Petrochemicals

In 2009, ORLEN Group’s petrochemical segment consisted of selected units of the Petrochemical Production Plant in Płock and the following companies: Basell Orlen Polyolefins and Unipetrol RPA. We are the sole manufacturer of olefins, polyolefins and most petrochemicals in Poland and the Czech Republic. The high quality of our products and our efficient distribution network make us one of the strongest market players in this part of Europe.

Petrochemicals^[1]

In the first half of 2009, we still experienced the aftermath of the economic breakdown from the second half of 2008. Demand for petrochemicals was significantly limited as a result of the slowdown in the car and construction industries.

The market situation was also reflected in the prices of petrochemical products, which were quite low, in particular in the 1st and 2nd quarters of 2009. Prices started visibly growing by the end of the 2nd quarter last year, which, combined with the limited demand, especially for olefins and polyolefins, resulted in a lower level of cracker utilisation across Europe. Also, stock levels shrank in the entire supply chain.

ORLEN Group factories in Poland and the Czech Republic manufactured over 930,000 tonnes of ethylene, which is appr. 7% less than in 2008. The volume of propylene production in the report period levelled 575,000 tonnes, which is a 3% drop compared to the previous year.

The limited production volume of the two basic petrochemicals was mainly due to limited demand for those products and optimisation of the operation of units interlinked within the production chain.

Production volume of selected petrochemicals in PKN ORLEN in 2008–2009 (tonnes)

	2008	2009	Dynamics
Ethylene	539 866*	516 288	-4%
Propylene**	356 079*	358 195	1%
Butadiene	57 398	54 794	-5%
Benzene	141 004*	117 540	-17%
Toluene	127 436*	122 164	-4%
Paraxylene	24 148	-	-100%
Phenol	43 763	33 108	-24%
Acetone	27 796	21 052	-24%
Glycols	87 464	68 709	-21%
Cooling fluids	10 072	11 666	16%
Solvents	10 486	7 021	-33%
Sulphur	132 195	134 850	2%
Ethylene oxide	12 409	17 689	43%

* Total produce for sale and own consumption.
**Total propylene manufactured at the Production Plant in Płock.

Non–fuel sales by ORLEN Group in 2008–2009 (‘000 tonnes)

			2008					2009
	Polish companies	Czech companies	Lithuanian companies	Total	Growth/Fall/ spadek	Polish companies	Czech companies	Lithuanian companies	Total	Growth/Fall/ spadek
Heating oil III	961	146	1 798	2 905	29%	930	85	1 466	2 482	-15%
P fractions	338	–	-	338	13%	315	-	-	315	-7%
Sulphur	130	34	76	241	26%	135	31	70	236	-2%
Refinery	60	232	178	470	-23%	70	375	169	614	31%
Ethylene	-	153	-	153	-1%	-	143	-	143	-6%
Propylene	6	27	-	33	-32%4	14	36	-	50	54%
Benzene	95	179	-	274	-1%	83	182	-	265	-3%
Glycols	88	-	-	88	-14%	84	-	-	84	-4%
Toluene	103	-	-	103	-14%	91	-	-	91	-11%
Paraxylene	25	-	-	25	-22%	1	-	-	1	-97%
Orthoxylene	21	-	-	21	-19%	21	-	-	21	-1%
Butadiene	55	-	-	55	-7%	57	-	-	57	2%
C fractions	-	211	-	211	24%	-	168	-	168	-20%
Polyolefins	-	482	-	482	21%	-	500	-	500	4%
Ammonia	-	195	-	195	11%	-	234	-	234	20%
OXO alcohols	-	56	-	56	4%	-	18	-	18	-68%
Industrial oil	-	21	-	21	-27%	-	18	-	18	-12%
Petrochemical	186	225	-	411	-6%	186	192	-	378	-8%
Total nonfuel	2 069	1 960	2 052	6 080	12%	1 987	1 982	1 705	5 674	-7%

Sales of the main petrochemical products in 2009 (%)

	Ethylene	Propylene	Benzene	Oxo	Ammonia	Carbamide	HDPE	PP
Domestric sales	84	60	97	51	96	49	25	57
Export	16	40	3	49	4	51	75	43

Plastic Materials

The total volume of polyolefins manufactured by ORLEN Group in 2009 was only slightly lower than the 2008 figure.

In the report period, the production of polyethylene at our plants in Poland and the Czech Republic totalled appr. 607,000 tonnes, which was 6% less than in 2008. Polypropylene production volume in 2009 amounted to over 535,000 tonnes, which was appr. 2% less than the figure generated by ORLEN group in 2008.

Investment

In 2009, the volume of exported HDPE was similar to the 2008 figure, whereas in the case of PP, export volume went up by as much as 36%.

The most important projects implemented in 2009 were the ongoing reconstruction of the PX (paraxylene) unit and PTA (purified terephthalic acid) unit, which started in 2007.

By the end of 2009, the progress of the PX project was:

• 92.5% of the basic unit – out of the assumed 97.2%.

The start-up of a unit providing raw material for the production of purified terephthalic acid, with annual capacity of 400,000 tonnes, is scheduled for 2010.

By the end of 2009, the progress of the PTA unit was:

• Overall project tasks: 84.2% of the projected 80.9%;
• Basic unit (ISBL and OSBL1): 85.8% of the projected 82.2%;
• Infrastructure (OSBL2): 70% of the projected 92%.

The unit, with an annual production capacity of 600,000 tonnes of acid, will be started up in the 2010 on an area adjacent to the premises of ANWIL Włocławek.

In the Czech Republic, we continued a project aimed at increasing the productivity of the polypropylene unit. As planned, the unit’s production capacity in 2009 reached 285,000 per annum. We also completed the renovation of the benzene extractive distillation unit, as a result of which the product output rate in the 2nd quarter of 2009 was 20% higher than in 2008.

[1] Information on the sales of petrochemicals (non-fuel products) is also provided in the “Wholesale Segment” section of this Report.