Macroeconomic environment
The primary indicator used to gauge the health of an economy is GDP, which, driven by consumption, investment and exports, helps to assess the state of the economy.
Changes in GDP are typically correlated with fluctuations in fuel consumption and unemployment rates.
GDP and fuel consumption.
Source: GDP based on EUROSTAT
Consumption – prepared on the basis of in-house estimates, and data of Agencja Rynku Energii S.A., Lithuanian Statistical Office, Czech Statistical Office and German Petroleum Industry Association
The prices of refining and petrochemical products offered by the ORLEN Group are determined mainly by reference to commodity market prices expressed in foreign currencies.
The costs of key feedstocks, including crude oil, and debt servicing are also mostly expressed in foreign currencies, including USD and EUR.
In addition, CAD and NOK exchange rates affect the prices of hydrocarbons produced and sold by the ORLEN Group's operations in Canada and Norway.
Therefore, any fluctuations in the exchange rates of these currencies against the Polish złoty are a major driver of the ORLEN Group’s financial results.
Average exchange rate.
Source: Based on the exchange rates set by the National Bank of Poland (NBP).
Among external factors typically bearing on the energy, refinery and petrochemical industries, the following macroeconomic variables are of key importance: prices of electricity, property rights, emission allowances, hard coal and natural gas (key fuels in the Polish electricity system), oil price, and spreads for refining and petrochemical products offered by the ORLEN Group.
The primary feedstock used by the ORLEN Group in its refining and petrochemical processes is crude oil, whose prices fluctuate in response to changes in global demand and supply as well as changing geopolitical factors.
Average annual brent price [USD/bbl].
Source: In-house analysis based on Platts.
The ORLEN Group’s operating performance strongly depends on the differences between market prices of petroleum products and prices of oil and other necessary feedstocks (called crack spreads).
The cost of feedstock and the selling prices of refined products for the ORLEN Group are dictated by many factors outside its control. These include:
- movements in the supply of and demand for refining and petrochemical products,
- rexpansion of global refining capacities,
- changes in process-related operating costs (energy, utilities, maintenance, transport),
- changes in environmental and other legislation that could require the ORLEN Group to incur significant expenditure.
Average annual crack spreads for refining products [USD/tonne] and petrochemical products [EUR/tonne].
Source: In-house analysis based on Platts and ICIS.
A model refining margin and a model petrochemical margin are calculated for the Refining and Petrochemicals segments. For the calculation methodology for the model refining and petrochemical margins, see Glossary of selected financial terms in the last section of this Report.
Annual model refining margin [USD/bbl].
Average annual model petrochemical margin [EUR/tonne].
Source: In-house analysis based on Platts and ICIS.
The Energy segment’s performance is strongly correlated with electricity prices and costs of natural gas, hard coal and emission allowances (EUAs). Furthermore, natural gas prices also have a bearing on the performance of the newly established Gas segment and the Upstream segment in Poland.
Avarge annual natural gas prices [PLN/MWh].
Avarge annual electricity prices [PLN/MWh].
Source: Based on POLPX data
Average annual carbon emission allowance prices [EUR/tonne].
Average annual coal prices including transport [EUR/tonne].
Source: Based on Bloomberg and Polish Coal Market data.
The performance of the Upstream segment in Canada is significantly influenced by current CLS (Canadian Light Sweet) oil and AECO gas quotations.
Average annual CLS oil prices [USD/bbl].
Average annual AECO natural gas prices [CAD/GJ].
Source: In-house analysis based on data from https://www.gljpc.com/price-chart
Sensitivity analysis
Analysis of sensitivity to changes in key macroeconomic parameters1 [PLN million].
1 The effect of changes in the above factors has been estimated on the assumption the no correlation exists between them and the other factors which have a bearing on the ORLEN Group’s performance. Changes in macroeconomic factors may also have an additional impact on, for instance, optimisation of the product portfolio, sales markets or degree of processing capacity utilisation, which may additionally affect the results of ORLEN’s operations.
- Estimated effect of changes in the model refining margin with the ORLEN Group’s processing capacity utilisation assumed at approximately 270 million barrels.
- Estimated effect of changes in the model petrochemical margin with the ORLEN Group’s sales of polymers assumed at approximately 1,023 thousand tonnes (ORLEN Unipetrol: 662 thousand tonnes, and BOP (50%): 361 thousand tonnes).
- Estimated effect of changes in the wholesale margin with the sales volumes of gasoline and diesel oil in Poland assumed at approximately 10.2 million tonnes, and effect of changes in retail margin with fuel sales in Poland estimated at around 8.1 billion litres.
- Estimated effect of changes in the electricity price with net electricity production assumed at 12.3 TWh.
- Estimated effect of changes in the natural gas price with natural gas sold in the Gas segment assumed at 62.1 TWh.
- Estimated effect of changes in hydrocarbon prices in Canada with hydrocarbon production assumed of approximately 5.7 mboe per annum.
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ORLEN Group 2022 Integrated Report
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