Poland’s Orlen to buy gas producer KUFPEC Norway in $445 million deal

Poland’s Orlen to buy gas producer KUFPEC Norway in $445 million deal

Polish state energy giant Orlen is set to continue its recent expansion in Norway after one of its subsidiaries, PGNiG Upstream Norway, agreed a $445 million (1.8 billion zloty) deal to purchase a 100% stake in KUFPEC Norway from the Kuwait Petroleum Corporation.

The agreement – which is scheduled to be finalised by the end of the year, subject to approval by the Norwegian authorities – will see Orlen acquire further interests in five fields where it is already active and boost its gas output in Norway by one third, to over four billion cubic metres annually.

“This [deal] significantly enhances our capacity to meet the demand of the Polish market and the entire region utilising our own gas resources,” announced Orlen’s CEO, Daniel Obajtek.

“We have secured control of fields where we already hold direct interests acquired through previous transactions, [which] will ensure seamless integration of the acquired assets.”

So far, PGNiG Upstream Norway has been producing 0.6 billion cubic metres of gas per year from the five fields, – Gina Krog, Sleipner Vest, Sleipner Ost, Gungne and Utgard. That will increase to 1.74 billion cubic metres. The gas will be exported to Poland via the Baltic Pipe, which opened last year.

The agreement marks the second acquisition by PGNiG Upstream Norway this year, after a $1 billion deal in June that included purchasing interests in the Sabina and Adriana fields.

Between 2017 and 2022, entities owned by Orlen completed 10 acquisitions in Norway, increasing natural gas production there from 0.5 billion cubic metres in 2017 to 3.1 billion cubic metres in 2022.

Gas output this year is again projected to surpass three billion cubic metres, and the acquisition of KUFPEC will boost production next year to more than four billion cubic metres. Orlen has ambitions to reach six billion cubic metres of annual production there as soon as possible.

Upon completing the acquisition of KUFPEC, the Orlen Group will hold 94 licenses on the Norwegian Continental Shelf and become the fifth largest license holder among companies operating in the area, the company said.

Orlen has expanded rapidly in recent years through the acquisition of state-owned competitors in Poland, including Lotos, PGNiG and Energa. That has seen it rise to be ranked among the 50 largest companies in Europe by Forbes magazine.

This year, Orlen has been eying the acquisition of a fertilizer plant from Poland’s largest chemicals group, Grupa Azoty, which is also partly state-owned.

However, Azoty issued a statement yesterday stating it wished to end negotiations with Orlen after consulting with an external firm. The deputy CEO of Azoty said that the analyses carried out “do not give grounds to continue discussions regarding a potential acquisition”.

Obajtek disagreed with this conclusion, writing on social media that Azoty’s decision to abandon the sale of its plant “does not serve to stabilise their financial situation and the fertiliser market, whose consolidation plans date back to the last century”.

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