Model refining margin

In order to assess the impact of changes in prices of commodities and products on global markets on the profitability of the refinery, Grupa LOTOS S.A. publishes its model refining margin and makes the model available on its website.

The refinery optimises the mix of energy carriers used in its refining processes on a weekly basis to reflect movements of market prices of commodities and petroleum products, with a strong focus on reducing the consumption of natural gas, given its current high costs. In the fourth quarter of 2021, up to 70% of the reduction in the volume of gas consumption by the Company was directly attributable to the rising prices of the commodity.

Given the optimisation measures implemented, the published model refining margin provides an insight into the hypothetical profitability of a refinery operating within a specific technological setup, based on prices from NWE markets published by Refinitiv.

As a result, the model margin does not reflect the actual margin generated by the Grupa LOTOS S.A. refinery subject to seasonal variations and optimisation adjustments.

The Company updated its model margin calculation method (for details, see: Current Report No. 5/2021 of Feburary 10th).

The updated mathematical formula for calculating the model margin of Grupa LOTOS S.A.’s refinery is as follows:

Model refining margin [USD/barrel] = revenue (products from 94% of crude processed = 23% gasoline + 63% diesel oil + 8% heavy fuel oil) – costs (100% of crude processed + cost of natural gas consumption)

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