Energy 13 December, 2017 10:00 am   

The expansion of the Pomeranian pipeline will hit Russia. ‘It will protect against a terrorist attack’

Currently, every fifth barrel of crude oil processed at the Gdańsk Refinery comes from other direction than the East. The authorities want a further diversification and are afraid of a terrorist attack on transmission infrastructure, which is why as part of the oil policy they are planning to build the second line of the Pomeranian pipeline – writes Wojciech Jakóbik, Editor-in-Chief at

A decreasing share of Russian oil in Poland

Although Russian oil is still significant for Polish PKN Orlen and Grupa Lotos companies, the importance of supplies from outside of Russia through the Gdańsk Refinery is growing.

In 2015, oil exports from Russia to Poland accounted for around 10 percent of sales in general. Out of ca. 240 million tons of exported raw material, almost 26.5 million tons was sent to the Polish market. However, diversification reduces the share of Russian oil in Poland. The crude oil supplies to Poland increased from 7.4 million tones in 2011 to 10.8 million in 2015.

In August, Reuters reported that Poland wants to replace oil supplies from Russia with importing a similar type from the Middle East. Deliveries of the Iranian raw material for Grupa Lotos reduced the share of Russian Mercuria in the Gdańsk Refinery, although the Poles declare interest in further cooperation. The argument for reduction of supplies from Russia is the plan of lowering of oil quality sent to the European market in 2018 undertaken by the Russian Transneft due to the desire to compete more effectively for the Chinese market, as Andrzej Kublik from Gazeta Wyborcza wrote.

Two oil deliveries from Iran were brought by PKN Orlen. Last year, it signed a contract with Saudi Aramco for the purchase of 200 000 million tones (mt) a month for refineries in Poland, Lithuania and the Czech Republic. Although Reuters argues that the diversification will be mainly based on oil from Iran, it is more difficult due to the country’s bad relations with the US. As previously informed, Washington’s objection to further opening to Iran may limit Poland’s ambition in scope of import from this direction.

Grupa Lotos also buys oil from the USA. Another tanker with the American WTI is already sailing to Gdańsk. – This is the second transport from the United States for the Gdańsk concern, but not the first from the American continent. In November, the company imported 600,000 DSW oil barrels (Domestic Sweet) from the USA, and in September nearly 700 000 Hibernia oil barrels from Canada – as Lotos boasts.

PKN Orlen has already bought spot deliveries from Iraq, Azerbaijan, Kazakhstan, Nigeria and Norway. – The market situation allows opening to alternative suppliers, which increases flexibility and efficiency in planning the supply of raw material within the entire Capital Group – the company informs. – Currently, the supply of the concern’s refinery is made on the basis of long-term contracts with producers – Rosneft Oil Company, Tatneft Europe AG and Saudi Aramco. PKN Orlen is technologically prepared to process over 80 different types of oil from around the world.

– The emergence of new grades of crude oil for trans-hipment in Naftoport is the result of the strategy of diversifying supplies realized by Polish refineries. On our part, we have not recorded any changes in cooperation with Mercuria or company’s fears from competition in Polish Naftoport. PERN is looking forward to cooperate with Mercuria due to, for example, previous good experiences of both parties – Igor Wasilewski, the CEO told

Nevertheless, PERN confirms the new trend. In the last two years, PERN has been observing the volume growth of crude oil types other than REBCO oil, mainly the alternative to REBCO oil is the Iranian Light and Arabian Light.  In 2017, crude oil from the Middle East accounts for approx. 30 percent of marine supplies reloaded at the Naftoport terminal. In 2015, this oil accounted for about 5 percent of total marine supplies. – Such an increase clearly proves the strategy of supply diversification and the search for alternative oil types for processing mainly by Polish refiners – Wasilewski assessed.

This means that the calculations from 2015 have already changed to Russia’s disadvantage. However, one should not make any hasty conclusions thereof. Russians will remain the main supplier of crude oil to Poland for a long time, but the increased significance of competition allows us to improve the terms of contracts, which was observed in recent years in new PKN Orlen agreements with Rosneft.

Fear of a terrorist attack

On November 28th, the Council of Ministers adopted the policy of the Polish government for logistics infrastructure in the oil sector. It contains a recommendation to build the second line of the northern oil pipeline. Government Plenipotentiary for strategic energy infrastructure, Piotr Naimski, admits that this is necessary due to the further diversification of oil supplies to Poland, as well as the risk of a terrorist attack.

– We already have the possibility of supplying this refinery from Naftoport. Transmission through one line is enough for its operation. However, a second line is necessary in order to rationalize it with respecto of oil type. This will strengthen security – Piotr Naimski assessed. The minister informed that the exercises of terrorist attacks showed that the second line is necessary for this reason.

The purpose of the second line is also to prevent contamination. Until now, raw material from other directions than Russia was still mixed in the Russian oil system. – The construction of the second line of the Pomeranian pipeline, important for the energy security of the state, will enable simultaneous meeting of PKN Orlen refinery in Płock and Grupa Lotos in Gdańsk needs and will ensure the security of pumping at the time of failure – reads the government’s oil strategy.

Immortal discussion about the merger

Warsaw oil plans generate new speculations about the merger of PKN Orlen and Lotos. From the point of view of competition on the European market – with such giants as the Hungarian MOL – such a merger would improve the potential of Poles. However, it would also be difficult from the point of view of competition on the market, and therefore unacceptable by the Office of Competition and Consumer Protection (UOKiK).

So far, the government has argued that there are no preparations for the merger. However, after transferring the competences of UOKiK in the scope of concentration on the energy market to the special Energy Market Power Supervisory Commission, it may decide to allow it to assess the merger in the fuel sector. This would be a signal that the authorities may decide to merge PKN Orlen and Lotos. For now, this kind of considerations have no basis.