Polish Briefing 8 August, 2017 9:00 am   
Editorial staff

Polish Briefing: Oil slightly dropped, market waiting for OPEC-Russia talks results

What goes on in Poland on the 8th of August.

The Mažeikiai oil refinery back in the headlines

At the end of 2006 PKN Orlen bought an oil refinery in Lithuania’s Mažeikiai. Since the beginning the company has been battling issues, first those created by Russians and then by Lithuanians. At the end of last June Orlen and the Lithuanian Railways signed a settlement and concluded a dispute which lasted several years.

Last Sunday TVP Info disclosed new tapes recorded at the Sowa i Przyjaciele restaurant, which revealed that the then-Orlen CEO Jacek Krawiec talked to the then-Minister of International Affairs Radosław Sikorski about solving PKN Orlen’s problems in Lithuania in 2014.

“I’m not gonna budge. They’re di.s. I’ll talk to this Kulczyk guy to give them shit, cause that won’t do any harm,” Krawiec said. “And secondly we need to build our fraction in the parliament, you know our won group,” Sikorski said.

The portal wrote that the Orlen CEO hoped the Civic Platform (PO) politician would help him. “You gotta help me cause this is you know… It’s not my yard,” he told Sikorski. “Yes, sure, sure. Your dough, my political influences – let’s do this,” Sikorski said. “Yep, let’s do this,” Krawiec replied.

PKN Orlen bought Mažeikiai’s control stock on 26 May 2006 from Russia’s Jukos which was forced into bankruptcy by Russian authorities. In November 2006 the European Commission approved the takeover and the Lithuanian government, as well as representatives of the Polish company expressed the wish to close transactions within a few weeks. Ultimately Orlen took the refinery over on 14 December 2006.

Renewables – scandalously low prices

There has been a heated discussion on the amendment to the Act on renewable energy sources, which changes the rules governing the alternative fee. It decreases the fee from the current PLN 300 to 125% of the average price for a green certificate for the last year.

“Some are saying that the drastic decrease of the fee will sink the renewable energy sector,” Maciej Musiał head of Pracownia Finansowa told the eNewsroom service. However, we need to remember that there is significant inequality on the market. Apart from trade on the power exchange there also exists off-session trade.

“Pracownia Finansowa, as private entrepreneurs have to strive to sell certificates at the exchange at PLN 30 per MWh. On the off-session market there are still contracts where the price is a lot higher than PLN 100 and is correlated with the alternative fee. So this is a way for the state to avoid those responsibilities, which originated because of the unfavorable contracts. Minimizing the fee will allow to deal with them at a much lower costs. We should point out that PLN 50-100 spent on one certificate from an unfavorable contract outside of the exchange will be enough to buy five certificates today. This should translate into at least a minimal decrease in their oversupply. The new regulations even the playing field for the entire sector. However, this does not change the fact that the prices are scandalously low,” Musiał added.

VAT revenues increased by ca. 25% yoy

According to unofficial information by Dziennik Gazeta Prawna, the VAT revenue increased by almost 25% yoy, i.e. by ca. PLN 94.7 bn between January and July this year, This is 2/3 of the annual plan, which is PLN 143.5 bn, the daily stressed.

“About PLN 94.7 bn – this is the commodities and services VAT revenue at the end of July, DGP learned. This is almost 25% more than last year at the same time. The economic upturn is helping the state’s coffers and the Finance Ministry claims that tightening the tax collection system is also getting more and more effective,” the daily wrote.

In July VAT revenue alone was PLN 14.7 bn, which means an 8% increase yoy, the newspaper reported.

“We did predict the slowdown of the growth rate in later months, we pointed this would be caused by one-time events, which significantly increased statistics at the beginning of the year,” explained the daily’s informer at the ministry.

The newspaper also reminded that a year ago at the same time the state treasury received VAT from taxpayers which settle quarterly. This year the biggest taxpayers cannot do this. Additionally, at the end of June the ministry introduced a 15-day, accelerated return of tax for micro-businessmen that perform construction services.

Oil slightly dropped, market waiting for OPEC-Russia talks results 

Oil prices on the New York fuel exchange dropped by 0.3% after the week ended at a 1.5% decrease. The markets are waiting for the results of a two-day meeting between OPEC and other oil producers who are to talk about the issue of following the contract on limiting the production of the raw material. West Texas Intermediate Crude Oil price in September on the NYMEX in New York is estimated at USD 49.9 after a 0.3% drop.

The investors will focus on the two-day talks that will take place at the beginning of the week. The parties will be talking about the contract on limiting oil production, which is binding until the end of March 2018.

The contract signatories promised to cut oil production by 1.8 m barrels per day (b/d), out of which OPEC will cut 1.2 m (b/d) and Russia 300 thousand (b/d). According to calculations made by Bloomberg the cartel states followed the policy at 86% in July in comparison to 78% in June (IEA calculations).