Poland’s state-owned oil giant PKN Orlen has announced that it has begun work on expanding and modernising its refinery in Lithuania, in what Poland’s government says will be the “largest investment in the history” of its Baltic neighbour.
The Mažeikiai oil refinery in northwestern Lithuania was launched in 1980. “The refinery needs to be modernised,” Orlen’s CEO, Daniel Obajtek, told state broadcaster TVP Info last week. “There must be big investments there.”
He said that expansion would also “increase the profitability of the refinery”, enabling earnings (EBIDTA) to increase by €68 million annually, as well as “strengthen the energy security of the region”.
Inwestycja w instalację pogłębionego przerobu ropy w @ORLENLietuva przyniesie wzrost EBITDA. Zwiększenie uzysku produktów wysokomarżowych wpłynie na stabilność dostaw paliw w państwach bałtyckich i w Polsce. Umacniamy naszą pozycję lidera transformacji energetycznej w regionie pic.twitter.com/dUeeHGtxOl
— Daniel Obajtek (@DanielObajtek) October 8, 2021
The project will be overseen by Orlen Lietuva, which is part of the Orlen Capital Group. The company forecasts that it will take four years to complete and be worth €641 million.
This is “a historic day for ORLEN Lietuva and the Lithuanian economy,” wrote Obajtek on Friday, as he announced that the modernisation and expansion project had entered its “implementation phase”. He said it was the “largest investment project carried out in Lithuania”.
That claim was repeated by Poland’s minister for state assets, Jacek Sasin, who declared that the project “in Możejki is the largest investment in the history of Lithuania”. He noted that Orlen was able to afford such investments thanks to its profits, which reached 4 billion zloty (€874 million) in the first quarter of the year.
“It is of great importance for the entire economy and energy security…also of all countries in the region,” said Sasin.
Mažeikiai is the only crude oil refinery in the Baltic states and one of the largest employers in Lithuania, Obajtek told TVP, noting that it employs 1,500 people directly and 4,500 through services and subcontracting.
Orlen has made a number of large investments in recent years, buying Energa as well as signing initial agreements to take over its smaller rival Lotos Group and state oil and gas firm PGNiG.
It has also, however, been accused of doing the ruling party’s bidding by taking over Poland’s largest network of local newspapers and news websites. Obajtek justified that takeover as part of the company’s sales and marketing strategy, but critics say it is a means of bringing the press under government control.
AB Orlen Lietuva Refinery is the second largest in Orlen Capital Group, with a capacity to process 10 million tonnes of crude oil per year (though the company says it is more efficient to limit production to 8 million tonnes).
Last week, Obajtek and Sasin met with Lithuania’s president, Gitanas Nausėda. In February, Obajtek also met with the country’s prime minister, Ingrida Šimonytė.
Main image credit: Juozas Šalna/Flickr (under CC BY 2.0)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
