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Poland’s PKN Orlen offers to sell Lithuania refinery

07.08.2014  | 

PKN Orlen, Poland’s biggest oil refiner, has offered to sell its unprofitable refinery in neighboring Lithuania to KazMunaiGaz, Vilnius-based newspaper Lietuvos Rytas reported.



PKN Orlen, Poland’s biggest oil refiner, offered to sell its unprofitable unit in neighboring Lithuania to KazMunaiGaz, Vilnius-based newspaper Lietuvos Rytas reported, without saying where it got the information.

Orlen met with the Kazakh state-controlled energy company on “several occasions” this year and with Kazakh Foreign Minister Erlan Idrisov in January to discuss the sale of Orlen Lietuva, the newspaper said. 

Orlen isn’t holding “any negotiations” to sell the refinery and is “analyzing various strategic options,” the Polish company said in an e-mailed statement. No one at KazMunaiGaz was immediately available to comment on the report when contacted by e-mail.

State-controlled Orlen bought 84% of Lietuva for $2.34 billion in 2006 in its biggest foreign acquisition, beating KazMunaiGaz as well as Russia’s Lukoil and TNK- BP. Russia later halted crude supplies to Lietuva, forcing the sole oil refiner in the Baltic states to seek more expensive deliveries by sea.

“The sale should be taken in positive light by the market provided that the buyer offers a fair price,” Oleg Galbur, a Vienna-based analyst at Raiffeisen Centrobank, said by e-mail. “In the current environment of depressed refining margins and with the market not expecting a strong rebound, it would make sense for Orlen to reduce its exposure in refining by divesting a low-profitable refinery.”

All Options

Orlen is considering all options for its Lithuanian unit, including its closure, Orlen Lietuva CEO Ireneusz Fafara said at a news conference on May 5.

The unit posted a $42 million loss in the first quarter while sales tumbled 43% to $1.29 billion with output capacity falling 40 percentage points to 58%, according to Orlen’s presentation on its website. The refinery can process 200,800 barrels of oil a day, according to data compiled by Bloomberg.

“Lietuva’s financial earnings are under strong pressure due to the unfavorable macroeconomic environment and very bad logistical conditions on the local market,” Orlen said in the statement sent in response to Bloomberg News questions.

Apart from expanding in Lithuania, Orlen also bought oil companies in the Czech Republic and Canada in past years. Orlen’s Unipetrol, the largest Czech refiner, agreed last week to buy the remaining 32% stake in Ceska Rafinerska from Italy’s Eni SpA for 30 million euros ($41 million).

In an effort to boost crude oil production and cut its reliance on Russian supplies, Orlen acquired Canada’s TriOil Resources for C$183.7 million ($171 million) last year and Birchill Exploration for C$255.6 million in 2014.

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