Czech state to lend Unipetrol fuel worth up to CZK 1.9 billion to cover production shortfall

The state will lend Orlen Unipetrol part of the fuel stocks held in its material reserves. The loan will cover up to 135,000 cubic metres of fuel worth CZK 1.9 billion. This will help Unipetrol cover the production shortfall at its Litvínov refinery, which had to suspend output after an unexploded bomb was found on the site. The government approved the loan today, Pavel Švagr, head of the Czech State Administration of Material Reserves (SSHR), told reporters. The total size of the loan will depend on the refinery’s current needs; if the maximum amount is lent, it would represent 11 percent of state reserves, enough for approximately five and a half days.

The reserves administration will therefore release up to 95,000 cubic metres of diesel and up to 40,000 cubic metres of petrol to Orlen Unipetrol. „Releasing these emergency stocks will cover the refinery’s production shortfall for around 14 days. The market alone cannot make up for the supply shortfall in such a short time. By providing the loan, we are keeping fuel supplies stable in the Czech Republic, and drivers will notice no difference. There is therefore no reason for speculative increases in fuel prices,“ Švagr said.

Industry and Trade Minister Jozef Síkela (STAN) also commented on the loan’s approval, aiming to prevent possible speculation on the Czech fuel market. He recalled that the loan was prompted by the suspension of production in Litvínov. „Thanks in particular to this loan, as well as increased fuel imports from abroad within the Orlen Group, sufficient fuel supplies on the Czech market continue to be ensured,“ added Mariusz Wnuk, chairman of the board and CEO of Orlen Unipetrol.

The SSHR and Orlen Unipetrol will negotiate the terms of the loan this afternoon. According to the head of the reserves administration, these may include a ban on exporting fuel abroad and a requirement for Unipetrol to pay the fees for taking fuel out of storage and putting it back in. Švagr expects the fuel to be returned by around the end of the year, provided no further unexpected events occur. The administration will also require the company to secure the loan against risks up to its maximum value. The refinery will pay interest equal to the central bank’s two-week repo rate. The exact amount will depend on the volume of fuel borrowed and when the refinery returns it. Unipetrol will draw the fuel from storage facilities across the Czech Republic.

The state maintains fuel reserves equivalent to approximately 90 days of consumption. Švagr said the loan would not put the stocks at risk and that Czechia would continue to have sufficient reserves to ensure oil security.

Workers found a British World War II aerial bomb at the Orlen Unipetrol refinery in Litvínov during excavation work last Wednesday afternoon. Explosive ordnance experts and firefighters are now preparing a controlled detonation. The company halted production last week because of the bomb.