Audit Finds Orlen Lost $1.2B on Petrochem Project

Polish refiner Orlen has incurred an estimated loss of 5 billion zlotys ($1.22 billion) on its Olefins petrochemicals project, according to State Assets Minister Jakub Jaworowski, as reported by several news agencies. Speaking on Wednesday while presenting the findings of an audit into state-owned companies, Jaworowski revealed the financial setback, describing it as the largest loss uncovered during the investigation. Orlen has announced it will not proceed with the project in its current form and plans to decide by December whether to optimize, suspend, or terminate the investment altogether.

The audit, launched after the new coalition government led by Donald Tusk took office, examined state treasury companies for financial mismanagement. It uncovered losses from failed investments and unjustified expenditures amounting to at least "several billion zlotys," Jaworowski said in a press release. Orlen was identified as the most affected entity. In response to the findings, approximately 50 notifications have been submitted to the prosecutor's office, with more potentially to follow as investigations continue. Executives from state companies under the previous Law and Justice (PiS) administration have denied any wrongdoing, rejecting accusations of mismanagement or negligence.

The Olefins Complex is a central component of Orlen’s ORLEN2030 strategy, designed to solidify its market position and align with its carbon neutrality objectives. When completed, the project was projected to increase Orlen's share in the European petrochemical market from 5% to 6.4%, boosting its competitive edge and adding approximately 1 billion zlotys to its annual EBITDA. The investment, approved by Orlen’s Management Board in June 2018, was a cornerstone of the company’s long-term petrochemical development program, with production initially slated to begin in 2025.

The main outcome of the project was to develop a cutting-edge steam cracker with an annual production capacity of 740,000 tonnes of ethylene and 340,000 tonnes of propylene. The facility was designed to utilize pyrolysis-based technology licensed from KBR, which involves cracking hydrocarbons such as naphtha, LPG, and ethane at temperatures above 800°C. The process produces olefins such as ethylene and propylene, as well as by-products including mixed C4s, gasoline (pygas), pyrolysis oil, and hydrogen. Heat recovered during the reaction would also be used to generate high-pressure steam, optimizing energy efficiency.

Despite its potential, the project's financial challenges now cast a shadow over its future. The revelations of substantial losses have raised concerns about decision-making under previous management and the feasibility of continuing the investment under current economic conditions. Orlen’s forthcoming decision in December will determine the next steps for this ambitious yet troubled venture.