Warsaw-listed refiner PKN Orlen has signed a letter of intent (LOI) to take over Poland’s oil and gas exploration and production company PGNiG, PKN Orlen said on July 14.

The LOI marks another step in the process of Warsaw building a “multi-energy company active not only on the liquid fuels market but also on the gas and energy markets,” Poland’s ministry of state assets said in a statement. 

“We are building a company with a global reach,” the ministry added.

“[PKN Orlen] will play the leading role in the capital and organisational consolidation of the company and PGNiG,” PKN Orlen said in a market filing.

The first stage of the process will be negotiations with the State Treasury, which holds a 71.88% stake in PGNiG, the company also said. There were no other details regarding the planned merger, which could take around a year to complete, PKN Orlen's CEO Daniel Obajtek told specialist website Energetyka24.

The completion of the merger “will be possible, among others, after receiving appropriate corporate approvals and approvals of the competition protection authorities regarding the concentration,” PKN Orlen also said.

That appears likely, given the size of the two companies. PKN Orlen’s turnover came in at PLN111bn (€24.8bn) last year. PGNiG – which is also listed on the Warsaw Stock Exchange – posted earnings of PLN42.2bn.

Following the merger with Lotos and if taking over PGNiG is completed successfully, PKN Orlen’s turnover could jump to some PLN200bn, Prime Minister Mateusz Morawiecki told a press conference.

PKN Orlen received a final nod from the European Commission for taking over Poland’s other refiner, Grupa Lotos, also on July 14. 

Following the announcement, PKN Orlen’s stock price declined 4.69% to PLN58.5 at the close of the day’s trading on the Warsaw bourse. PGNiG shares rose 3.99% to PLN5.11.

PKN Orlen is an oil refiner and liquid fuels retailer active in Poland, as well as Germany, Austria, Czechia, Slovakia and the Baltic states.

PGNiG is an oil and gas exploration and production company with assets both at home and abroad, such as in Norway, from where it is going to source gas to fill the planned Baltic Pipe, a project crucial for Warsaw as it works to end its dependence on gas imports from Russia.