CAPITAL: Warsaw

MONETARY UNIT: Zloty

REFINING CAPACITY: 382,000 b/cd

OIL PRODUCTION: 7,100

OIL RESERVES: 114.9 million bbl

GAS RESERVES: 5 tcf

Poland hoped to ensure its security of energy supplies by continuing its reliance on coal but expected natural gas to play a growing role in its expanding economy.

Polish gas demand was expected to rise to 22-27 billion cu m/year by 2010 from of 11 billion cu m/year in 1998. Electricity consumption would increase 40%. Poland planned to increase gas supplies through exploration and imports from western Europe and from Russia through the Yamal pipeline. Increased gas use would allow an alternative to coal for power generation, but that required restructuring of the gas sector.

With gas demand expected to double by 2010, state-owned Polish Oil & Gas Co. (POGC) estimated it would cost $57 billion to improve the national supply and storage infrastructure, reduce exploration costs, and finance restructuring.

The government planned a four-stage process to privatize POGC. Support facilities and exploration companies would be partially privatized and production companies and downstream gas transmission companies removed from POGC`s control.

An energy law passed in April 1997 required POGC to open its pipeline network to other companies, decontrolled gas prices over 2 years, and required producers and buyers to renegotiate gas contracts. Poland`s finance ministry also recommended that the country`s excise tax on liquid fuels be increased by 32-60% by the year 2002 to match levels required by the EU.

The ministry proposed increasing the tax on unleaded fuel to 1,104 zlotys/kl in 2002 from 835 zlotys/kl in 1998.

Privatizations

Poland said it would reopen bidding for Rafineria Gdanska SA, the country`s second-biggest oil refinery and might consider selling it through an initial public offering after it rejected bids from 12 international companies.

Nafta Polska SA, the state-owned manager of Poland`s oil refineries, said the bids received for a 51% stake in the refinery didn`t provide for enough investment or workers` benefits.

Bidders included British Petroleum Plc, Agip, and Elf Aquitaine SA.

The refinery, Poland`s second-largest by sales after Petrochemia Plock SA, needed investments of $1.3 billion to boost production and build new gasoline stations.

The government planned to sell the Plock refinery, together with the national gas distribution network, Centrala Produktow Naftowych SA, through an offering in 1999 after it completed the sale of a majority stake in the Gdansk refinery.

Demand for fuel in Poland almost doubled during 6 years after a boom in car sales, which were rising by an average 25%/year.

At the same time, the number of trucks and other commercial vehicles using Polish roads was soaring as the economy continued to grow at more than 5%/year.

Poland planned to abolish duties on imports of fuels in 2001, and Polish refineries were trying to boost their competitiveness before then.

Petrochemia Plock SA was building a $33 million, 600,000 metric ton/year isomerization unit and a 460,000 ton/year light naphtha hydrotreater at its 260,000 b/d refinery.

EuroGas Inc. agreed to form a Polish joint venture with VEW Energie AG and National Power International Ltd. to build a $150 million gas-fired, 150-MW power plant in western Poland.

POGC was building a 4.3 billion cu m underground gas storage facility in Wierchowice.

Apache Corp. became the 50% partner of FX Energy Inc. in a 1.5 million acre concession in the western Carpathian region of southern Poland. Apache was to fund three exploration wells and acquire 350 km of 2D seismic survey during the first 3 years.

FX and Apache were also partners in the Lublin concession in southeastern Poland, where Apache had acquired 1,200 km of 2D seismic and planned two wells. POGC had an option to participate.