PKN ORLEN’s investment in deep crude conversion in Mažeikiai will enhance the refinery’s profitability
PKN ORLEN is investing to expand its refinery in Mažeikiai. By the end of this year construction will start on a project to build deep crude conversion units enabling production of larger volumes of high-margin products. According to the agreement signed between PKN ORLEN and ORLEN Lietuva on the financing of the project, the Company is to invest EUR 641m. This will be the largest capex project carried out by the ORLEN Group in Lithuania in its operating history. The project will enhance the profitability of the refinery, contributing to strengthening energy security of the region. The project is slated for completion by the end of 2024, and it will add as much as ca. EUR 68m to annual EBITDA.
‘This is a historic day for ORLEN Lietuva and the Lithuanian economy. As announced earlier, our investment in deep crude conversion in Lithuania is entering the execution phase. In the agreement signed today PKN ORLEN has declared its intent to fund the project, which will help us to significantly enhance the competitiveness of the refinery in Mažeikiai, which is key to ensuring energy security for our region. Increased yields of high-margin products will also improve the stability of fuel supplies in the Baltic states as well as in Poland. In a parallel effort, we are holding discussions with the Lithuanian government on possible forms of support for the project. This reflects the warming of Polish-Lithuanian relations at the governmental and business levels seen in recent years,’ said Daniel Obajtek, President of the PKN ORLEN Management Board.
Deep conversion units built at the Mažeikiai refinery will increase the yield of high-margin products by 12%, to over 84%, from less than 72% today. The project will reduce crude oil throughput but not fuel production volumes, also enabling the company to further expand its business into new products and extend its value chain. This in turn will reduce the company’s sensitivity to changes in the macro environment.
The deep crude conversion project will help eliminate production of high-sulphur heavy fuel oils, enhancing the refinery’s profitability given ever more stringent environmental regulations on heavy fuels. PKN ORLEN has already purchased a licence and procured front-end engineering design for the project.
In July 2021, ORLEN Lietuva, an ORLEN Group company, signed a letter of intent with the Lithuanian Energy Ministry to pursue a deep crude conversion project. Closer cooperation between the Company and Lithuania is a result of an earlier meeting of Daniel Obajtek, President of the PKN ORLEN Management Board, with the Lithuanian Prime Minister Ingrida Šimonytė.
ORLEN Lietuva is a key ORLEN Group company, operating the sole refinery in the region, guaranteeing its security. PKN ORLEN is consistently investing in expanding its assets in Lithuania. The Mažeikiai refinery is important to the Polish and Lithuanian economies. It is Lithuania’s largest company, with about 1,500 employees, of whom over 90% are residents of Mažeikiai and neighbouring towns. Another 4,500 people are employees of external service providers and subcontractors. ORLEN Lietuva is also one of the largest exporters and taxpayers in Lithuania having paid EUR 566,495,374 in taxes to the Lithuanian government in 2020 alone.