Key assets and logistics

In 2021 the Logistics Division worked on preventing the spread of COVID-19 infections. The number of infections did not cause any major disruptions in our logistics processes thanks to our efforts, appropriate monitoring and sophisticated solutions. In the first half of the year, the acceptance of a long-awaited investment in the Railway Cistern Filling Station took place: the fourth NB04 rail filler. This investment will make it possible to satisfy 100% of our loading needs on the railway in the refinery while substantially lowering costs. This investment along with other additional elements has also contributed to a more than 20% increase in some moments of the number of rail maneuvers on the rail siding. Optimizing these processes coupled with such significant growth was and still is a challenge for the employees of the Logistics Division and Lotos Kolej. In Q4 2021 the expectations of all vehicle carriers in the Lotos Group resounded more strongly in terms of substantial rate hikes for vehicle transport (significant increase in the costs of fuel and drivers’ salaries). The cost pressure and therefore the pressure on the rates for services rendered by suppliers is present in all logistics areas. 2021 also saw highly extensive involvement on the part of key employees from the Logistics Division in work to carry out remedial measures during the Lotos Group and PKN merger.

Piotr Chocholski Logistics Director

Upstream assets and production volume

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.

In 2021, the LOTOS Group’s average daily production of crude oil and natural gas was 17.3 thousand boe/d (a decrease of 14.6% year on year). Approximately 64% of that total output, i.e. 11.2 thousand boe/d, came from the Norwegian fields. The Baltic fields, with the average output of 5.7 thousand boe/d, accounted for 33% of the total volume. The remaining 3% of production (0.5 thousand boe/d) came from fields in Lithuania. The share of crude oil in total production volumes was 53%, with natural gas accounting for the balance (47%).

17.3 thousand boe/d

Average daily production of crude oil and natural gas of the LOTOS Group

At the end of 2021, the LOTOS Group’s total 2P (proved and probable) reserves were estimated at 69.2 mboe, including 57.5 mboe of crude oil (83% of the total 2P reserves) and 11.7 mboe of natural gas (17% of the total 2P reserves).

LOTOS Group's hydrocarbon reserves and output

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

Lotos-ENG_Mapa Lotos-ENG_Mapa

Product structure of oil and gas sales

2021 2020
(by volume) w % (by volume) w %
Natural gas (million boe) 2,82 45,6% 3,55 44,1%
Oil (mbbl) 3,35 54,4% 4,50 55,9%
Total oil and gas (million boe) 6,17 8,06


Source: the Company

Logistics supporting the Refining & Marketing segment

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.

In 2021, the Company received approximately 7.2 million tonnes of crude oil from 87 tankers through PPPP Naftoport, including 12 cargoes of oil from the B3 and B8 fields and five cargoes of Lithuanian oil.

The Company also transshipped approximately 1.48 million tonnes of petroleum products and fuel components using 143 vessels, including 90 tankers chartered directly by LOTOS Group. A total of 230 tankers were handled, carrying approximately 8.7 million tons of crude oil and products.

7.2 million tonnes

crude oil received by PPPP

Logistics infrastructure of the LOTOS Group

Lotos-grafiki-ENG_Mapa-3 Lotos-grafiki-ENG_Mapa-3

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.

Storage and distribution of fuels

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:

  • rail freight transport in Poland,
  • independent freight transport services in Germany and the Czech Republic,
  • traction services,
  • trainload and non-trainload services,
  • maintenance of rolling stock,
  • eco-friendly cleaning of rail tank cars,
  • international rail freight,
  • provision of railway siding and freight forwarding services to the LOTOS Group,
  • lease of rail cars,
  • training services for train drivers, shunters and rolling stock inspectors.

The year 2021 was a year of growth for the freight market in Poland. As at the end of December 2021, 112 carriers provided freight transport services under licences issued by the President of the Office of Rail Transport. Between January and December 2021, they transported 243.6 million tonnes of cargo, 9.1% more than the year before. At the same time, the average haul distance fell, which resulted in a slightly lower (7.2%) increase in freight work (measured in tonne-kilometres) between January and December 2021.

Changes in the Polish rail freight market

2021 2020 Change 2021/2020
mass of cargo carried (million tonnes) 243.63 223.24 9.10%
tonne-kilometers (million) 55,984.35 52,217.93 7.20%
train-kilometers (million) 81.62 77.5 5.30%
Source: LOTOS Kolej's in-house analysis based on the Office of Rail Transport data

In 2021, LOTOS Kolej maintained its runner-up position in the market in terms of freight workload, despite a decrease in its share in the Polish rail freight market (calculated by freight workload) from 10.36% in 2020 to 10.00% in 2021. This share decreased despite a rise in freight workload, from 5,407 million ntkm (net tonne-kilometres) in 2020 to 5,600 million ntkm in 2021 (an increase of 3.6%) and a 2.9% increase in the total tonnage carried (from 12,552 thousand tonnes in 2020 to 12,914 thousand tonnes in 2021), of which 8.85 million tonnes were hazardous materials – the segment of the rail freight market in which the company has been the market leader for years.

Source: in-house analysis of LOTOS Kolej

Source: in-house analysis based on the Office of Rail Transport data

Under contracts concluded in 2021, LOTOS Kolej purchased two and leased twelve modern electric locomotives. In the reporting period, LOTOS Kolej continued its purchases of modern intermodal rolling stock, co-financed with a PLN 74 million subsidy obtained under the Infrastructure and Environment Operational Programme for 2014–2020. The project was designed to increase LOTOS Kolej’s share in the intermodal transport market starting from 2020.

The company continued to expand its transport business in Germany. In 2021, using its own and German train drivers, the company transported more than 565 thousand tonnes of freight. By expanding the operations in that region, LOTOS Kolej broadened its offering, while providing its customers with fast and reliable transport services between Poland and Western Europe. LOTOS Kolej continued its operations in the Czech Republic. In 2021, using its own train drivers as well as services provided by Czech operators, the company transported over 33 thousand tonnes of freight. In May 2021, the company carried out the first rail transport across the Polish-Lithuanian border, thus implementing the agreement with Lithuanian Railways on the organization of international freight transport.

Refining & Marketing sales structur

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.

Refinning & Marketing sales structure (tonnes)

2021 2020
domestics sales exports total domestic sales exports total
Gasolines 1,379,946 51,773 1,431,719 1,447,538 195,528 1,643,066
Pyrolysis 450,106 450,106 567,401 567,401
Reformate 52,217 52,217 43,867 43,867
Diesel oil 6,182,935 0 6,182,935 5,912,456 133,837 6,046,293
Bunker fuel 106,213 106,213 109,331 109,331
Light fuel oil 262,671 262,671 235,141 235,141
Heavy products 554,654 327,132 881,786 528,047 454,395 982,442
Jet 187,901 149,748 337,649 75,086 153,538 228,624
Lubricants 35,032 57,895 92,927 34,570 42,673 77,243
Base oils 9,252 158,109 167,361 9,950 166,987 176,937
LPG 268,050 0 268,050 246,785 975 247,760
Other petroleum products 452,670 162,119 614,789 537,890 365,437 903,327
TOTAL 9,439,324 1,409,099 10,848,423 9,136,794 2,124,638 11,261,432
Crude oil (commodity/feedstock) 1058 0 1,058 80,583 0 80,583
TOTAL 9,440,382 1,409,099 10,849,481 9,217,377 2,124,638 11,342,015
Source: the Company

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