Viewing cable 06WARSAW980
Title: POLAND'S ORLEN ANXIOUS FOR COURT DECISION IT CAN

IdentifierCreatedReleasedClassificationOrigin
06WARSAW9802006-05-25 15:16:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Warsaw
VZCZCXRO7868
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHWR #0980/01 1451516
ZNY CCCCC ZZH
P 251516Z MAY 06
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC PRIORITY 0719
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHKW/AMCONSUL KRAKOW PRIORITY 1101
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 WARSAW 000980 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/NCE AND EB/ESC 
EUR/NCE FOR DKOSTELANCIK AND MSESSUMS 
EB/ESC FOR SGALLOGLY, RGARVERICK, AND JLEWANDOWSKI 
DOE FOR LEKIMOFF 
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS, JKIMBALL, MWILSON 
TREASURY FOR MGAERTNER 
 
E.O. 12958: DECL: 05/25/2106 
TAGS: ENRG ECON EPET PREL PGOV ETRD LH PL RS KZ
SUBJECT: POLAND'S ORLEN ANXIOUS FOR COURT DECISION IT CAN 
BUY LITHUANIAN REFINERY 
 
REF: VILNIUS 459 
 
WARSAW 00000980  001.2 OF 002 
 
 
Classified By: Economic Counselor Richard Rorvig, reason 1.4 b and d 
 
 ¶1.  (C)  Summary:  PKN Orlen's Wojciech Wroblewski, told us 
that PKN Orlen is waiting for U.S. court approval of the sale 
by YUKOS of its controlling stake in the Mazeikiu refinery 
for the purchase to go through.  PKN Orlen aggressively 
pursued the sale both as a strategic asset and as a way to 
block LukOil's expansion into the European market.  Orlen is 
not concerned about adequate oil supply as it is already 
Russia's largest consumer and the terminal at Butinge gives 
it flexibility of supply in the even of a pipeline 
disruption.  Orlen is also opening an office in Kazakhstan 
and hopes to purchase assets there by year-end.  End Summary. 
 
Yes - Orlen will buy Mazeikiu If,... 
------------------------------------ 
¶2.  (C)  Wojciech Wroblewski, PKN Orlen's Senior Advisor on 
Strategy, confirmed to EconOff that PKN Orlen, Poland's 
state-owned oil company, has received all Lithuanian 
government approvals, as well as YUKOS's approval, to 
purchase the Mazeikiu refinery in Lithuania.  He would not 
confirm the purchase price.  He noted, however, that Orlen is 
anxiously awaiting a U.S. court decision, expected on May 25, 
which could lift the ban on the sale of YUKOS's shares in the 
refinery, allowing the transaction to proceed. 
 
Mazeikiu a Strategic Asset 
-------------------------- 
¶3.  (C)  Orlen's purchase of the Mazeikiu refinery is a 
strategic decision, explained Wroblewski.  First, it adds to 
Orlen's refinery capacity.  With refinery capacity at a 
premium, and only two refineries for sale in Europe, winning 
the bid is critical for Orlen's continued growth.  Mazeikiu's 
close proximity to Poland is attractive since it will allow 
Orlen to expand its operations in the neighborhood.  Equally 
important, if Orlen purchases the refinery, LukOil cannot. 
Orlen is not looking forward to competing with LukOil in 
Eastern Europe if and when LukOil succeeds in purchasing 
assets in the region. 
 
Orlen Now Russia's Biggest Export Market 
---------------------------------------- 
¶4.  (C)  Stability of oil supply from Russia is not a major 
concern for Orlen.  Wroblewski noted that Orlen is currently 
Russia's largest purchaser of oil, accounting for 10 percent 
of total Russian oil exports.  Purchasing the Mazeikiu 
refinery will add to Orlen's purchasing power - it will 
purchase 32 million tons of oil per year after the sale is 
finalized.  Orlen evaluated the risks of possible Russian 
displeasure at losing the sale, but believes that commercial 
interests will prevail.  In addition, the existence of the 
Butinge terminal, which is part of the sale, will allow Orlen 
to purchase oil from other sources if the pipeline supply is 
disrupted. 
 
Operations Expanding Elsewhere 
------------------------------ 
¶5.  (C)  PKN Orlen is continuing to expand its operations in 
the region in its quest to become a more important player in 
the European oil industry.  Orlen officials also visited the 
refineries for sale in Serbia and Slovenia.  Wroblewski noted 
that LukOil officials were at the Slovenian refinery the week 
before, and offered to purchase the assets, which had not 
operated in the previous eight years.  Wroblewski's analysis 
was that the refinery was worthless and that Orlen is not 
interested.  Orlen is also opening an office in Astana, 
Kazakhstan this year and hopes to purchase a share in an 
existing production sharing agreement (psa) or a new psa to 
gain more on-shore experience and increase reserves. 
 
Comment 
------- 
¶6.  (C)  PKN Orlen's purchase of the Mazeikiu refinery would 
be a strategic win for the Polish oil company in its efforts 
to solidify and expand its position in the region.  If and 
when the sale occurs, if Orlen and Polish government 
officials can contain their glee at the purchase at the 
 
WARSAW 00000980  002.2 OF 002 
 
 
expense of Russian companies, it could also help improve 
commercial relations between Poland and Russia. 
ASHE