Extraction and processing of crude oil is our primary business. Through continuous improvement of our exploration and extraction activities as well as investments in modern and safe production processes, we strive to deliver highest quality products to the market.
Our range of product includes:
- fuels (unleaded petrol, diesel oil and light fuel oil)
- heavy oil
- bitumens
- aviation fuel
- naphtha
- liquefied gas propane-butane (LPG)
- base oils
Prospecting and extraction
We conduct exploration and extraction activities in the area of the Baltic Sea, the Norwegian Continental Shelf and in Lithuania. In 2017, our hydrocarbon extraction was carried out: in fields located in the Baltic Sea (fields B3 and B8 – crude oil with a small amount of associated gas), from Norwegian fields (gas and condensate – light crude oil), as well as from onshore fields in Lithuania (Petroleum).
In 2017, the average daily oil and natural gas output of LOTOS amounted to 22.9 thousand boe/day, which sums up to the annual potential of 1.1 million toe (tons of oil equivalent). 74% of the total volume, that is 17,000 boe/day, came from Norwegian fields.
At the end of 2017, the LOTOS Group had confirmed reserves of crude oil and natural gas of the 2P category (proved and probable) of total 88.2 million boe, including 8.8 million tonnes of crude oil and 3.3 billion m3 of natural gas.
In the scope of extraction, our activities are focused on building a balanced and diversified portfolio of assets. We want to increase our involvement in the development of new fields, gradually increase the importance of exploration activities in the portfolio and limit participation of concession for deposits in mature fields. In scope of extraction in 2017, we managed to achieve results consistent with the strategic goals set.
The implementation of the company’s strategy for 2017-2022 in the upstream activities focused on using the experience, knowledge and potential of LOTOS Petrobaltic to strengthen and develop operations in the strategic segment of Maritime Power in the Baltic Sea as well as specialization and expansion into the areas of international concessions.
The key element of this process was to define the scope and real possibilities of development and expansion of LPB. The potential of LOTOS Petrobaltic allowed the division of the company in terms of specialization as the direction of the adopted strategy for diversifying revenue sources in the segment. Following the reorganization, the strategic tasks of LOTOS Petrobaltic, it’s mission and development strategy were determined, as a result of which LOTOS Petrobaltic becomes a modern company, comprehensively managing the needs of the energy industry, offshore and sea operations in the Baltic Sea basin. It is based on experience, knowledge and on the team of dedicated employees and focuses on its core business, gradually expanding the scope of services to include offshore project management, logistics, transport and operating services. Consistent implementation of the LOTOS Petrobaltic strategy and the interest shown by foreign companies offered by the LPB service makes us to look optimistically in the future also in the aspect of exploitation of the company’s potential not only at the Baltic Sea. LOTOS Petrobaltic is successfully exploiting the B3 and B8 hydrocarbon fields located under the bottom of the Baltic Sea.
Simultaneously, the further development of exploration and the upstream segment outside the Baltic Sea were entrusted to LOTOS Upstream (LUPS), a subsidiary of LOTOS Petrobaltic. The establishment of LUPS influenced the progressing specialization of operations in both companies, enabling real assessment of the directions of further expansion and development of the segment outside the Baltic Sea. As a result of the transformation, LUPS has become the entity responsible for the development of hydrocarbon exploration and extraction outside the basin of the Baltic Sea, formulating a development strategy dedicated to foreign concessions, business development and supervision over the implementation of the development outside the basin of the Baltic Sea. LUPS was also entrusted with ownership supervision over the B4 and B6 gas fields, which will be operated by LOTOS Petrobaltic in the operational phase.
Diversified portfolio of assets
The exploration and extraction activities of LOTOS in Norway are carried out through the subsidiary LOTOS E&P Norge AS, situated in Stavanger. At the end of 2017, the company was a shareholder of 26 concessions for prospecting, identification and extraction of hydrocarbon fields on the Norwegian Continental Shelf.
In Poland, our exploration and extraction activities are conducted mainly in the Polish zone of the Baltic Sea, as well as onshore concessions in the north-east and north-west Poland.
We have three concessions for exploration, prospecting and extraction of crude oil and natural gas in the areas of Łeba, Rozewie and Gotland, and (including subsidiaries and joint ventures) we have four concessions for extracting hydrocarbons from B3, B8 and B4/B6 deposits. Operations in the onshore area in Poland are carried out on the proprietary “Młynary“ concession and in cooperation with PGNiG on the Kamień Pomorski and Górowo Iławeckie concessions (LOTOS share of 49%).
In Lithuania, exploration and extraction are carried out by the subsidiary AB LOTOS Geonafta based in Gargždai. In 2017, Lithuanian companies operated onshore oil fields within 7 concession blocks.
Production
The LOTOS Group has one of the most modern and youngest refineries
in Europe with annual processing capacity of about 10.5 million tons. Strategic placement of the refinery gives it a significant logistical advantage in access to raw materials and product sales channels compared to the competition in the region.
In the production and trade process, we focus on the technological modernization of the refinery. It has a unique combination of raw material supply channels, ensuring simultaneous access to raw material supplies both by land, from Russia, through the PERN pipeline network, as well as to the supplies of raw materials by sea from many countries as well as from proprietary fields.
In the report by Solomon Associates for 2016, the refinery of Grupa LOTOS S.A., as in the previous surveys, obtained an excellent result in energy efficiency. This is important, as energy costs contribute to more than half of all costs of the plant, outside of the costs of raw materials. Also in the majority of other key competitiveness indicators, such as the efficiency of maintenance services, the utilization rate of the installation – the results of Grupa LOTOS S.A. place it among top 25% refineries. The Solomon Associates ranking is the world’s most important benchmark of refineries, in which hundreds of companies from all over the world are compared every two years and it is a prestigious factor for both the refining sector as well as for other associated businesses.
The very good technical condition of our refinery has also been confirmed with the highest Nelson Complexity Index in Poland (and one of the highest in Europe), which reflects the intensity of investments in the refinery, potential fixed costs and the potential of generating added value by the refinery.
The Nelson Complexity Index for the Gdansk refinery amounts to 10.0.
The main investment of the Grupa LOTOS S.A. in 2017 in the production process is the EFRA Project (Effective Refining), which, thanks to the construction of one of the most advanced delayed coking installations, will enable deeper processing of crude oil. The progress of the whole EFRA Project implementation at the end of December 2017 amounted to 90%.
Implementation of the EFRA Project, thanks to the combination of new installations with the ones already existing in the Gdansk refinery, will bring more high-margin products produced from each barrel of oil processed by the refinery. EFRA in practice means that:
- refining margin for each processed barrel of raw material will increase by approx. USD 2/bbl,
- EFRA production facilities will also produce about 900,000 tons of high-margin products annually. This will result in an increase in the EBITDA result by PLN 0.6 billion/year,
- after completing the investment and launching new installations, 1 ton of heavy residues will produce approximately 700 kg of fuels and 300 kg of coke, and the Gdańsk refinery will not produce unprofitable heavy fuel oil.
In 2017, the LOTOS refinery processed 9.6 million tonnes of crude oil, 7% less than the year before. It was the result of the 6-week long maintenance shutdown „Spring 2017”. The predominant types of processed crude oil, similar to the previous years, was Russian Ural oil. Its share amounted to approximately 78.3% and was slightly higher than in the previous years.
The other part of the raw material consisted of crude oil imported from other directions, including approx. 201 thousand tonnes of crude oil delivered by the LOTOS Petrobaltic Group. The selection of crude oils for processing was based on the process of production optimization, in order to take advantage of any opportunities of increasing the processing margin of the refinery.
Safe supply chain
To ensure the production safety of the LOTOS Group, the products are shipped via rail transport from the Gdansk refinery. LOTOS Kolej, a company specializing in this kind of operations, is responsible for the comprehensive implementation of railway logistics for the entire Corporate Group. In 2017, LOTOS Kolej transported 13.3 million tons of goods, of which 7.03 million tons were hazardous materials.
Maritime transport is another important element in the logistics chain. Linking the product pipelines at the Gdansk refinery with a liquid fuel trans-shipment base in the Northern Port grants the company significant benefits by reducing transport costs. In 2017, in seaports LOTOS handled about 7 million tonnes of crude oil, petroleum products and fuel components. The location of the LOTOS refinery in the vicinity of the maritime oil terminal allows the diversification of gas supplies, enables the supply of crude oil from proprietary fields in the Baltic Sea and Lithuania, as well as from the North Sea or from other, more distant points of origin. In 2017, approximately 4.3 million tons of crude oil were delivered to the Grupa LOTOS S.A. by sea.
Supply chain within the refinery in Gdansk
Maritime
transport
Railway
transport
In 2017, LOTOS Kolej transported 13.3 million tonnes of goods. The company constantly develops cooperation with clients outside the LOTOS Group, both in domestic and foreign transport. In 2017, the Company continued its 4-year contract with the Polish Armed Forces on the transport of F-34 aviation fuel. The concluded contract is the result of tender procedure won by LOTOS, with strictly defined criteria, such as safety and quality of the services provided.
LOTOS Group product offer in 2017
The marketing activities of the LOTOS Group in 2017 was conducted as part of the Grupa LOTOS S.A. and by its subsidiaries: LOTOS Paliwa, LOTOS Oil, LOTOS Asfalt, LOTOS-Air BP Poland. Grupa LOTOS S.A. carried out marketing activities within the country (sales to foreign concerns) and in export by sea and land. The subsidiaries carried out production and sales for fuel, oil and asphalt industries.
In 2017, the LOTOS Group achieved a 31.6% share in the domestic fuel market. The largest share in sales, as in previous years, was diesel oil. The volume of diesel sales in 2017 amounted to PLN 5,198,000 tonnes, thus achieving a 47.5% share in total sales (improvement of 4 percentage points comparing to 2016). The second largest item in the quantitative sales structure of the LOTOS Group was gasoline, with a 14.2% share. Gasoline sales by the LOTOS Group amounted to 1555 tonnes and represented a similar level as in the previous year. The share in the total sales volume of the LOTOS Group of the last item, that is heavy products, amounted to over 10%.
In 2017, we can proudly announce a 19% increase in domestic sales. The main driving force behind this growth was the sale of motor fuels (diesel fuels and gasolines), associated with effective sales activities both in the retail and wholesale channels on the growing market. Despite the maintenance shutdown, the LOTOS Group was able to fully meet the growing demand for the product on the domestic fuel market.
In addition, a significant increase in domestic sales also occurred in the bitumen segment. High sales dynamics was the result of domestic demand, related both to the realization of construction projects and limited product expeditions from domestic and neighbouring refineries.
Finally, we are happy with the record amount of fuel sold at each of the five airports, at which refuelling operations take place. The increase in domestic aviation fuel sales in 2017 reached 42%. This increase is the result of the expansion of the subsidiary LOTOS – Air BP Polska on domestic airports.
At the end of 2017, 493 petrol stations operated as a part of the LOTOS network (increase by 6 additional stations), placing it in third place among fuel station chains in Poland. LOTOS strengthened its position in the transit stations segment on motorways and expressways with 20 Passenger Service Areas (MOPs), situated at the A1, A2, A4 and A6 motorways as well as S3 and S7 expressways. We also carry out sale of non-fuel products and services, which in 2017 increased by 14% compared to 2016.
