Delivery of investment plans
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Throughout 2022, ORLEN continued execution of the Olefiny III project, to date the largest petrochemical initiative in Europe in the 21st century. The main project deliverable will be a new steam cracker with an annual production capacity of 740 thousand tonnes of ethylene and 340 thousand tonnes of propylene. This is a crucial facility, where the process of pyrolysis occurs. In the process, hydrocarbon feeds such as naphtha, LPG, and ethane are cracked into valuable petrochemical products. The cracking reaction (in which longer hydrocarbon chains are broken down into shorter ones) takes place at temperatures above 800°C, with heat from the process recovered to generate high-pressure steam. The process products are primarily olefins, such as ethylene and propylene. Products derived from the Olefin III feedstocks, along with their derivatives (after further processing), will have a wide range of applications, including in the production of automotive parts, household appliances, and electronic devices, as well as in the manufacturing of cleaning agents, hygiene and medical products, and synthetic fibers used for clothing and protective masks. By increasing the base petrochemical production potential by more than 1 million tonnes, ORLEN will solidify its position as the leading company in Central and Eastern Europe. The project aims to increase the conversion of fuel streams into petrochemicals, which will result in significant margins in the current market environment. It will also serve as a potential source of revenue in case of a future decrease in demand for liquid fuels. In order to maximize results of the Olefin III project, in 2022 ORLEN acquired the LDPE unit from BOP and also signed an agreement to purchase a license and a base design for the new installation with the world's leading polymer technology company, LyondellBasell. Currently, ORLEN is working on the base design and preparing for the construction of the new unit.
As part of the programme to develop production assets in both the refining and the petrochemical sections of the Płock plant, preparations have begun for the construction of a state-of-the-art Oxygen and Nitrogen III unit. In addition to providing access to auxiliary utilities such as oxygen and high-purity nitrogen, the unit will also be capable of producing valuable noble gases, such as argon, from the air. In 2022, the Group signed a contract with the LINDE company for the construction of the unit.
In 2022, preparatory work also continued on other petrochemical projects that will help secure ORLEN's interests and contribute to the potential of Poland and the region. One of such projects is Chemical Recycling.
In 2022, ORLEN pursued investments in the refining area, targeting increased energy and operational efficiency while optimizing its processes to bolster its potential further. Construction of the key visbreaker unit was continued to achieve higher crude conversion rates and increase yields of white products. In the visbreaker, vacuum residue, which has so far been used to make heavy fuel oils and bitumen, will be processed into high-margin products, i.e. gasoline and diesel oil. The project is scheduled for completion in 2023. At the same time, in order to implement its climate policy, the Production Plant in Plock began the construction of a standalone unit for the hydrogenation of vegetable oil and post-frying oil (HVO), which will enable the production of biocomponents for diesel fuel and "green" aviation fuel. The current project completion date is 2024.
In 2022, ORLEN also continued with the implementation of investments in TGTU, which will enable the treatment of residual gases resulting from hydrogen sulfide and ammonia removal processes. The work is expected to be completed in 2024. Once the unit is operational, it will significantly reduce sulfur emissions into the atmosphere, which is one of several pro-environmental projects being implemented by ORLEN.
As part of the goals to achieve decarbonization by 2030 and carbon neutrality by 2050, several business-driven investments were carried out in 2022 at the Płock Production Plant to enhance energy and process efficiency. Simultaneously, ORLEN continued the preparatory and contracting stages of further initiatives.
For the past several years, ORLEN has been consistently diversifying its oil supply sources, bolstering Poland’s and the region’s energy independence and security. The key element of this process is the agreement signed in 2022 with Saudi Aramco, the world’s largest oil producer and global industry leader. In December 2022, a feasibility study for a petrochemical project in Gdańsk was launched as a result of an arrangement made under the joint development agreement between Saudi Aramco, SABIC, and Orlen S.A. The objective of this project is to construct a world-scale petrochemical complex utilizing the potential of Gdańsk Refinery, ORLEN, as well as the world's largest oil company, Saudi Aramco, and SABIC.
In Gdańsk, at the quay on the Martwa Wisła river, the construction of a marine transshipment terminal began. The terminal will have the capacity to handle more than one million tonnes of petroleum products and chemicals. The main purpose of constructing the terminal is to provide an alternative route for transporting goods to and from Gdańsk Refinery. This will not only make the refinery independent of other transshipment ports but also relieve the rail siding at the refinery site, which is currently used to transport products between the plant and the transshipment points. Initially, the terminal will have the capacity to handle about 130 ships per year, and eventually, it is expected that this number will be tripled. It is worth noting that one ship can carry as much cargo as three train sets. The first tankers will moor at the Martwa Wisła berth in 2025.
In 2022, Gdańsk Refinery also began construction of a modern Hydrocracking Oil (HBO) unit, which is closely related to the terminal. The HBO unit will enable the production of high-quality Group II base oils in quantities exceeding 400 thousand tonnes per year. Group II base oils have better performance characteristics, including higher resistance to oxidation, a high viscosity index, and lower sulfur content, making them increasingly preferred over Group I base oils in the market. The implementation of the HBO project will enable Gdańsk Refinery to produce more high-quality Group II base oils, which in turn will generate higher margins from the sale of refined oil products. Introducing Group II base oils to both Polish and foreign markets will also increase the competitiveness of the Group. The general contractor for the HBO project is the Italian company Kinetics Technology. The value of the HBO Project totals over PLN 1.4 billion. The work is to be completed in 2025. The decision to construct an offshore transshipment terminal and the HBO project strengthens ORLEN's position as an investor that is intensively developing the assets it has acquired as part of merger with Grupa LOTOS.
In 2022, ORLEN Południe completed the construction of a new 5.0 hydrogen production unit dedicated to serving the automotive industry. In the first half of the year, the hydrogen production unit was commissioned for final operation following the successful acceptance of the filling station, allowing for full servicing of ORLEN Południe's battery trucks.
In 2022, ORLEN Upstream Group conducted investment works based on the ORLEN Group Strategy to 2030, which aimed to maximize the value of assets and production, prioritize selected exploration and appraisal projects, and launch production in areas still under development. Investment activities in 2022, both in Poland and Canada, were financed entirely with operating cash flows.
The key exploration / appraisal / modernization projects carried out in Poland in 2022 by the PGNiG Branches of the ORLEN Group included:
- drilling of appraisal wells Lubycza Królewska 2 and Husów 134K;
- upgrade of the Jaksmanice 219, and Tuligłowy 32 wells;
- drilling of exploration wells Roszkowo 1, Rogusko 1K, Sierosław 2H exploration.
The key investment projects completed in 2022 included:
- development of the following wells: Przemyśl 291K, 292K, 316K, 318K – Przemyśl Zachód Gas Production Facility;
- tie-in of the Rogoźnica 3, 4, 5 wells;
- development of the Koźminiec 1 well;
- development of the Kamień Mały field;
- development of the Paproć 66H well.
Capital expenditures on the ORLEN PGNiG Branches' exploration and production activities abroad focused on ambitious investment projects with all projects financed with operating cash flows generated by PGNiG UN. The Company took steps to significantly ramp up production and enhance its operating performance by investing in:
- acquisition of shares in the Ørn field from Wellesley Petroleum;
- launch of investment works on the Tommeliten Alpha field and the third development phase on Ormen Lange;
- launch of the investment process on the Fenris, Alve Nord, Verdande, Andvare and Ørn fields; further investment works on currently producing fields.
The capital expenditures incurred by PGNiG in 2022 were allocated to the modernization and expansion of the gas distribution network, construction of new service lines, as well as replacement and verification of gas meters and measurement system components. In 2022, PSG implemented the Strategic Investment Programme, including 34 infrastructure projects, divided into the following groups:
- projects listed under the Infrastructure and Environment Programme (POIiŚ) 2014-2020, with signed agreements for EU funding;
- projects not listed to participate in any current funding programmes which, at the time of allocation of additional EU funds to the gas distribution area, will demonstrate readiness to apply for such funding;
- projects designated to participate in the next EU financial perspective;
- others projects, most of which have achieved economic viability and are implemented with PSG's own funds.
The company also implemented the ‘Programme for Accelerating Investment in Poland's Gas Network in 2018-2022.’ In 2022, gas distribution services were launched in 19 municipalities. As of December 31st 2022, the number of new municipalities with access to gas reached 236, which is approximately 79% of the planned target. In November 2022, the Management Board of PSG decided to terminate the programme. Nevertheless, to further eliminate transmission bottlenecks, PSG continued to work on projects to build nine high-pressure pipelines as part of its standard investment process in 2022. As part of these projects, approximately 590 km of high-pressure gas network are planned to be built together. These investments are stipulated in the Act on investments accompanying the LNG Terminal in Świnoujście, and one of them, which involves the construction of a connection pipeline with a length of approximately 0.4 km to the transmission system of OGP Gaz-System in Zambrowa, has been completed.
Another initiative pursued in 2022 was the ‘Energy Transition Programme’, with the primary goal of supporting PSG in:
- Preparing the PSG structure for Poland's energy transition;
- Connecting commercial and industrial sources to the gas grid;
- Supporting PSG in its efforts to acquire new commercial customers and developing the network to enable distribution of biogas (Spatial Database).
In 2022, PSG also remained committed to advancing its 2016–2022 Strategy in distribution and infrastructure through various projects. They were aimed at implementing technological and organizational solutions in the areas of customer service, metre reading, network asset management, distribution service billing and security, as well as research and development
Increase in non-current assets in 2022 [PLN million]
Change in non-current assets by segment [PLN million]
Capital expenditure by market [%]
The key development projects being pursued in 2022 included:
- construction of a visbreaker unit in Płock;
- construction of hydrocracking unit – Lithuania;
- construction of second-generation bioethanol plant – ORLEN Południe;
- construction of HVO unit (hydrogenation of vegetable oils) – Płock;
- expansion of olefins production capacities at Płock;
- expansion of fertilizer production capacities at Anwil;
- upgrades of existing assets and connection of new customers at the ENERGA Group;
- construction of CCGT Ostrołęka and CCGT Grudziądz;
- construction of offshore wind farms in the Baltic Sea;
- expansion of the service station and non-fuel sales networks;
- launch of new services and products;
- focus on the most promising fields in the Upstream segment.
Assessment of project implementation
The ORLEN Group manages the structure of its capital expenditure in line with the developments in market situation, and focuses on the most effective investment projects. For a description of key projects planned for the following years, see Section 6.4 of this Report.
The financial situation of the ORLEN Group is stable, with adequate cash flows and available financing sources, including funding from the European Union related to innovation and energy transition, to support the implementation of its investment plans.
For information on selected financial ratios confirming the Group’s ability to carry out the investment plans, see Section 1.3 of this Report.
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ORLEN Group 2022 Integrated Report
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