Alice Rudd: Saudi Aramco’s investment in PKN or a Polish move by the world’s oil leader

Our northern neighbors already knew that Putin’s economic influence in the energy sector would have to be limited before Russia attacked Ukraine. As early as 2018, PKN Orlen, which is 27.5% owned by the Polish state, was preparing to buy another refining giant, Grupa Lotos, in which the state owns 53.2% through the Ministry of Finance, to build a solid platform for maintaining energy stability in the Polish economy. However, the ambitious plan faced criticism from the antitrust authorities, so it was necessary to find partners for a very complex deal, as in the movie Ball Lightning.

And it worked. Therefore, when PKN Orlen announced in January 2022 that a grandiose merger would take place by the end of the year, at the end of which a strategic partnership with Saudi Aramco, the world leader in oil production and reserves, and representatives of Russian business interests could explode into a rage. Replacing supplies from Russia is a key factor in the deal, which was finally approved by the European Commission in the summer and completed with the latest signatures at the end of November.

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It wasn’t just any business. PKN Orlen’s management announced its intention to acquire a competitor, Grupa Lotos, which, apart from refining and related production, also had its own network of gas stations. That, of course, was the problem with competition law. Therefore, it has been established that the new entity must dispose of a certain part of the property. Thus, the Hungarian company MOL bought 417 gas stations operating in Poland from Grupa Lotos, while PKN Orlen in return bought 144 gas stations operated by MOL in Hungary and 41 gas stations operating in Slovakia.

Later, Grupa Lotos was absorbed by PKN Orlen, and it was the turn of Saudi Aramco, which, through its trading subsidiary Aramco Oversesas, bought a 30 percent stake in the refinery in Gdańsk, taking 100 percent of the associated wholesale business, and in At the same time, the PKN concern was contractually committed to increasing strategic oil supplies from 200 to 337 thousand barrels per day, with the possibility of further growth.

This commercial partnership with the world champion in oil production is, of course, a dramatic reduction of Russian influence in the region, but it will also bring other economic incentives. This is an important stabilization of Poland’s oil supply, which is also – thanks to Saudi Aramco’s investments directly in the production chain – stronger than the “normal” commercial contract. With the deal, PKN Orlen has acquired an important partner for technological investments, which are not only necessary due to the suppression of Russian oil refining, but will also increase efficiency in production and thus also in achieving European environmental goals.

At the same time, the entry of Saudi Aramco opened the door to bilateral trade negotiations between Polish and Saudi companies. The first smiles show that it will not end on paper like other geopolitical partnerships in the region. And last but not least for us, the flow of Saudi oil will also have synergistic effects in neighboring countries associated with commercial or petrochemical infrastructure, among which the Czech Republic ranks first (PKN Orlen owns Orlen Unipetrol and the network of Orlen petrol stations).

It is possible to expect that more and more EU countries will go in a similar direction, that is, through strategic partnerships with world giants with the aim of stabilizing their own needs. It turns out that diversifying geopolitical risks is the only option in areas where we do not have enough raw material resources.

The author is an economist