Warsaw is studying a potential merger of state-controlled oil and gas companies PKN Orlen, Lotos Group and PGNiG, the Polish treasury minister said on January 11.

The treasury says the plan is motivated by the need to defend the companies against possible hostile takeover bids. However, investors will worry it is part of the ruling Law and Justice (PiS) party's ongoing efforts to rapidly consolidate power since coming to office in November.

Strategies at Poland's listed state companies have commonly appeared to be driven by politics rather than business for years. PKN has struggled to maintain the largely loss-making Mazeikiai refinery in Lithuania that it was pushed into buying in 2006 from the rump of the bankrupt Russian oil firm Yukos, to the fury of Moscow. Executives at gas company PGNiG – and even ministers – have fallen in recent years over the company's failures to secure greater independence from Russian gas supplies. 

“Primarily this is about securing the treasury ministry’s interest in these firms from any eventual hostile takeover attempt," Treasury Minister Dawid Jackiewicz told PAP news agency. "We will also mull what potential synergies can be achieved."

The treasury has only begun analysing the potential of a merger, Jackiewicz stressed. The minister said he hopes to determine if it is feasible by the end of the first quarter. The last PiS government, in office in 2005-07, sought unsuccessfully to merge PKN and Lotos. Wojciech Jasinski, appointed CEO of PKN in December, was treasury minister at the time.

If executed, the merger would create a giant with a market capitalisation of around PLN60bn (€13.5bn). It would control Poland’s oil and gas imports, as well as retaining a dominant position in refining and downstream segments.

The three companies have been pushed in recent years to explore Poland's shale gas deposits, which were seen as having the potential to allow the country to halt gas imports from Russia. The nationalist PiS is a ardent critic of Moscow.

Russia, meanwhile, has often sought to gain a foothold within Polish companies in recent years, particularly those with a strategic role in gas. Attempts to wrest control of major chemicals companies earlier this decade saw the previous government pass a law in August that aims to protect “strategic” companies from unwanted advances. PKN and Lotos get the bulk of their crude supplies from Russia.

Should the merger go through, the new company would be supervised by a new energy ministry, which was created shortly after PiS took office. The teasury ministry – which currently manages Poland's state companies – is set for liquidation around 2017, a change that PiS advocated during the election campaign. The treasury will consider more than one merger option, Jackiewicz said.

At the close of trading on the Warsaw Stock Exchange on January 11, PKN Orlen shares had gained over 2% to PLN64.6, while Lotos traded 0.11% down to PLN26.1. Shares of PGNiG dropped 3.6% to PLN4.6.

Poland maintains operational control of PKN despite holding just 27.5% in the company, which until recently was viewed as one of the most independent of Poland's state companies. "Fuels are clearly less strategic than gas," Tamas Pletser at Erste Bank pointed out to bne IntelliNews late last year. 

Warsaw holds a 53% stake in fellow refiner Lotos, and 72% in PGNiG. The national gas utility was one of the first state-controlled companies to experience a change of CEO under the new government, when former PiS economy minister Piotr Wozniak was appointed in December.