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ORLEN Group 2016 Integrated Report

II nagroda specjalna w kategorii Raport Zintegrowany | Najlepszy raport on-line

Opportunities

Capitals:  

The vision for the growth of the ORLEN Group fits well with global trends in the use of energy sources (e.g. use of crude oil, alternative fuels, energy storage), technological progress (e.g. smart everything, Internet of Everything, advanced robotics, 3D printing) and social shifts (e.g. changing social behaviours, urbanisation, demographics), which are bound to create new consumer behaviours and expectations.

Global changes have been gathering pace in recent years and will have a growing, yet unpredictable, impact on the world around us. To respond to those processes, the ORLEN Group will consistently adapt its business model across all of its sectors:

1. Integrated assets and strong market position of the Downstream sector

With integrated assets in three Central European countries, 30 million tonnes of various crude oil types processed every year, and a portfolio of over 50 refined and petrochemical products sold to more than 80 countries across the globe, the ORLEN Group is perfectly placed to further expand its Downstream business.

Key activities to be undertaken in the Downstream sector over the period covered by the 2017−2021 Strategy will be aimed at ensuring the security of feedstock supplies, further improvements in operational excellence, and a strengthening of the Group’s market position.

In the area of feedstock supply security, the ORLEN Group will seek to diversify its oil supply sources and secure natural gas supplies. It will, at the same time strive for greater integration, more flexibility in how it responds to market and regulatory challenges, and increased yield of high-margin products at its refineries in Poland, the Czech Republic and Lithuania. The growth of its share in the home markets (e.g. through an attractive product portfolio) and the expansion of the infrastructure which facilitates contact with customers have been identified as the two pillars that will support the reinforcement of the Group in its market position.

2. Development of the product and service range and high customer satisfaction in the Retail sector

The Retail sector comprises more than 2,700 service stations, making up the largest retail chain in Central Europe. They handle 1.4 million transactions daily. In Poland alone, they sell 6.6 billion litres of fuel every year, with substantial volumes bought by customers actively participating in the Vitay loyalty scheme and fleet customers.

The key growth drivers in the Retail sector are the modern service station network, unique procurement experience, and further operational excellence improvement.

PKN ORLEN will develop its network of CODO and DOFO stations (nearly 200 new sites by 2021), plans to introduce quality fuels, and preparations are underway to sell alternative fuels. The ORLEN Group is a regional pioneer in the installation of electric car quick charging points in cooperation with TESLA, a leading manufacturer of electric vehicles. By undertaking a number of initiatives, the Retail sector will transform to provide customers with a unique purchasing experience. It plans to launch new products and services, leveraging its competitive advantages and business experience (a large and dense network of service stations and a sizeable customer base). In the coming years, PKN ORLEN intends to open upgraded Stop Cafe 2.0 catering outlets. The concept was well received by customers and the extended product range promises a higher non-fuel margin. Tailored offers (based on Big Data) and the development of a loyalty scheme will help to increase customer satisfaction. As part of its optimisation efforts, the ORLEN Group will implement a number of initiatives to cut costs and boost revenue (e.g. customer satisfaction surveys, optimisation of land assets, optimisation of the network cost, more service stations with premium fuels). Another element of key importance to the sector is the implementation of projects to support sales, as they are necessary to start many significant initiatives.

3. Cautious continuation strategy in the Upstream sector

Growth in the Upstream sector over the last four years helped to build a solid asset portfolio. In 2014−2016, PKN ORLEN took a number of steps to increase its production potential in Poland (acquisition of two licences from Deutsche Erdoel AG, entering into a joint operating agreement with PGNiG, securing new licences from the Ministry of the Environment, and the acquisition of FX Energy) and Canada (acquisition of the first Canadian subsidiary TriOil Resources, followed by two other transactions: the purchase of Birchill Exploration and Kicking Horse Energy). The ORLEN Group has a strong asset base for value creation: production of 5 million boe in 2016, 2P reserves of 114 million boe, and assets to effectively increase production and steadily improve cost efficiency.

Under the current 2017−2021 Strategy, the ORLEN Group will build its value in the Upstream sector based on cautious continuation of the current efforts, i.e. increasing production in Poland and Canada and further improvements in operational excellence. The plans include growing production volumes and 2P reserves, and a focus on the most profitable projects. Challenges posed by the prevailing low hydrocarbon prices are believed to be temporary and in the medium term the prices are expected to show an upward trend again. The ORLEN Group will closely watch and flexibly respond to developments in the oil and gas markets. The consistent improvement in key performance indicators (e.g. better well economics, optimised scope of work) and synergies within the sector in Poland and Canada (e.g. transfer of know-how from Canada, one of the most technologically advanced oil and gas markets) are key elements for the operational excellence improvement in the Upstream sector.

4. Innovations that create value

The ORLEN Group’s innovation management model brings together all aspects of the Group’s strategy and the innovations themselves are understood to mean much more than just the development and implementation of new products. Special attention is paid to product, process and marketing innovations. Projects related to the current value chain are given key priority. The ORLEN Group offers its employees and innovators certain forms of support which are not readily available elsewhere and can tip the scales for the commercial success of innovative projects – from specialist laboratories up to a vast retail network. Because of the role of intellectual capital in the modern economy, strong focus is placed on the development of staff competencies. The ORLEN Group consistently builds a team of experts, especially in the area of R&D, and develops a system to support leaders.

The innovation strategy relies on external and internal innovations supported by an advanced management model. To stimulate external innovation, the ORLEN Group carries out projects facilitating cooperation as part of an external ecosystem of innovations, successful implementation of state-of-the-art commercial solutions and the use of special tools for project implementation (Accelerator, Crowdsourcing, Innovation Lab). Internal innovations are efforts to streamline technological and organisational processes, develop the portfolio of R&D projects, and tap synergies within the ORLEN Group.

The ORLEN Group supports the culture of innovation to fully benefit from internal and external innovations. Innovation is promoted as the desired attitude across the organisation, and the fast-track decision-making process for innovative projects ensures the continuing ability of the ORLEN Group to flexibly respond to market needs.


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