, allocation of exploration acreage to foreign companies is under consideration.

POLAND'S REFINERIES

Poland has seven refineries, but only two of them are built to western standards.

The 252,000 b/d unit at Plock, run by Mazovian Refinery & Petrochemical Works, is responsible for 80% of Polish products. Petrochemicals account for about 35% of its sale. The plant was opened in 1964,

The 60,000 b/d Gdansk refinery, built in 1975, has just been transformed from a state owned enterprise into a joint stock company of the Polish Treasury. About 80% of its production is sold in Poland. The balance is exported through the Baltic.

Gdansk feedstocks are imported through the Baltic or through the spur from the Friendship line.

The Baltic import terminal is being expanded and a new pump unit installed on the Gdansk-Plock spur that will enable all crude requirements to be imported from non-Soviet sources.

The five small refineries in Southeast Poland at Czechowice, Trzebinia, Jasio, Jedlicze, and Glimar have a combined crude capacity of only 70,000 b/d and are supplied by rail. The plants are unlikely to survive privatization in their present form.

Siwicki said Poland's energy supply is unlike the rest of Europe. Because of coal domination, oil accounts for only 14% of the country's primary energy supply, mainly in transportation.