Orlen had a powerful problem. Money flows into it through a wide stream, and their biggest origin is inexpensive Russian oil. And Orlen was told to give it up. But we managed to defend her in part.
PKN Orlen is the largest Polish company. With a very ambitious young manager who has tremendous political connections. Orlen's profits are impressive. It is unusual that the government has not taxed them, which present is simply a common practice in Europe. seemingly the power of the company's influence on the government is powerful.
Where do these profits come from? From advanced refining margins and inexpensive Russian oil. Refinery margins in 2021 were microscopic (between 1.5 and 3 dollars per barrel), but in the second and 3rd quarters of 2022 – ranging from 16 to 26 $/b. So it's nearly 10 times. Therefore, Orlen was able to make a price maneuver that added power points in the eyes of drivers. erstwhile the government was restoring 23 percent VAT at the beginning of 2023, Orlen made a VAT change so that the drivers did not feel an increase on the distributor at all. The fresh Year's Eve operation “VAT Disappearing” went smoothly, although to the red, angered the opposition.
Even more serious origin of income was Russian oil. president Obatek himself admitted: “Lotos’ advanced salaries were due to Russian oil processing and a advanced differential, which was as much as $50 per barrel compared to Brent oil. Today, there are no specified profits and earnings due to the fact that there is no Russian oil in the refinery in Gdańsk." And he added at the end: “Poland does not want this oil.”
Not truly "wants". The Polish company talks about 70% of oil, coming from "in another directions than Russian". Yes, it is true, but it concerns the full Orlen Group, that is not only Poland, but besides Lithuania and the Czech Republic. erstwhile only Poland is taken into account, and Orlen is already the full Polish oil and fuel marketplace after the intake of Lotus and PGNiG, it looks much worse politically (or better for the results of Orlen). In 2021, Poland brought 61% of oil from Russia. Over 15 million tons. Counting about on the fingers, if a barrel of Russian oil was on average $25 cheaper for the full year 2022, the extraordinary income from this origin would be $2.7 billion (25 * 7.3 * 15), or PLN 12 billion (*4.4). Of course, if Russian oil were inactive so big.
To this you gotta add cheaper imported diesel from Russia. As with oil, Poland imported 7.2 million tonnes of diesel in 2021, of which 67% from Russia, we would have almost PLN 4 billion (7.2 *0.67 * 25 * 7.3 * 4.4). Together with oil – PLN 16 billion a year.
Yeah, but Washington's promises were made, and the hen at the fence. Orlen faced the problem of giving up Russian oil. Thanks to our nephews, the EU embargo does not cover pipelines from Russia. So we can inactive enjoy the extra prosperity, at least any of it. But no. Poland (and Germany too) undertook to halt importing Russian oil at the end of last year. It's a political decision. Viktor Orbán made the completely opposite, but in Russian matters we stand with Hungary on other sides of the barricade. Orlen had to choose: politics or business. It's not an easy choice. You quit pressure, they'll slap you on the shoulder, they'll praise you in the media, but the others will take the profits you could have taken. And if it makes you poorer and weaker, no 1 will feel sorry for you. due to the fact that with the mediocre and the scared, nobody matters.
The Germans have bent. They quietly cut off Russian oil, securing their deliveries from Gdańsk. They paid the price for it – they threw Rosnieft, a Russian investor, out of Schwedt refinery. Orlen didn't bend. For months, he has prepared politicians and audiences for the fact that contracts from the east will not break. And he won. He maintained the remains of the Urals oil supply to Poland, so he will proceed to benefit from the immense profits that import from the east.
One oil supply contract from Russia expires in January 2023. You can't prolong it, and you'd gotta have the courage of Viktor Orbán. But another contract will last another year. So there's only 10 percent of the most valuable profitable oil left in Orlen's buying book. Better than nothing.
The question is, how could this have worked out in this angry push and screaming from all sides? In my opinion, a young, dynamic manager has offered to exchange power: VAT for Russian oil. That's why he could have stayed on deliveries from the east. But this sweet bite will surely draw the envy and wrath of the large world. Let's not be amazed erstwhile another storm breaks out around Orlen.
Andrzej Szczęsniak
Think Poland, No. 3-4 (15-22.01.2023)
