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New ambitions in biomethane, greater flexibility in LNG supplies – interview with PGNiG PKN ORLEN’s Central Branch Director

The Polish ORLEN Group became the biggest energy company in Central and Eastern Europe following a merger with Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) last November. Earlier in March, the Group brought forward an updated ORLEN2030 strategy – with new investment plans in renewable energy including offshore and onshore wind power, photovoltaics, biogas and biomethane, biofuels, electromobility and renewable hydrogen. As part of the updated strategy, the company is also planning to develop nuclear energy including small modular reactors (SMR).

Looking to get further insights into the post-merger shape of the ORLEN Group, we sat down with Iwona Waksmundzka-Olejniczak, Central Branch Director of PGNiG PKN ORLEN and Member of the Management Board of PKN ORLEN.

ORLEN Group’s interest in decarbonised gases

During the launch of the ORLEN2030 strategy, the company placed an emphasis on its role in Poland’s coal phase-out and transition to greener energy sources. On this point, we began our discussion regarding the company’s increased interest in renewable gases.

“Not only do we maintain our interest in this area, but we move from declarations to action. The merger with PGNiG allowed for the consolidation of activities related to biomethane, as this was an area developed by both companies, and a joint venture was planned. Currently, these activities are centralised in PGNiG Bioevolution, which will take over all assets related to biogas production and take care of developing further projects. This also applies to projects implemented thus far by ORLEN Południe,” says Ms Iwona Waksmundzka-Olejniczak.

“We are also interested in green field projects and acquisitions but these are not limited to biomethane. According to the strategy, within its time horizon [by 2030], we are going to achieve the production level of one billion cubic metres [bcm] of biogas, which includes both conventional biogas plants, combined with the production of electricity and heat and biomethane plants. The production structure will be adapted to the needs of the Group and our customers,” she adds.

“The production of renewable hydrogen is a more faraway prospect” Ms Iwona Waksmundzka-Olejniczak notes. “Contrary to biogas and biomethane, and even bioLNG, which already have a clearly defined customer base, the hydrogen market is not yet developed enough to speak specifically about its shape.”

As one of the largest producers of hydrogen in Poland, we want to be present in the development of the renewable hydrogen market, especially that we own and develop assets that will play an important role in this process, such as offshore wind farms and photovoltaic [PV] farms, whose surplus production will have to be managed. We also have storage facilities in underground caverns where we plan to implement pilot hydrogen storage projects. This is an area where our competencies are unique in the country.

Current and future presence in Ukraine

Staying on the topic of renewable energy and decarbonised gases, we asked the Central Branch Director whether the Group is considering cross-border cooperation and investments in these areas. “We see the potential for growth in these markets not only in our country. Of course, Poland will be very important for us and we want to have a significant share in the production of decarbonised gases, but we are also eager to engage in foreign projects and partnerships with other players,” Ms Iwona Waksmundzka-Olejniczak says.

“Moreover, we anticipate that such cooperation may extend to other business segments. We especially see potential in the development of offshore wind farms,” she adds.

In terms of its location, Ukraine is of course one such market, and its potential is huge. However, major investments may only be undertaken when armed hostilities cease and Russian troops withdraw from this country. We are present in this market through other business segments, especially in the area of liquid fuels, we are interested in natural gas extraction projects and, if the environment is favourable, we will also get involved in biogas projects.

Exploring new LNG markets

Moving to the Group’s operations in the oil and gas sectors, we asked Ms Iwona Waksmundzka-Olejniczak whether the company plans to strengthen its liquefied natural gas (LNG) trade ties with emerging export-oriented countries like Mozambique, Algeria or Nigeria.

“At present, the United States and Qatar are the main directions of LNG supplies for the ORLEN Group,” Iwona Waksmundzka-Olejniczak notes. “The company receives deliveries from these directions in connection with the implementation of long-term contracts based on the DES [delivery ex ship] formula. The Group’s portfolio also includes long-term LNG supply contracts concluded by the company in the FOB [free on board] formula, which provide for the collection of cargo at newly constructed terminals in the USA. In addition, the company receives LNG from other directions in connection with purchases on the SPOT market.”

In 2022, the ORLEN Group relied primarily on LNG for gas imports. At 6.04 bcm, LNG deliveries accounted for as much as 43 per cent of the company’s total imports.

It is worth emphasising, however, that the supply of gas in liquefied form means access to the global market. The company analyses the market situation on an ongoing basis, also in terms of potential supply directions. Further decisions regarding contracting will depend on the results of these analyses and the changing needs of the company and its customers.

Aside from Qatar and the United States, we asked about other LNG supply routes that the ORLEN Group may have a strong interest in, especially from a short- to medium-term perspective. “In the past, as part of SPOT deliveries, in addition to LNG from Qatar or the USA, the company received deliveries that were loaded in terminals located, for example, in Norway, Nigeria, Trinidad and Tobago or Egypt. This indicates a high diversity of offers, also in terms of LNG origin, available on the short-term contract market,” Ms Iwona Waksmundzka-Olejniczak says.

“Following the merger, the Group has also gained full flexibility in terms of possible directions of LNG supplies thanks to the chartering of LNG tankers by PST [PGNiG Supply & Trading GmbH]” Ms Iwona Waksmundzka-Olejniczak tells us. “Therefore, it is difficult to point to specific directions. For any transaction, the trading conditions will be of primary importance,” she concludes.

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