22.03.2019
ORLEN strengthens ties with Saudi Aramco
PKN ORLEN can import up to 800,000 tonnes of Saudi crude oil over six months under a contract signed with Saudi Aramco Products Trading Company, a subsidiary of the Saudi oil producer. The contract is an important step that guarantees stability of supply to ORLEN’s refineries in Europe. Under a separate commercial contract, the supplier from Saudi Arabia has committed to purchase heavy fuel oil from ORLEN Lietuva. With that latter contract in place, PKN ORLEN, acting through its Lithuanian-based subsidiary, is strenghtening its strategic relationship with Saudi Aramco also in the area of heavy fuel oil trade.
‘The contracts with Saudi Aramco’s subsidiary are a new form of a bilateral business relationship consisting in the supply of feedstock and receipt of finished products. While exploring various procurement options, we are building a strategic partnership with the supplier from Saudi Arabia. The steps we are taking are dictated primarily by global market conditions, including increased demand for finished petroleum products, such as diesel oil. Our strengthening of relations with partners in the Persian Gulf region is a real contribution to enhancing Poland’s energy security,’ noted Daniel Obajtek, President of the PKN ORLEN Management Board. ‘The trade relationships we have built have helped us to develop a mechanism that will allow ORLEN Lietuva to market heavy fuel oil just months before new global regulations on bunker fuels come into force. With this move we are strengthening the position of our Lithuanian refinery in the region,’ added Mr Obajtek.
PKN ORLEN will be able to import six shipments of Saudi oil from May to October this year. The final volumes of oil will be flexibly agreed with the producer on a case by case basis, depending on PKN ORLEN’s current needs. With the commercial flexibility secured through negotiation, deliveries can be routed either to Naftoport in Gdańsk or the terminal in Butynga.
In a parallel effort, PKN ORLEN has secured a customer for the entire volume of heavy fuel oil available for sale by sea from its Mažeikiai refinery (up to 160,000 tonnes a month) under a term contract. This ensures the product will be physically sold in the initial period of the expected market turbulence related to the entry into force, as of January 1st 2020, of new global regulations that cap sulphur content in bunker fuels (IMO 2020). The new regulations have an impact on demand for heavy fuel oil marketed by the ORLEN Group’s Lithuanian subsidiary.
As a result of its diversification efforts, approximately 30% of all crude oil processed at the ORLEN Group is now sourced from alternative directions. The Group is looking to increase feedstock purchases from the Persian Gulf, including through long-term relations with Saudi Aramco. In April 2018, the two companies signed an annex to increase the volume of Saudi oil sold to PKN ORLEN to 300,000 tonnes per month. Appreciating the potential of supplies from the Persian Gulf, PKN ORLEN remains open to cooperation with producers from that region, as demonstrated by the present contract for six spot deliveries.
