Orlen Petrochemical Project: Financial Mismanagement Issues

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Poland’s Orlen Suspends Costly Olefins III Project, Shifts Focus to New Chemicals

Poland’s largest oil refiner, Orlen, has suspended its Olefins III petrochemical project in Płock after an internal review. The original budget of PLN 8.3 billion ($2.04 billion) surged to PLN 25 billion ($6.16 billion) by 2023. Further assessments indicated costs could climb to PLN 51 billion ($12.56 billion). To save PLN 15 billion ($3.69 billion), Orlen decided to halt the project and redirect resources to more viable initiatives.

Internal Review Exposes Mismanagement and Cost Overruns

Orlen’s review, led by CEO Daniel Obajtek, revealed significant financial irregularities. The previous management failed to account for market conditions, resulting in unrealistic assumptions. The review also uncovered issues with technology, scheduling, and installation design, contributing to cost overruns. In response, Orlen has filed a report with the prosecutor’s office and is considering legal action against former board members for financial mismanagement.

Shifting Focus to the New Chemicals Project

Following the suspension of Olefins III, Orlen will shift its focus to the New Chemicals (Nowa Chemia) project. This project will utilize existing infrastructure from Olefins III to produce monomers, ethylene oxide, glycols, styrene, and the C4 fraction. The New Chemicals project, based on more realistic assumptions, is set to begin operations by 2030. It will replace the current Olefins II facility, maintaining Orlen’s production at Płock while bolstering its position in the petrochemical sector.

Looking Ahead: A More Feasible Petrochemical Strategy

Initially, Olefins III aimed to expand Orlen’s petrochemical operations with new steam crackers and increased production of ethylene and propylene. However, due to cost overruns and operational issues, Orlen has opted for a more sustainable path with the New Chemicals project. This shift ensures long-term growth while avoiding the risks associated with Olefins III.