Orlen Suspends Olefins III Project Amid Cost Overruns and Irregularities

Polish Refiner Faces Major Setbacks, Redirects Resources Toward More Viable Projects
Poland’s largest oil refiner, Orlen, has halted its ambitious Olefins III petrochemical project in Płock following a comprehensive internal review. The decision was driven by a significant surge in projected costs, which have risen by more than six times the original estimate. Initially budgeted at PLN 8.3 billion ($2.04 billion), the project’s costs were revised to PLN 25 billion ($6.16 billion) in 2023, and further assessments indicated that the final expenditure could soar to PLN 51 billion ($12.56 billion), including critical infrastructure costs. The suspension of the Olefins III project is expected to save the company PLN 15 billion ($3.69 billion), allowing Orlen to redirect those funds toward other initiatives to boost its competitiveness and support Poland’s economy.

Internal Review Reveals Serious Irregularities and Unrealistic Assumptions
Orlen’s decision follows a detailed analysis of the project under its current management, led by CEO Daniel Obajtek. The review uncovered significant financial irregularities, which pointed to unrealistic financial and operational assumptions made during the planning phase by the previous management team. According to the company, these assumptions did not account for the prevailing market conditions and led to an overestimation of the project’s feasibility. In addition to the financial miscalculations, issues with technology, scheduling, and the design of inside battery limits (ISBL) installations were found to be major contributors to the cost overruns.

In 2023, the project’s scope was scaled back, and certain advanced chemical components were excluded, yet the overall budget remained inflated. The identification of these irregularities led Orlen to report the matter to the prosecutor’s office, and the company is exploring legal action to pursue compensatory claims against former board members. The general meeting of the company has endorsed these potential claims.

Shifting Focus to the New Chemicals Project
In response to the halt of Olefins III, Orlen is shifting its focus to the New Chemicals (Nowa Chemia) project, utilizing the existing infrastructure initially set aside for Olefins III. The New Chemicals project aims to develop a monomer production facility, along with expanded capacities for the production of ethylene oxide, glycols, styrene, and the C4 fraction. These revised plans are based on more realistic financial, technological, and operational assumptions, and the project is designed to meet market demand for key petrochemical products.

The New Chemicals project is expected to begin operations by 2030 and will gradually take over the role of the current Olefins II facility. This shift will allow Orlen to continue its production at Płock, a crucial industrial site located around 120km northwest of Warsaw. By pursuing this more feasible path, Orlen aims to maintain its position as a key player in the Polish petrochemical and refining sectors.

Original Olefins III Plans and Future Prospects
The Olefins III project was originally conceived as a major expansion to Orlen’s petrochemical operations. It was set to include a new steam cracker with an annual production capacity of 740,000 tonnes of ethylene and 340,000 tonnes of propylene, along with additional facilities for ethylene oxide and glycol production. However, the significant budget overrun, along with the operational and technical challenges identified, led to the suspension of these plans.

Instead, Orlen’s New Chemicals project will focus on more sustainable and market-responsive expansions, ensuring the long-term growth of the company’s petrochemical operations without the risk of the cost overruns seen in the Olefins III project.