GRI Index: G4-2
Under the current 2014–2017 Strategy, the ORLEN Group will build its value based on:
1. Enhanced competitiveness and integration of production assets
- The ORLEN Group holds high-class assets which integrate the refining business with petrochemical production and power generation. Given the scale and depth of crude processing and its integration with the petrochemical operations, the Płock refinery is classified as a supersite (according to WoodMackenzie). Drawing on advanced site configuration, good location and low crude supply costs, it has become one of Europe’s leading refineries. PKN ORLEN’s assets have a very high operational efficiency, also thanks to a number of current development projects: PX/PTA, HON VII, planned construction of an FDG (Flue Gas Desulfurization) unit, construction of a Flue Gas Denitrification and Dust Removal unit, and PE3 unit.
- The ORLEN Group is the largest petrochemical business in Central Europe. Integration with a refinery is a source of cost savings, while a competitive product basket, which includes monomers, polymers, aromatics, PTA, fertilizers and plastics, ensures attractive margins and extends the value chain. The Company is a strategic supplier for the chemical industry in the region.
- Own cogeneration units are another step closer to the ORLEN Group’s operational excellence and security of the National Power Grid. This integration of refining, petrochemical and power generation assets creates an integrated downstream value chain, which serves as a natural hedge. On that basis, the Company is able to diversify risks and generate stable cash flows regardless of the macroeconomic conditions.
- Central Europe’s largest fuel sales network under the strong and recognizable ORLEN brand supports the Group’s business profile. The Company’s non-fuel sales are growing dynamically based on the opening of new Stop Cafe and Stop Cafe Bistro outlets, selling 38 million hot-dogs and 8 million litres of hot beverages every year. PKN ORLEN’s strong customer focus and a modern management culture have attracted a large group of loyal customers, including 0.7m of active FLOTA accounts and 2.7m of active holders of VITAY loyalty cards. Future development of the ORLEN Group’s Retail segment will be based on innovative non-fuel sales projects.
2. Development of promising business areas
- The ORLEN Group is also developing promising activities connected with its current business. The Group contributes to sustainable growth of the Company’s value by investing in upstream and power generation.
- We invest in power generation − a sector with large potential for growth. Through the construction of two CCGT units in Płock and Włocławek, the ORLEN Group will establish its foothold in the power generation market, and with the Group’s modern assets, the investment will generate significant profits. The CCGT Unit in Włocławek is one of PKN ORLEN’s two key cogeneration projects, the other being the Płock plant. Electricity produced by the two CCGT units in the high-efficiency cogeneration process will be used for the ORLEN Group’s in-house purposes and sold in the domestic market. The Włocławek and Płock plants are industrial power projects tailored to the ORLEN Group’s needs, greatly enhancing the operational excellence of its Downstream business (Refining, Petrochemicals, Power Generation and Wastewater Management). These projects allow PKN ORLEN to gradually build its power and heat generation potential. The current total installed capacity at PKN ORLEN’s generating assets in Poland, the Czech Republic and Lithuania is more than 760 MW for electrical power and nearly 5 000 MW for heat. Once the two new projects are operational, the installed capacity will increase by over 1 000 MW and 630 MW, respectively.
- The ORLEN Group intends to intensify exploration and production efforts to secure access to own reserves of crude oil and natural gas. In 2015, we took a number of steps to increase the Company’s production potential in Poland, including acquisition of two licences from Deutsche Erdoel AG, entering into a Joint Operations Agreement with PGNiG, securing new licences from the Ministry of Environment, and acquisition of FX Energy. In Poland, work is currently under way in 29 licence areas located in eight provinces. With the acquisition of the first Canadian subsidiary TriOil in 2013, the ORLEN Group gained access to crude oil and natural gas reserves in North America. In mid-2014, the Company’s production potential in Canada was doubled following the second acquisition of Birchill Exploration, a Canadian company operating in Alberta. In December 2015, we closed acquisition of Kicking Horse Energy, our third production company in Canada. The projects are located in the Canadian province of Alberta and cover high-quality production assets: Pouce Coupe (the Montney gas formation), Kaybob (the Dunvegan oil formation), Lochend (the Cardium oil formation), Ferrier/Strachan (the Cardium formation), and Kakwa (Montney). We also hold a 10.7% share in a project involving construction of Goldboro LNG, a liquefied natural gas export terminal on Canada’s east coast (Nova Scotia), as well as assets in the Montcon region (the Hiram Brook formation) in New Brunswick. Upstream investments in Canada will allow the Company to build know-how and to transfer knowledge from one of the most technologically advanced markets to Poland. The ORLEN Group’s total production capacity (2P reserves) is 97.2 Mboe. In 2015 alone, the Company drilled 25.6 wells.
3. Investment in development and innovation
- In the mid-term perspective, we see growth opportunities in innovative projects. To start with, the ORLEN Group will carry out initiatives related to the current value chain by developing proprietary research projects and using tools such as crowdsourcing and scouting. We offer our employees and innovators certain forms of support which are not easily available and which can tip the scales for the commercial success of innovative projects – from specialist laboratories up to a vast retail network.
- Collaboration with the scientific community will provide opportunities for new competitive advantages. To that end, the ORLEN Group signed two framework agreements with renowned Polish universities of technology: the AGH University of Science and Technology of Kraków and the Warsaw University of Technology. The agreements will facilitate the launch of new projects for the development and implementation of technologies that foster innovation, efficiency, safety and environmental performance in the petrochemical, refining, chemical, power and heat generation and upstream segments.
- A number of innovative projects are also rolled out internally, including biocomponents, biofuels from algae, or photovoltaic cells at service stations. PKN ORLEN is engaged in a research and development project aimed at developing state-of-the-art technologies for production of biocomponents. As part of that project, we will try to determine whether biofuels could be combined with diesel oil produced by the Company. Another R&D project will explore alternative sources of next-generation biocomponents. The Company intends to launch a research station at its Production Plant in Płock, where carbon dioxide and process wastewater will be used to grow algae. As part of our innovative activities in the Retail segment, the ORLEN Group launched a pilot project to install photovoltaic cells at eleven service stations throughout Poland. Electricity generated from solar energy will partially cover the demand for power at service stations, which will bring both environmental benefits (providing a clean energy source) and economic effects (lower cost of electricity purchased from the grid).
- We also see opportunities in the development of alternative fuels and production of zero- and low-emission vehicles, and we have been analysing the market trends for quite some time now. The PKN ORLEN Group responds to the expected changes by installing electric car quick charge ports. We do so in collaboration with Tesla, a US-based manufacturer of electric cars and a leader in quick charging technologies. In addition to bringing benefits for customers, the Company will gain invaluable experience in a promising market, which will pave the way for innovative projects in the future.
- The Company is looking closely at its competitive environment, always on the lookout for growth opportunities in new areas of activity. We engage in negotiations with our business partners, carry out analyses and organise workshops with experts – all this to fully tap opportunities as they arise. The ORLEN Group is also looking closely at the broad regulatory environment, not only to keep its operating cost at a minimum, but also to optimise its business models.
- Aware of the role of intellectual capital in modern economy, we put strong focus on development of staff competencies. We consistently build our team of experts, especially in the area of R&D, and develop a system to support our leaders.