Czech state to lend Orlen refinery 50,000 cubic metres of diesel due to technical fault

The State Administration of Material Reserves (SSHR) will lend 50,000 cubic metres of diesel to the Orlen Unipetrol refinery in Litvínov. The government decided this today. SSHR chairman Pavel Švagr confirmed the information to the Czech News Agency (ČTK). According to Orlen spokesman Pavel Kaidl, the reason is damage to the ethylene unit caused by a widespread power outage in part of Czechia in early July. Production of other fuels is sufficient, Kaidl told ČTK. Orlen Unipetrol operates the densest network of filling stations in Czechia.

SSHR received Orlen’s loan request late last week, Švagr told ČTK, Czech Television and Czech Radio. SSHR will provide Orlen with financial security worth one billion crowns, he said, and the diesel must be returned by the end of this year at the latest. The company is also not allowed to export the diesel abroad. “Of course, this loan is not free; it comes at a price,” he added, noting that the interest rate is four percent. Orlen will start drawing on the diesel either this evening or on Thursday, he said.

The loan will not significantly affect Czechia’s oil security, Švagr said. “Our loan represents around five percent of our emergency stocks of products, so it is a fairly reasonable loan,” he said. “There is also no reason to expect problems at filling stations; thanks to this loan, there is enough fuel,” he added. He also does not expect any upward pressure on fuel prices.

“In July, a widespread power outage hit the Litvínov refinery, significantly damaging some production technologies, including the ethylene unit, and severely restricting operations across the entire site. After the necessary repairs, we began restoring production. However, as we gradually returned to full capacity, we discovered a related fault in the main compressor of the ethylene unit,” Kaidl said.

As a result, the company had to shut down the ethylene unit in recent days, he said, curbing petrochemical and fuel production.

Despite the measures taken, including halting fuel exports and increasing supplies from abroad, the company is currently unable to fully meet demand for diesel on the Czech market, according to Kaidl. Last Wednesday, 13 August, Orlen Unipetrol announced on its website that the ethylene unit at the Litvínov refinery would be shut down for several days. The company’s other refinery, in Kralupy nad Vltavou, is operating, Kaidl said.

Earlier this year, the Litvínov refinery also borrowed oil from state reserves because supplies via the Russian Druzhba pipeline had been halted. The government then approved a loan of up to 330,000 tonnes of oil. In mid-June, Orlen Unipetrol said it had begun returning the borrowed oil to the state. According to Švagr, Orlen has so far returned two of the four borrowed tanks of oil, with the remainder due by the end of September.

“We used this situation to replace Russian oil with non-Russian oil. This means that instead of Russian oil, Orlen is returning Azeri Light, a type of light crude processed at the refinery in Kralupy nad Vltavou,” Švagr added.

Previously, the state reserves contained only Russian oil processed by the Litvínov refinery, he said.