Poland’s Orlen ditches largest petrochemical project in Europe

Warsaw-listed Polish refiner Orlen will not pursue its Olefins 3 petrochemical project, writing off billions already spent in its development to avoid even bigger losses, the company said on November 11.

The company’s CEO Ireneusz Fafara said that ending the project was “the best of the bad decisions” the company could make. Olefins 3 came under scrutiny after last year’s election, which saw Orlen’s previous political patrons, the radical-right Law and Justice (PiS) party, lose power. 

The new government of Donald Tusk drove changes in Orlen’s executive ranks, including the dismissal of CEO Daniel Obajtek, who was seen as a PiS loyalist. In June, Obajtek successfully ran for a seat in the European Parliament as a PiS candidate.

Orlen decided to “stop the Olefins 3 complex development under the current scope” since its continuation “is not profitable,” the company said in a market filing.

The project’s scope was “inadequately defined”, while its financing costs and the time necessary for realisation were underestimated - as was the project’s capex, which Orlen now estimates could increase the total costs by up to PLN45bn-PLN51bn (€10.57bn-€11.97bn).

Former CEO Obajtek lambasted the decision on social media.

“They stopped the foundation of Orlen’s future development - the largest petrochemical investment in Europe and the only one in Central and Eastern Europe,” Obajtek wrote on X.

Obajtek added that the scrapped project is the type major economies like the US, Saudi Arabia or Germany are investing in. “Is it possible that the current [management] is giving ground to the Germans?” Obajtek wrote.

Orlen’s stock price appeared to reflect disappointment among the investors about the decision to end Olefins 3, as it fell just over 3.5% to PLN51.35.

In Q3 Orlen reported a net profit of PLN3bn for the first three quarters of 2024, a major decrease compared to the net result of PLN17bn in Q1-Q3 2023. The company said that the fall in net profit owed to write-offs it had to carry out to make Orlen’s actual standing “credible” following poor management under Obajtek.