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Two officials have suggested there will be changes on the market after the Orlen, Lotos and PGNiG merger. They will affect the gas sector, but not necessarily the oil sector. Market deconcentration must take place in parallel with the strengthening of state control tools – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
- The Government Plenipotentiary for Strategic Energy Infrastructure Maciej Bando told the Polish Press Agency that he supported deconcentration in the gas market.
- The next step towards the deconcentration of the gas market is to amend the law on gas reserves. Its project, numbered as UC50, implements EU legislation that is the subject of a dispute between Poland and the European Commission.
- The proposed changes should be assessed positively, because they aim to separate activities in the interests of the state’s energy security, which does not always have to be market – based, from the typical market activities undertaken by the Orlen listed company-Wojciech Jakóbik assesses.
- The next step could be a similar arrangement in the oil and fuel sector, where some of the terminals and fuel bases are also under the control of the Orlen supplier rather than the infrastructure operator of this type, i.e. PERN.
Deconcentration of the gas market, not oil
Orlen CEO Ireneusz Fąfara told the Financial Times that the merger with Lotos “is irreversible” and so is the acquisition of 30 percent of the shares of the Gdańsk refinery by Saudi Aramco. He announced a visit to Riyadh to discuss the prospects of cooperation with Aramco, which became a partner in the merger as the European Commission required selling part of the assets to approve the merger.
The Government Plenipotentiary for Strategic Energy Infrastructure Maciej Bando told the Polish Press Agency that he supported deconcentration in the gas market. By that he means the Orlen Group selling its gas storage facilities managed by Gas Storage Poland to Gaz-System on top of the pre-agreed sale of operator rights and separating from the Group Polska Spółka Gazownictwa, operator of the distribution network, to meet the decoupling requirement.
Law on reserves with deconcentration in the gas sector
The next step towards the deconcentration of the gas market is to amend the law on gas reserves. Its project, numbered as UC50, implements EU legislation that is the subject of a dispute between Poland and the European Commission. The Commission found that the existing law discriminates and imposes a disproportionate burden on gas market participants. The obligation to store the gas will be taken over by the Governmental Strategic Reserves Agency. Importantly, minister Bando does not mention the exclusion of PGNiG from the Orlen Group.
“In the opinion of the plenipotentiary, it is important that the operation and ownership of key energy infrastructure, such as transmission networks or natural gas storage facilities, is an attribute of companies in which the state treasury is the sole owner. This is due to the role of this infrastructure in ensuring energy security of the Republic of Poland,” points out the Office of Maciej Bando in response to questions BiznesAlert.pl.
The fate of PGNiG Upstream Poland remains to be decided. This company was supposed to concentrate mining assets after the Orlen-Lotos-PGNiG merger, but it has not yet been formed. Orlen stated that it would like to carry out this process by the first of July 2024.
“The companies specified in the new regulations will monthly pay the so-called gas fee to the Emergency and Strategic Gas Reserves Fund, from which the purchase of natural gas for the purpose of establishing and maintaining strategic reserves of natural gas will be financed. The change in the method of financing will not affect the costs incurred by final customers, since the obligation to maintain gas reserves already exists in the legal system,” the justification of the project says.
What else will change?
The proposed changes should be positively assessed because they aim to separate activities in the interest of national energy security, which do not always have to be market-oriented, from the typical market activities undertaken by the publicly traded company Orlen. This separation can alleviate conflicts between state policy priorities and business interests. Market deconcentration must be supported by strengthening state control through operators. The fate of PGNiG in the Orlen group remains to be decided upon.
“Russia’s invasion of Ukraine, as well as hybrid actions undertaken by Russia, have made the public aware of the importance of properly protecting the infrastructure that ensures that society meets its basic needs – such as electricity, gas and fuel supplies. For this reason, transmission infrastructure operators in Poland are companies in which the State Treasury is the sole owner. These are companies that are responsible for the safe and uninterrupted transmission of energy carriers to final customers,” the Plenipotentiary’s office said.
The next step could be a similar overhaul in the oil and gas sector, in which part of the terminals and fuel bases are also under the control of the Orlen supplier and not the infrastructure operator of this type, i.e. PERN. It would be a move in line with the idea of President Fąfara. “For now, I am sure that with the current team in power, there will be no political decisions affecting our business. I would resign if someone told me what to do,” the CEO Orlen told the British newspaper.
