PKN Orlen, Lotos managements approve merger plan

Poland's biggest oil refiner PKN Orlen (PKN.WA) and number two player Grupa Lotos (LTSP.WA) said their management boards had approved plans for a merger first announced in 2018 but delayed by antitrust issues, said Reuters.

In exchange for shares held in Grupa LOTOS, its existing shareholders will receive shares in the enlarged PKN ORLEN. The transaction is subject to approval of the share exchange ratio and other terms of the merger by shareholders of both companies at their respective general meetings. Once the process is carried through, it will lead to the creation of a strong multi-utility group pursuing capital projects aimed to strengthen Poland’s energy security and its independence in terms of feedstock supplies.

“Poland’s energy security as the driving force behind the country’s economic growth is for us a priority goal. This is why we are setting out to build a strong integrated group with well diversified revenue sources, resilient to the highly volatile macroeconomic environment. As was the case with our previous acquisitions, we intend to enhance the LOTOS post-merger value by leveraging the strengths of both combined entities. The strong partner we have secured for the process, being a global petrochemical leader and the world’s largest oil producer, will provide added support. As a result, we will modernise and further develop our business, strengthening its resilience to the increasingly volatile market environment and driving sustainable value creation for our shareholders, retail customers and local communities,” says Daniel Obajtek, President of the PKN ORLEN Management Board.

The agreed share exchange ratio, as well as the final detailed concept of the merger, were the subject of analyses by international consulting firms. The merger will be effected through the acquisition of Grupa LOTOS S.A. by PKN ORLEN S.A. This means that, upon the acquisition, the existing shareholders of Grupa LOTOS will take up new shares in the increased share capital of PKN ORLEN and become the latter’s shareholders. As a result of the merger between PKN ORLEN and Grupa LOTOS, the Polish State Treasury’s equity interest in the combined entity will increase to approximately 35%. Assuming a subsequent merger with PGNiG, this stake will increase to about 50%, meaning that the state’s control over the newly formed multi-utility group will be further reinforced.

According to the merger plan, shareholders of Grupa LOTOS will receive merger shares in the following proportions: 1,075 (PKN ORLEN shares): 1 (Grupa LOTOS shares). In other words, in exchange for one share in Grupa LOTOS its shareholders will receive 1,075 shares in PKN ORLEN, with the reservation that the number of allocated shares must be a natural number, and so any unallocated fractions of merger shares will be settled in cash, to be paid to the existing shareholders of Grupa LOTOS in accordance with the merger plan.

The proposed acquisition is the simplest and quickest solution possible for this transaction, which will enable swift and complete integration of the assets and businesses. The adopted transaction structure will also ensure liquidity for the new group, enabling effective continuation of the existing projects and investment in other promising business areas.

The merger of PKN ORLEN and Grupa LOTOS is an important step in building a strong and diversified multi-utility group. The ongoing energy transition poses a huge challenge for oil and energy companies as it involves a gradual shift away from hydrocarbons and conventional fuels towards new and more sustainable energy sources. The combined entity to be formed based on the assets of PKN ORLEN, the Energa Group, Grupa LOTOS and PGNiG will be the largest company in Central and Eastern Europe, capable of facing the challenges of energy transition and implementing the most ambitious projects.

As it was written earlier, PKN Orlen is exploring ways to produce polymers using carbon dioxide. New technology to capture, store, reuse or replace carbon pollution is being explored around the world, with some companies working on methods of converting the greenhouse gas into products such as plastic, soap, or fabric.

Under its 2030 strategy, Orlen plans to reduce CO2 emissions from existing refining and petrochemical assets by 20% and by 33% from its power generation business. It has also set a 2050 target date for achieving a net zero carbon footprint.

PKN ORLEN is a Polish company and one of Central Europe’s largest refiners of crude oil. We specialize in processing crude oil into world-class unleaded petrol, diesel, heating oil, and aviation fuel as well as plastics and other petroleum related products.
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Croatia is ready to increase the capacity of the Adriatic oil pipeline to supply Hungary and Slovakia with crude in case of any disruptions to imports from Russia via the Druzhba pipeline, Hungary's foreign minister said, as per Hydrocarbonprocessing.

European Union leaders gave concessions to Hungary in order to agree an oil embargo on Russia over its invasion of Ukraine, sealing a deal in the early hours of Tuesday that aims to cut 90% of Russia's crude imports into the bloc by the end of the year.

With its embargo the bloc aims to reduce Moscow's income to finance the war it launched more than three months ago in Ukraine, but it exempted landlocked Hungary because the country relies on the Druzhba pipeline for oil.

Hungarian Foreign Minister Peter Szijjarto said he had reached a long-term energy security co-operation agreement with Croatia's energy minister, whereby Hungary's southern neighbour would provide an alternative route for possible additional oil imports, if needed.

"Croatia is ready to provide a route for oil shipments towards Hungary, should they become necessary," Szijjarto said, adding that Hungarian energy group MOL would start talks with Croatian officials later in the day. MOL's downstream business model has been built on Russian crude shipped via the Druzhba pipeline that covers about 65% of the oil Hungary needs.

Shares in MOL rose more than 5% early on Tuesday after the EU exempted Hungary, the Czech Republic and Slovakia from sanctions on Russian oil.

As per MRC, Hungary on Monday stuck to its demands for energy investment before it agrees to a Russian oil embargo, clashing with EU states pushing for swift approval of more European Union sanctions against Russia for invading Ukraine. The EU commission early this month proposed the new package of sanctions against the Kremlin but the measures have not yet been adopted, with Hungary being among the most vocal critics of the plan.
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Unipar is to build a new facility at its Camacari Petrochemical Complex, in the state of Bahia, for production of chlorine and derivatives, said the company.

Unipar (UNIP3) announced plans to implement a production unit at the Camacari Petrochemical Complex, in Bahiawhich will require investments of around 140 million reais.

The expectation is that the work will be completed within two years from the start of construction, scheduled to begin in the second half of this year, Unipar said in a statement to the market on Sunday.

The annual production capacity of the new plant will be up to 10 thousand tons of chlorine, 12 thousand tons of caustic soda, 25 thousand tons of hydrochloric acid and 20 thousand tons of sodium hypochlorite.

Unipar currently has factories in Cubatao (SP) and Saint Andrew (SP), in addition to a unit in Bahia Blanca, in Argentina.

The company’s installed production capacity at the end of the first quarter was up to 680,000 tonnes of liquid chlorine per year, 766,000 tonnes of liquid caustic soda and flakes, 667,000 tonnes of hydrochloric acid and 472,000 tonnes of sodium hypochlorite.

As per MRC, Brazilian company Unipar Indupa plans to expand chlorine and caustic soda production at its Santo Andre plant (Santo Andre, Sao Paulo, Brazil). The company plans to increase the production of chlorine by 29,000 tonnes, caustic soda by 32,000 tonnes per year. The project includes the construction of a hydrochloric acid furnace with a capacity of 91,000 tonnes per year. The construction and furnace will cost approximately USD 17.9 mln, with commissioning expected in the second half of 2023.
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McDermott International has been awarded a Front-End Engineering Design (FEED) contract by North Oil Company (NOC) for the Ruya Development, previously referred to as Al-Shaheen Phase 3-Batch 1, located offshore Qatar, said the company.

This award is one the largest FEED projects undertaken in McDermott's history and follows the successful completion of the pre-FEED contract. "This is a strategic contract for our offshore business in Qatar and a game-changer for McDermott as it represents the largest offshore FEED we have ever received in the Middle East," said Tareq Kawash, McDermott's Senior Vice President, Offshore Middle East. "As was the case for the Pre-FEED with NOC, work will be led from our highly skilled Doha operating center and will be supported by our Chennai engineering office."

"The award strengthens our successful collaboration with NOC and demonstrates the continuity of our business relationship with them," said Neil Gunnion, McDermott Qatar Country Manager and Vice President Operations. "Utilizing our comprehensive experience and in-depth knowledge of the offshore sector in Qatar, we look forward to continuing to work closely with NOC to contribute to the development of Shaheen, which is Qatar's largest offshore oil field."

The scope of the contract comprises developing FEED studies and deliverables suitable for an engineering, procurement, construction, installation and commissioning (EPCIC) project. This includes creating technical output data (FEED data), providing EPCIC schedule and cost estimates, and developing an early work plan for the brownfield scope with necessary site surveys. The scope also ensures that new greenfield facilities design and brownfield modifications comply with applicable rules and regulations.

McDermott has decades of experience delivering projects in Qatar, a historically strategic market, and is significantly increasing localization efforts with the Tawteen In-Country Value (ICV) program. The Ruya Project will be managed from the McDermott Doha office with support from Chennai.

As per MRC, McDermott’s storage business unit, CB&I, and Korea Gas Corporation (KOGAS) have signed a memorandum of understanding (MoU) to explore the development of large-scale liquid hydrogen storage to support Korea’s hydrogen economy roadmap. Last year, South Korea announced plans to achieve carbon neutrality by 2050 by replacing coal-fired power generation with renewable sources and internal combustion engine vehicles with hydrogen-powered and battery-based electric vehicles, McDermott wrote in a statement.
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Oil prices were largely unchanged after choppy trade on Monday, buoyed by Saudi Arabia raising its July crude prices but amid doubts a higher output target for OPEC+ oil producers would ease tight supply, said Hydrocarbonprocessing.

Brent crude was up four cents to USD119.76 a barrel at 12:22 p.m. EDT (1622 GMT) after touching an intraday high of USD121.95. U.S. West Texas Intermediate (WTI) crude futures rose 8 cents, or 0.1%, to USD118.95 a barrel after hitting a three-month high of USD120.99. The benchmark fell by USD1 earlier in the session.

Saudi Arabia raised the July official selling price (OSP) for its flagship Arab light crude to Asia by $2.10 from June to a $6.50 premium over Oman/Dubai quotes, just off an all-time-high recorded in May when prices hit highs due to worries of disruptions in supplies from Russia.

The price increase followed a decision last week by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, to boost output for July and August by 648,000 bpd, or 50% more than previously planned, though constraint in global refining capacity has kept prices elevated.

"Crude inputs into the U.S. refineries have been reduced by about 6% from 4-years ago at this time with this reduction associating with a need for less crude cover while contributing to a severe tightness in the gasoline and diesel markets," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

The increased target was spread across all OPEC+ members, however, many of which have little room to increase output and which include Russia, which faces Western sanctions. "With only a handful of... OPEC+ participants with spare capacity, we expect the increase in OPEC+ output to be about 160,000 bpd in July and 170,000 bpd in August," JP Morgan analysts said in a note.

On Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023, saying they expected Russian output and exports to fall by around 1 million to 1.5 MMbpd by end-2022. Separately, Italy's Eni and Spain's Repsol could begin shipping small volumes of Venezuelan oil to Europe as soon as next month, five people familiar with the matter told Reuters.

As per MRC, Slovakia said on Friday it would be hardest hit by European Union sanctions on Russian oil and it expected solidarity from Brussels to mitigate the impact. The economy ministry said Slovakia had sought a three-year derogation on trade in piped Russian oil and oil products, but was unsuccessful as tough sanctions were approved with the aim of hitting Russian revenues following its invasion of Ukraine.
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