The national strategy for Poland's oil industry, prepared by the Economy Ministry, will be debated by a Polish Cabinet body on Tuesday, according to the ministry's weekly bulletin. The strategy, up for government approval, applies to refiners PKN Orlen and Grupa Lotos, as well as oil and fuel logistics companies. The strategy envisages the state holding on to its stakes in refiners PKN Orlen and Grupa Lotos, which give it effective control of the companies. There are also no plans for a merger of the fuel companies, an idea frequently floated in the past.
Our view: We expect the Polish Cabinet to discuss mainly the issues of energy security and diversification of oil supply sources. As the market has already speculated the government may try to persuade Lotos and PKN Orlen, to stop using intermediaries in their oil supply deals. It is also possible that the company will be forced to use the higher grade oil in order to minimize the dependence on Urals crude. In this case the negative consequences for companies’ profits can not be avoided.