Energy Infrastructure / Innovations pgnig 7 February, 2024 7:35 am   

Jakóbik: Mažeikiai 2, or Poles in a German refinery (ANALYSIS)

schwedt Greenpeace activists at the Schwedt refinery in Germany. Source: Greenpeace / Twitter

Poles entering the Schwedt Refinery may be an economic challenge, but it will contribute to the energy security of Poland, the EU and NATO. Exactly as was the case with the Mažeikiai refinery in Lithuania – writes Wojciech Jakóbik, editor-in-chief

  • German media suggest that Berlin will agree to the derusification of the Schwedt refinery.
  • German Business Insider says Rosneft’s shares could be taken over by a Polish company.
  • Orlen, with a stake in Schwedt, will have impact on the product policy of this plant, which supplies eastern Germany and western Poland.
  • The presence of Poles in Schwedt offers the prospect of a change in relations with eastern Germany.

Derusification of the Schwedt Refinery

German media suggest that Berlin will approve the derusification of the Schwedt refinery, in which 54 percent of shares are still held by Russia’s Rosneft, but for now the facility is under the government trusteeship. That is, the Russians still own these shares, but they do not have a say in how the company runs. Poles want the facility to be derusified so that once the war in Ukraine is over there is no return to normal relations with Russia, which goes along with the RERowerEU program aimed at the EU departing from Russian fossil fuels and cooperating with others when it comes to energy.

German Business Insider says Rosneft’s shares could be taken over by a Polish company. In the past, in this context, there have been speculations about the state owned Orlen and the private Unimot. The first company confirmed talks about Schwedt were happening. “That was the topic we discussed,” admitted Orlen President Daniel Obajtek in response to a question from “There were different plans. There’s not much I can say. You will find out yourselves,” he said. Unimot also sought to join Schwedt, but was interested in Shell’s minority stake, which was taken over by the British Prax, which was also reported by first. It is worth noting that Prax should be examined by the Polish intelligence services in terms of relations with the Russians in case of cooperation in Schwedt.

There are challenges on the horizon for the Schwedt refinery. Aleksandra Fedorska reported for that Germans expect the new investor to spend on the energy transition. In addition, there is a discussion on Schwedt increasing sulfur emissions. It may provoke new Polish-German disputes, but also bring protests against similar emissions in Poland. Much more important, however, is the fact that higher sulfur emissions may result from a greater share of high-sulfur oil in processing. This is a reference to a fact that I described in April 2023 for, which is an analogy between the blend that is delivered to Schwedt via the Friendship oil pipeline described in documents as “from Kazakh fields” and Russia’s REBCO. The Polish Climate Ministry confirmed that oil going via Friendship to Schwedt has the chemical properties of a Russian blend, while the oil that arrives at the Naftoport doesn’t. Hence, many speculate that the Russian oil is labeled as Kazakh. Deliveries accounted for as Kazakh may be physically coming from Russia. This is not a violation of sanctions as they allow this, but it is a threat to security of supply as it entails dependence on a Russian transit route and, due to Kazakhstan paying transmission fees to Russia, fills up the Kremlin’s coffers. Deliveries via naftoports, including the Polish one in Gdańsk, are a much better solution. They will be possible once Schwedt is derussified.

Polonization of the Schwedt Refinery

However, it is precisely the entry of Poles into the Schwedt refinery that can provide an answer to both of the above challenges. The cooperation between Orlen and Saudi Aramco in the petrochemical sector and the possible investment in the petrochemical plant in Gdańsk offer hope for a successful energy transition of the fuel sector. Orlen is already promoting electromobility and hydrogen at its stations, and with a stake in Schwedt, it will influence the product policy of this plant supplying eastern Germany and western Poland, where Orlen has stations on both sides of the Oder. It is worth recalling the analogy to the Mažeikiai refinery, whose profitability is visible only after a series of expensive investments undertaken by Orlen in cooperation with the government in Lithuania. It is also important to take into account the possibility of a slower transition away from fossil fuels in the transport sector of eastern Germany and the countries of NATO’s eastern flank due to technological backwardness and security and economic considerations. This means Poland and Germany will need to cooperate on fuels longer. The presence of Poles in Schwedt also gives the prospect of changing relations with eastern Germany by reducing Russia’s economic influence on the policy of the local lands, which is personified by the politician I publicly called Schroeder in a skirt, i.e. Mecklenburg Prime Minister Manuela Schwesig, co-responsible for the Nord Stream 2 gas pipeline project. This is a reference to the Russian lobbyist, former chancellor Gerhard Schroeder of the SPD party, of which Schwesig is also a member. The development of economic ties on both sides of the Oder river with Poland having more agency would benefit all parties.

Polish-German cooperation in Schwedt may also be important for the security of fuel supplies in the region in the face of Russia’s invasion of Ukraine and the threat to NATO’s eastern flank. The use of Schwedt to supply Berlin and Berlin-Brandenburg Airport provides the economic rationale for investment in the fuel infrastructure needed in the event of a NATO conflict. described the need to expand the network of oil pipelines serving the alliance to supply the Armed Forces. The presence of Poles in Schwedt can facilitate the conversation on this topic, and the Schwedt business case will make it possible t o use this infrastructure in times of peace. In turn, the presence of Orlen in the German refinery may facilitate the construction of the second line of the Pomerania oil pipeline, whose fate depends on the interest in Naftoport supplies (they may also come from Kazakhstan and go to Germany) and from the point of view of security of supply is necessary for redundancy and flexibility of work between Gdańsk and the Płock refinery. The East German Leuna refinery already receives one hundred percent of its oil from outside Russia, and the nearby Schwedt refinery could do the same without Russian mediation if the Poles had a decisive opinion on product policy and investment. In addition, the divestment of important fuel assets such as bases and terminals in the course of the merger by Orlen could be offset by access to a greater supply of fuel through Schwedt.

Schwedt or Mažeikiai 2?

The strategic importance of the Schwedt refinery, especially in the face of speculation about the reduction of strategic fuel stocks in Poland, would have been visible only during the crisis, but it would have paid for itself many a time. This was the case with the underinvested and old Mažeikiai refinery, built, like Schwedt, during the communist era. Its importance proved to be irreplaceable in 2022, when thanks to the decisions of Orlen Lietuva, the Baltic states could abandon Russian oil in the European Union. They were replaced by Saudi oil available thanks to the presence of Poles in Lithuania. The investment in the Mažeikiai refinery can only be assessed from this perspective decades after this controversial investment decision was made. It is time to seriously consider this topic of Poles entering the Schwedt. I support this move.