Polish integrated Orlen expects refining margins to weaken further in the rest of this year after its model margin hit a two-and-a-half year low in July.
The $10.3/bl model margin was the lowest since the start of the Russia-Ukraine war in February 2022. The margin was $14/bl in the first half of 2024, and Orlen sees it averaging $12/bl in the full year.
But rising domestic demand enabled Orlen to increase profits from refining in the second quarter, it said today. It processed nearly 9.4mn t (753,000 b/d) of crude at its refineries, a 2pc decline on the year caused mainly by maintenance at the 108,000 b/d Litvinov plant. That resulted in a 43pc fall in crude processing at its Czech subsidiary Orlen Unipetrol, to 1.1mn t (88,000 b/d).
Orlen processed 1mn t less Russian Urals crude than at the same time a year earlier. The Czech Republic has a waiver on EU ban on Russian crude imports but intends to give it up in 2025 after expanding capacity to import crude from the Trieste terminal in Italy.
In Poland Orlen processed 5.6mn t (454,000 b/d) of crude, a 7pc increase on the year as higher volumes at the 373,000 b/d Plock refinery compensated some decline at the 210,000 b/d Gdansk.
Throughput at the Lithuanian 190,000 b/d Mazeikiai refinery rose by 12pc on the year to more than 2.5mn t (205,000 b/d).
Orlen said healthy demand for refined products in Poland, the Czech Republic and Lithuania continues to support its downstream business, although demand was weak in export market Germany. It estimates Polish gasoline consumption rose by 6pc to nearly 1.5mn t in the second quarter, and diesel demand was up by 3pc to above 4.7mn t.
In the petrochemical sector, some recovery in margins and demand and fewer maintenance shutdowns at Plock helped Orlen increase production by 28pc on the year to 1.2mn t in the second quarter. Orlen increased its natural gas sales to external consumers by nearly 4pc on the year to 5.5bn m³, thanks to recovering demand from industrial users.
The improvement in refining profits was not enough to prevent Orlen from falling to a loss of 34mn zlotys ($8.8mn) in the second quarter from a profit of more than 6bn zlotys at the same time in 2023. The loss was mainly because falling prices of natural gas and financial write-downs related to a Polish gas price freeze mechanism for households that was in place until 30 June.
Orlen said it will cut its planned capital expenditure in 2024 by about 10pc to 35.3bn zlotys. It plans to continue its all main investment projects in refining and petrochemicals, including in a hydrocracker at Mazeikiai, new base oils unit at Gdansk and a petrochemical expansion at Plock.
