Lukoil’s Deal In Jeopardy - 11 September, 2002

Lukoil’s decire to buy Polish refinery is under threat as Poland's government see this step potentially risky for the security of the local oil market in Poland as Gdanska is the fifth largest Poland's refining plant. Everything becomes clear only after ministers debate.

The debates will be devoted to changes to an oil sector restructuring program, which may open door for a domestic tie-up involving Rafineria Gdanska, currently pursued by LUKoil. LUKoil is ready to pay $274 million in cash for the refinery and invest a minimum of $330 million over five years to upgrade it.

Also a decision on the future of the Baltic-coast refinery, whose sale to a consortium of LUKoil and British-based Rotch Energy has been described by the government as potentially risky, is likely over the next two weeks.

It’s not clear yet whether approval of the new program will dash chances of the LUKoil-Rotch consortium closing the deal to buy control of Gdanska, with throughput capacity of 85,000 barrels per day.

A potential change of the sector privatization program gives Polish market leader PKN Orlen additional possibility of acquisition of the smaller Gdanska.