Update to PKN ORLEN`s strategy 2006-2009

Regulatory announcement no 4/2006 dated January 10th , 2006

Polski Koncern Naftowy ORLEN S.A. („PKN ORLEN”, “Company”, “Group”), Central Europe’s largest downstream oil company, announces the update to PKN ORLEN’s strategy 2006 – 2009. The updated strategy of PKN ORLEN assumes the continuation of the Company pro-efficiency measures, strengthening of PKN ORLEN presence in key business areas in domestic markets and monitoring of expansion opportunities in new areas and markets, with M&A activities being of central significance in the forthcoming years.

The main points of the updated strategy are:

1. the plan to expand production operations with a view to ensuring own raw material base. Implementation of these plans will result in the ability to achieve significant growth in the Company’s value and to enhance its competitive position. The programme for the establishment of the production operations segment is divided into two phases: the first one - until 2009 and the second one - until 2015. The first stage assumes the gradual establishment of organizational structures, and the building of competencies on the basis of one-off asset acquisitions. In the first two years, the identification of assets for acquisition will focus on lower risk assets, with priority given to projects implemented as joint ventures. At that stage PKN ORLEN intends to acquire minority shareholdings, without assuming the role of operator, in order to take advantage of partner competencies. In the second stage of the programme, in the case of projects envisaging an involvement of approx. 5 years, the Company plans to assume the role of operator, but still employ outsourcing for technical issues. In the case of longer-term projects - 10 years - the Group will become involved in direct exploration to a larger extent, at the same time developing technical capacities and building organizational structures with the use of local human resources. Assumptions for future production volumes envisage a gradual increase in the volume of raw material from 0.4 million tonnes in 2007 to 4.3 million tonnes in 2015. The capital outlays required for program implementation are estimated at USD 130 million per annum in the years 2007-2009, and in the following 5 years at USD 438 million per annum.

2. the financial targets planned to be attained in 2009 as follows, under the assumption that the macroeconomic conditions of 2004 are maintained*:
 EBITDA: PLN 10 billion
The assumed level of EBITDA level in operating segments breakdown:
Refining: PLN 4.36 billion  Petrochemicals: PLN 3.67 billion
Chemicals: PLN 0.87 billion
Retail: PLN 1.18 billion
Production: PLN 0.26 billion
Others: PLN - 0.34 billion

Annual average CAPEX: PLN 3.4 billion.
The assumed annual average CAPEX in operating segments breakdown:
Refining: PLN 1.24 billion
Petrochemicals: PLN 1.1 billion
Chemicals: PLN 0.2 billion
Retail: PLN 0.55 billion
Production: PLN 0.28 billion
Others: PLN 0.03 billion

ROACE forecast at the level of minimum 18.5%.

The forecast of financial leverage at the level of ca. 30-40%.

3. making the level of divend payments dependent on the Company’s involvement in mergers and takeovers, and on the maintenance of an optimal capital structure. This solution is scheduled to be implemented in 2007, so as to refer that to the dividend payment for 2006. The Group will aim at paying a dividend at a level of at least 50% of FCFE (Free Cash Flow to Equity). If acquisitions are significant, however, the company’s priority will be a return to safe indebtedness levels, which may entail limited payments of the dividend in line with the FCFE-based approach. On the other hand, if Polkomtel is sold and there are no other investment liabilities, the company plans the establishment of a dedicated Dividend Fund, which will enable higher dividend payments in following years.

*The assuptions regarding macroeconomic conditions of 2004:
Brent price USD 38.3 /bbl,
Brent-Ural differential USD 4.1 /bbl,
Rotterdam refinery margin USD 5.6 /bbl,
Exchange rates of PLN/EUR 4.52,
Exchange rates of PLN/USD 3.65
CAPEX (annual average 2006-2009) PLN 3.4 billion, depreciation and amortisation (annual average 2006-09) PLN 2.1 billion; potential CAPEX in M&A activities not involved.
The financial data refer to the Capital Group of PKN ORLEN, IFRS numbers if not otherwise pointed.