The suspension of 1 of the most crucial projects of Orlen, the construction of the Olefina III complex, raises immense controversy in Polish manufacture and media. Daniel Obietek, erstwhile president of Orlen, critically assessed the decision of the current board to suspend the investment, calling it “the plowing of the Polish champion”. His words shed fresh light on the decisions regarding the future of Orlen and the full petrochemical sector in Poland.
Plan and improvement of Olefina III
The task to build Olefina III was 1 of the key projects in Daniel Obietek's time. The investment was intended to grow the petrochemical complex in Płock, which has been the foundation of the Polish oil manufacture for years. The cost of construction was initially estimated at around PLN 8.3 billion, and the task was to be completed in 2023. The aim of this investment was not only to increase the production of olefins, but besides to strengthen Orlen's position in the petrochemical market, where request for specified natural materials grew systematically.
However, already at the implementation stage, the task began to face serious difficulties. In 2021, after signing a contract with the contractor, the investment cost increased to PLN 13.5 billion, and the completion date of the task was postponed to the beginning of 2024. The costs increased due to the problems with availability of materials, as well as the effects of the war in Ukraine, which affected the prices of natural materials and the availability of labour. In 2023, after more detailed analysis, it was estimated that the full investment cost could be up to PLN 25 billion, an increase of about 500% compared to the first assumptions.
Decision to suspend investment
The Orlen Management Board decided to halt the Olefina III task in the face of the inefficiencies of further investment. As the current president of Orlen, Ireneusz Fąfara, explained, this decision was essential in order to avoid losses of PLN 15 billion which could be lost if the construction continued in its first form. It is worth noting that the task has been 1 of the flagship projects of the company in fresh years, and the decision to hold it means crucial changes in the strategy of Orlen, who gained a reputation as a leader in the Polish energy and petrochemical sector.
Criticism Obielka
Daniel Obietek, who headed Orlen at the time erstwhile the Olefina III task was being implemented, does not hide his disappointment at the decision to detain him. In his statement, he pointed out that the interruption of the investment was a consequence of the ‘bad preparation’ of the task and the incorrect assessment of its profitability at the planning stage. Both stressed that the investment was essential to guarantee Orlen's long-term improvement and to stay competitive on the market.
The erstwhile president besides pointed out that the decision to suspend the task could have serious consequences for the full Polish economy. In his opinion, giving up specified a large investment is “giving the marketplace to German companies”, which could weaken Poland’s position in the petrochemical market
Problems with excessive investment costs
The audit carried out by Orlen revealed that the first investment costs had been importantly understated and the Orlen board continued the project, although it was already clear in 2022 that its profitability was at risk. Subsequent increases in costs associated with the war in Ukraine and difficulties in obtaining materials and workers made the task even little profitable. Stopping the construction of the Olefina III complex may mean that large write-offs are needed for Orlen, but from a financial position this is little hazard than continuing the construction under the current conditions.
Orlen is presently heading towards fresh projects aimed at improving the financial situation of the company. Although stopping the construction of Olefina III is simply a painful decision, it can besides open the door to little risky but equally ambitious projects. Time will tell whether Orlen can get out of this crisis with a defensive hand and keep his position on the market
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Orlen halts the construction of the Olefina III complex. Ornament of the Polish Champion
