Lotos has said it would spend an additional $2.4 billion to boost its relatively small upstream business, but the new strategy left many analysts scratching their heads over potential acquisitions and sources of funding. Since announcing its higher spending plans on Monday, Lotos shares shed 8% of their value, hitting new all-time lows. “In the long term Lotos should tie itself up with a sector investor,” said Wieslaw Skwarko, a board member responsible for Lotos at Nafta Polska, which has 52% of the company. “From the point of view of Poland’s energy security, the idea is of tight cooperation with an investor that has access to oil reserves,” he said in an interview. Skwarko declined to discuss possible partners, but industry watchers have speculated Lotos could end up embracing one of the Nordic oil companies — Norway’s Statoil, Finland’s Neste or Sweden’s Preem.

Lotos CEO Pawel Olechnowicz has said Lotos could seek an alliance with a refiner in the Baltic Sea region to diversify its sources of oil. Earlier this week he said Lotos could consider selling a stake in exchange for assistance with funding its upstream investments. Poland has been seeking to lessen its reliance on Russian oil, which accounts for a lion’s share of imports by Lotos and its larger rival PKN Orlen.

Skwarko said Lotos should first complete its development program to boost capacity to be completed in 2011, when Lotos should be able to process 10.5 million tons of oil annually. Any move to lower the state holding in Lotos to below 50% would need government approval. Poland also controls PKN, where it holds about 30%. Skwarko said another less likely option was to expand cooperation between Lotos, PKN and state-controlled gas distributor PGNiG. “We should not exclude the possibility of capital ties between PGNiG, Lotos and PKN Orlen. Lotos and PGNiG should definitely cooperate on extraction projects,” he said. (Reuters)