Time of success

Refinery The beginning of the year at PKN Orlen was marked by difficult negotiations on supplies of raw materials, successful diversification of suppliers, and obtaining terms ensuring secure and relatively inexpensive supplies of crude oil until 2009. Another important task we accomplished was the upgrade of the hydrocracking unit's capacity (from 2.6m to 3.4m tonnes of oil per year), which makes it one of the largest facilities of this type worldwide. Furthermore, a modern facility for metering ethanole added to gasoline (150,000 tonnes of alcohol gasolines per month) is under construction. Thanks to the continued focus on the technological development of the production plant in Płock and implementation of stringent procedures ORLEN fuels already comply with the quality standards which are to be effective in the European Union in 2005. The Company is also well-advanced in preparatory work aiming at the construction of a facility for desulphurisation of cracking gasoline, which should make it possible to bring the sulphur content in gasoline down to 10 ppm. Such a low level of this parameter will not be required in the EU until 2009.

Petrochemical Activities
The key project, i.e. the upgrade of the Olefin II facility, carried out by ABB Lumus, has already been executed in 70%. The completion of that task will directly result in increased production of basic monomers (ethylene, propylene). Our polyolefins business is also thriving. The net financial result as at the end of 2003 reported by Basell Orlen Polyolefins, the joint-venture established last year, was 2.5 times larger than originally assumed, which confirms that the decision to create the JV was correct and bodes well for future results of the undertaking.

Modern Wholesale and Logistics
Last year saw the beginning of work on the modernisation of storage facilities in Mościska and Ostrów Wielkopolski, whose modification and extension will involve adaptation to new environmental laws. This will include improved air-tightness of both the existing and the new tanks, which will minimise emission of vapours into the air, thus protecting the natural environment. In 2003 we used for the first time the underground fuel and raw materials storage facility in the salt caverns of Inowrocławskie Kopalnie Soli "Solino" (Salt Mines of Inowrocław). The capacity of the caverns made available upon completion of the second construction stage is 1,740,000 m3 for crude oil and 815,000 m3 for storage of oils. The target storage capacity for crude oil and fuel is 5,000,000 m3. According to the environmental experts, this method of storing oil derivatives is very safe for the environment. A major advantage of the underground caverns is elimination of the risk of uncontrolled leakage or explosion, the most common hazard in surface tanks. The Company's strategy, which aims at maintaining the position of a wholesale leader and assumes expansion of the affiliated stations network and introduction of new type of cooperation under franchise agreements, contributed to the excellent operating result of PLN 973m in the production and wholesale segment after three quarters of 2003.

Strong ORLEN Brand
In the past year the retail trade division focused its activities on the establishment of a strong ORLEN brand. Its efforts led to an increased awareness and positive perception of our Company name. Market survey results translated into better sales of fuel at the PKN ORLEN service stations. At present, the annual average stands at 2.1m litres of fuel per service station. No one can challenge the success of our VITAY loyalty programme in 2003; to date it has been joined by 4.2m customers. The intensified efforts of the retail division led in the third quarter of the past year to a PLN 77m increase in sales in comparison to the analogous period of 2002, when sales had stood at a mere PLN 37m. Our activities in Germany also exceeded the targets. The re-branding of service stations purchased from BP has been completed in line with the schedule. The Company also recorded an increase in unit margins. What is more, the annual result was positive (PLN 14m), although no profit had been forecast for 2003 given the investments underway. As in Poland, the PKN ORLEN service stations located in Germany are very well perceived by the demanding customers of this western market.

Key to Success - Efficiency
Thanks to the comprehensive cost-cutting programme implemented in 2003, PKN ORLEN saved more than PLN 100m. This would not have been possible without the full commitment on part of our employees to the implementation of the programme. As a result, the growing and strong PKN ORLEN meets the conditions to become leader in the regional consolidation process. The agreement signed with MOL marked the first stage of a process which should result in the establishment of a Central European concern. Under this agreement, the two companies have committed to analysing their mutual capabilities with a view to initiating a partnership which in the future should permit the merger of the two enterprises. Undoubtedly, many small steps will have to be taken to implement the project and to initiate cooperation in select areas.

Good Partner and Employer
PKN ORLEN would not have been able to effectively achieve its goals but for its high-class specialists and experts, who have the opportunity to continually upgrade their qualifications. Without a doubt, this is why the Company is regarded as the best employer in the region. Every month, the human resources department receives a thousand job applications. Our cooperation with the local authorities and community is also very satisfactory. As part of this partnership, a plan to build a Technological and Industrial Park (a local equivalent of the Silicon Valley - place where thousands of residents of the region can find jobs) is becoming a reality. Similar goals - focused on responsible participation in the life of the local community - guided PKN ORLEN in 2003 to create the Forum for Płock and the Grant Fund, to which the Company allotted PLN 500,000. In our business activities we have not neglected environmental protection issues. In the past year, we implemented the Responsible Care Programme and undertook new initiatives, including protection of the peregrine falcon and restoration of the Piska Forest.

Press Office
PKN ORLEN