The past year was another stage of consistent implementation of the strategy for the years 2009 – 2013. In 2011 the Company focused on activities that promote growth of the Company’s value, strengthening of its position in the home markets as well as product and geographic expansion. They covered three areas:
Effective measures to strengthen efficiency, focused on ensuring operational efficiency, asset integration and segment management provide a solid basis for further development of the Company in the area of core business, extension of the value chain, as well as the use of new business areas to leverage the dynamic growth.
The year 2011 was difficult for the refinery industry in our region. Low refining margins, volatile Ural and Brent oil differential, soaring oil prices and weakening of the Polish zloty – all these factors affected the macroeconomic environment of PKN ORLEN. However, despite relatively unfavourable external surrounding, 2011 was very successful for PKN ORLEN. In 2011 the Company increased its total sales volumes by 4%, to an all-time high level of almost 35.5 million tonnes. Also revenue from sales reached record levels and amounted to almost PLN 107 billion. Sales in the refinery segment increased by 3% against last year, while the volume of processed crude oil dropped by 1%.
Start-up of the PX/PTA facility in June 2011 and initiation of the sale of terephthalic acid, as well as higher sales of plastics led to increased sales volumes in the petrochemical segment by 7%. In 2011 the Company also continued activities aimed at strengthening the financial position of PKN ORLEN: debt was reduced to the level of PLN 7.6 billion; the Company also signed debt refinancing loan agreements for the total value of almost EUR 3.0 billion, which allowed to provide the Company’s financing for 5 years.
Strategic activities in segments
One of the key tasks in 2011 was initiation of activities to improve efficiency, focusing on maintenance of operational efficiency, asset integration and segment management. They brought measurable financial benefits and allowed for further development of ORLEN Group.
It was possible to develop and strengthen the efficiency of key operating segments due o implementation of the overhaul programme. The Company carried out, among others, a big overhaul combined with replacement of the catalyst at the Hydrocracking plant in Płock, as well as an overhaul of the Catalytic Cracking, Alkylation and Tar Hydro-desulphurisation (HOG) plant. Moreover, the Company conducted a major overhaul of the Hydrogen Plant I. The refinery in Litvinov, the Czech Republic was also refurbished.
The implemented investment programme also proved to be successful. In 2011 the Company put into operation the Sulphur Recovery plant – Claus II, which will allow to further increase the volume of processed oil in subsequent years. In the logistics area, the Company is implementing the cavern strategy aimed at securing its own and commercial storage needs in the scope of crude oil and petroleum products.
In the petrochemical segment, construction of the Paraxylene (PX) and Terephthalic Acid (PTA) plant was completed. On 30 April 2011 the commissioning reports were signed, and performance tests were carried out in May and in June. They confirmed all guaranteed parameters and both production plants obtained so called PAC (Performance Acceptance Certificate).
The year 2011 was also characterised by further development of the retail segment. Activities of the Company in this area concentrated on improvement of sales efficiency. At the same time care was taken to maintain, despite rising energy prices and labour costs, the lowest possible operating costs. This was achieved through continuous efforts to improve and maintain high operating standards, and active support of fuel and non-fuel sales by promotional activities. Acquisition of additional fuel stations in Germany contributed to strengthening of the Company’s presence on that market. PKN ORLEN, as the first fuel company in Poland, initiated the sale of innovative natural fuel – BIO85.
The Company also consistently develops the non-fuel offer. In December 2011 the Company launched in Gdańsk the first Meeting Point in Poland, which broadens the offer of existing Stop Cafe and Stop Cafe Bistro points.
Development of new areas
The principal purpose of the PKN ORLEN strategy is development of an integrated, multi-segment fuel and energy entity with diversified asset structure – a multi-utility company. Major development investments are focused on new segments – hydrocarbon exploration and production (upstream) and electricity production. These activities will be carried out both independently, as well as in cooperation with Polish and foreign industry partners.
As regards exploration and production projects, in 2011 the Company implemented those which were characterised by an acceptable level of risk and ensured building of competence in a stable environment. They include e.g. Kambr (Cambrian), Karbon (Carboniferous), Lublin Shale and Sieraków projects, as well as newly launched Hrubieszów Shale and Mid-Poland Unconventionals projects which will allow to significantly strengthen the position of PKN ORLEN Capital Group on the market of unconventional resources in Poland. In 2011, the Company initiated, among others, drilling works under the Lublin Shale project aimed at appraisal of the resources and possibilities for gas production from unconventional deposits (shale gas). The Lublin Shale project is an excellent example of synergy with another objective of the development strategy of PKN ORLEN Capital Group, i.e. development of the energy segment, as success of this project will provide a source of fuel for future gas power plants.
In the scope of projects for development of energy sectors, key activities in 2011 were related to the implementation of the energy strategy adopted in 2009. They were implemented in three areas: the project for construction of the gas power plant in Włocławek (including initiation of activities regarding future gas supplies), establishment of PKN ORLEN position in the area of renewable energy sources and activities aimed at adaptation of production sources to environmental standards 2016 (CHP plant in Płock, CHP plant Litvinov, ORLEN Lietuva and Trzebinia).
The first stage of the adopted energy strategy is construction of the gas and steam power plant in Włocławek. Start-up of the unit is planned for the turn of 2014/2015. All key issues related to the preparation of the investment have been completed. In connection with implementation of the energy strategy in the scope of renewable energy sources the Company carried out analyses of the possibility of obtaining energy from wind farms.
A number of design works were carried out due to necessity to adapt the Company’s CHP plants to new environmental requirements in place since 2016. The key task is to adjust the CHP plant in Płock to the aforementioned standards. Currently tenders are being organised for the selection of a contractor for flue gas denitrogenation units for seven boilers installed at the CHP plant and joint flue gas desulphurisation unit for all boilers.
Further strengthening of PKN ORLEN Capital Group
In the scope of the third pillar of the strategy, regarding reorganisation of ORLEN Group, the Company undertook activities aimed mainly at:
The year 2011 was another year of ordering the ORLEN Group structure in accordance with the adopted segment management model. The Company increased its share in subsidiaries: ANWIL, IKS “Solino” and Rafineria Trzebinia. In November 2011 the Company executed the agreement for the sale of Polkomtel, which allowed to release the capital in the amount of PLN 3.7 billion and will facilitate further growth. Moreover, with the aim to strengthen the Capital Group management, the Company conducted in 2011 the processes of acquisition of minority shareholders in, among others, ORLEN Automatyka, ORLEN Wir, Rafineria Jedlicze, and consolidated and restructured assets of Paramo.
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