Key assets and logistics

The LOTOS Group is engaged in exploration and production activities in Poland, Norway and Lithuania. In 2021, hydrocarbons were produced from fields located in:

• the Baltic Sea – mainly crude oil with a small amount of associated natural gas,
• Norwegian Continental Shelf – natural gas and condensate (i.e. light crude oil) with a higher share of gas from the Heimdal and Sleipner fields, as well as crude oil from the Yme field (as of October 2021).
• onshore Lithuania – crude oil.

LOTOS Group’s hydrocarbon reserves and output 2P oil and gas reserves as at December 31st 2021Average daily oil and gas output in 2021

The LOTOS Group consistently adapts its logistics operations to the requirements of its trading operations and builds an efficient distribution system meeting the expectations of its customers, while being continually optimised. The purpose of those measures is to build an optimum logistics chain that would function efficiently in the constantly changing external and internal environments.

Grupa LOTOS enjoys considerable cost advantages because of its direct access to product and feedstock pipelines linking the refinery in Gdańsk to the liquid fuel handling facilities at Port Północny. Maritime transport plays the key role in the Company’s export of oil products, while accounting for a significant portion of feedstock deliveries and components used in production processes.

Logistics infrastructure of the LOTOS Group

Source: the Company

In 2021, the Company optimised its inventory structure in order to achieve the minimum level of inventory holding costs while securing the commercial needs of the LOTOS Group.

As part of its efforts to optimise operating costs, the Company continued to work on its use of rolling stock, which yielded numerous benefits in terms of costs and the number of rail tank cars used. At the same time, it made furtherupgrades to its railway infrastructure to accommodate loading of tank cars with a payload capacity of up to 22.5 tonnes per axle, which significantly increased daily shipments of oil products and eliminated the need to load and dispatch about 3,100 rail tank cars per year while keeping the volume unchanged.

In secondary logistics of fuels, the Company adopted a model of cooperation with transport companies that guaranteed appropriate flexibility in customer service with fixed costs curbed to the minimum.

In 2021, the Company continued to develop small marine cargo handling. Its transhipment terminal on the Martwa Wisła river is planned to be launched in 2024.

Seeking to expand its capacity to dispatch refinery products and to adapt its infrastructure to conditions prevailing on the domestic fuel market, the Group completed a project to construct the fourth rail loading facility, placed in service in May 2021.

In 2021, the Company deployed B2B interfaces for electronic data exchange with PKN Orlen. Interfaces for data exchange with Anwim were also designed and developed, while the production launch is expected to take place in 2022. The Shell data exchange upgrade project is also underway; it was commenced in 2021 and is scheduled to end in 2022. However, the largest effort was given to prepare IT systems at LOTOS Asfalt to spin off the processing refinery from Grupa LOTOS. The first stage of the project was completed in November 2021, and the second stage, including the switchover of all dispatch systems, is currently under way.

In response to market demand, contracts to expand and upgrade the fuel terminal in Piotrków Trybunalski were signed by the Company on January 14th 2020. After nearly two years of arrangements, design work and preparations, a building permit for the terminal was obtained on November 15th 2021, and construction work began. The project will quadruple the terminal’s storage capacity, to about 11,000 cubic metres, while doubling the amount of fuels it can handle. The terminal will allow the distribution of additive-enhanced gasoline, diesel and liquefied petroleum gas (LPG) at maximum filling speeds permitted by law. Owing to the technical solutions applied, the terminal will be put into operation at the „highest” market standard, also in terms of process automation. Once the occupancy permit is obtained, dispatch of all products from the terminal will begin later this year to enable the terminal to be included in the contracting of handling capacities as of the beginning of 2023.

LOTOS Terminale S.A. is the business centre responsible for professional fuel storage and distribution operations throughout Poland.

The Company operates four fuel depots in Czechowice-Dziedzice, Poznań, Rypin and Piotrków Trybunalski (currently being upgraded), where it handles almost 2 mcm of fuels annually.

LOTOS Terminale has a subsidiary LOTOS Biopaliwa, which produces 100 thousand tonnes of biofuel components per year.

An important element of LOTOS Group’s production security is the ability to dispatch products by rail from the refinery in Gdańsk. LOTOS Kolej, a specialised rail operator, is responsible for the provision of comprehensive rail logistics services throughout the Group.

In 2021, LOTOS Kolej provided the following railway services:

In 2021, the LOTOS Group’s Refining & Marketing segment sold 10,736 thousand tonnes of products (down 2.0% year on year), the bulk of which (9,439 thousand tonnes, or 87.9%) was placed on the domestic market. Domestic sales grew 3.3%, while exports fell 29.9% year on year.

At 6,183 thousand tonnes (an increase of 2.26%), diesel oil accounted for a major part of overall sales. Its entire volume was sold domestically. Another product category with a significant share in total sales were gasolines (which sold 1,432 thousand tonnes (down 12.9%)). Sales of heavy products also fell off (to 882 thousand tonnes, down 10.3%), due mainly to lower exports, which accounted for the majority of sales within this product category.