Privatisation and restructuring of petroleum sector

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Poland’s petroleum industry in general, and the major enterprise PKN Orlen in particular, is undergoing restructuring and privatisation, if relatively slowly. April and May 2004 saw disputes and protests over planned job losses at PKN Orlen and management attempts to impose wage restraint.

The current government strategy for Poland’s petroleum industry was announced by the Ministry of the State Treasury (Ministerstwo Skarbu Państwa) on 24 September 2002. It is a modified version of a programme for the restructuring and privatisation of this industry adopted by the cabinet on 15 July 1995. The basic goals of the overhaul programme are to ensure:

  • an environment conducive to the sustained economic growth and competitiveness of Polish petroleum companies from the perspective of European Union accession;
  • security of the country’s energy supply;
  • stability and increase in State Treasury revenues;
  • development of the petroleum extraction and processing sector;
  • elimination of harmful tendencies in the labour market;
  • conditions that encourage the growth of small and medium-sized enterprises;
  • conditions that foster research and development in Poland;
  • due safeguarding of consumer interests; and
  • environmental protection and safety.

PKN Orlen and the industry's structure

The overall condition of Poland’s petrochemicals industry is largely predicated by that of Polski Koncern Naftowy Orlen (PKN Orlen) the country’s largest fuel producer. The privatisation of this enterprise is now well advanced, with the State Treasury retaining control over a mere 27.6% of its shares, of which approximately 10% is held directly, and the remainder through Nafta Polska SA, a 100% state-owned entity. As regards the stakeholding structure of other major entities in Poland’s petroleum sector, the typical situation is that Nafta Polska controls roughly three-quarters of the share capital, the State Treasury some 10%, and the entity’s employees the remaining 15%.

The programme drawn up by the government calls for the privatisation of individual companies. Definitive decisions still have to be made, however, as to whether the best course of action would be to consolidate the two largest producers, PKN Orlen and Grupa Lotos, or, by contrast, to retain the distinctness of these two companies and enable them to compete with one another. In practice, opting for the consolidation route would translate into permitting PKN Orlen to take a hand in privatisation of Grupa Lotos.

Continued privatisation of PKN Orlen itself, meanwhile, is to proceed by way of divestment of the shares now held by Nafta Polska, with the direct stake of the State Treasury to remain intact. PKN Orlen is thus essentially a private company in which the State Treasury holds a minority stake. The articles of PKN Orlen, however, provide that only the State Treasury enjoys unrestricted voting rights at the company’s general meetings, with the actual influence wielded by private shareholders significantly diluted.

PKN Orlen aspires to be the largest producer and distributor of fuel in central and eastern Europe. To this end, it has been working to secure a merger with MOL, the largest fuel producer in Hungary. The two companies have signed letters of intent to this effect; while these letters expired in April 2004, efforts towards an eventual merger are still underway.

PKN Orlen is also seeking to bolster its weight by way of other foreign ventures. In 2003, it purchased a network of approximately 500 petrol stations across northern Germany; while in April 2004, it acquired a 62.99% stake in the Czech company Unipetrol, thus taking a share in the largest Czech refinery and in a chain of 300 petrol stations.

These various initiatives by PKN Orlen, as well as its financial results, make for a positive assessment of the company and for an optimistic outlook regarding its future. This rosy picture, however, is marred by a number of disputes currently surrounding it, many of which have a political character, and by personal infighting. There have recently been allegations of improprieties affecting realisation of the PKN Orlen restructuring strategy. Furthermore, the much-touted restructuring programme provides for much freedom as regards the means by which this restructuring is to proceed, and new ideas about how to overhaul PKN Orlen have been numerous.

Social partners’ positions

To the extent that the directors of PKN Orlen can pursue their own policies, those policies undoubetedly follow the line set by the Confederation of Polish Employers, (Konfederacja Pracodawców Prywatnych, KPP), of which PKN Orlen’s chair, Zbigniew Wróbel, is a leading member.

The trade unions have reacted to the continued privatisation and restructuring of PKN Orlen with mixed emotions. According to the National Petroleum Industry Section of the Independent and Self-Governing Trade Union Solidarity (Niezależny Samorządny Związek Zawodowy, NSZZ Solidarność): 'we initially supported all the privatisation plans, but now that we see that Democratic Left Alliance [Sojusz Lewicy Demokratycznej, SLD- the 'post-communist' party currently in the coalition government] wants to take power in the company, we are opposed. We also object to shedding of the remaining State Treasury stake because this is bound to bring redundancies.'

This appraisal by union activists refers to the strategic goals of PKN Orlen. At the same time, however, employee representatives have been protesting against short-term measures being taken at present and planned for the immediate feature - the NSZZ Solidarność source quoted above states that these measures are designed to bring savings to the tune of PLN 800 million. Hoping to avoid excessive spending, the PKN Orlen board of directors has proposed pay increases falling short of what was previously expected. In response to this development, the unions embarked on a collective dispute with the board. This lasted from 1 to 28 April 2004 and concluded with a settlement guaranteeing that the union demands will be met. Significantly, this collective dispute involved only NSZZ Solidarność, though supported by some activists from the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związków Zawodowych, OPZZ), the other major union organisation.

OPZZ as a whole has been adopting a more ambivalent stance towards the plans of PKN Orlen’s board. This is thought to be the result of the federal character of OPZZ: one of its constituent organisations, the Federation of Refinery and Petrochemical Workers' Unions (Federacja Związków Zawodowych Pracowników Rafinerii i Petrochemii) supports the restructuring plans formulated by PKN Orlen’s directors wholesale, including a planned reduction in the number of regional centres. A representative of this federation, however, admits that it represents only workers employed at PKN Orlen’s fuel-producing operations. A second OPZZ organisation - the Federation of Sugar Refining, Glass Smelting, and Ceramic Industry Unions in Poland (Federacja Związków Zawodowych Przemysłu Chemicznego, Szklarskiego i Ceramicznego w Polsce) - assembles mostly employees of the company’s regional operations charged with fuel distribution. It is this constituency which will be most affected by the proposed scaling back of regional entities, and it is they who organised protests in December 2003. Members of this organisation also seemed set to join a demonstration planned by NSZZ Solidarność for 19 May 2004.


The various problems associated with restructuring and privatisation of PKN Orlen and of the other petroleum sector companies in Poland arise largely from the strong political undertones infusing what is, or should have been, a purely economic issue. The company’s directors are targeted by political pressure, with the effect that PKN Orlen’s balance sheet assumes secondary importance to power politics. In this context, it might be ventured that the trade unions are the weakest element of the opposition to the restructuring called for in light of PKN Orlen’s long-term plans. At the same time, implementation of the restructuring plans is fraught by a paradox of sorts - PKN Orlen’s international achievements (the investments in Germany and the Czech Republic) have found no reflection as regard changes in its structure, a fact which is clearly to the company’s detriment. (Piotr Sula, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Wroclaw University [Uniwersytet Wrocławski])

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