Downstream

Refining and Marketing

2010 was the year of continuing development with a focus on operational efficiency. Refining and Marketing operates five refineries and related asset networks in the CEE region driven by the Supply Chain Management. Bratislava and Duna refineries continue to enjoy the advantage of their strong asset structure while major efforts to elevate INA Downstream performance have been in progress. Competitive crude and raw material supply and low cost product distribution are ensured by an extensive pipeline system and increased depot coverage. Regional wholesale activity is effectively supported by a widespread service station network of more than 1,600 sites in 11 countries with 7 brands operated in a multi-brand strategy by Retail Division.

Gradual improvement of refining environment in line with slowly recovering economy, while market developments in the CEE region showed diverse picture.
Phase-1 of INA modernization program is being completed to produce Euro V motor fuel quality and to reduce environmental footprint.
Strong emphasis on operational efficiency improvement continued to help balance the still challenging external environment.
Strong market position and further expansion to South Eastern Europe are supported by the development of logistics systems and retail network consolidation with revised focus on geographies.
Downstream continues the roll-out of sustainability principles among business units and countries on regional level.

Competitive advantage

MOL Downstream has an outstanding asset structure in the European refining sector. Our most complex refineries, Duna and Bratislava have had leading net cash margin positions in Europe since 2003 according to WoodMackenzie studies. Revamp of less efficient and sophisticated assets in Croatia and Italy gained momentum in 2010, enabling all of our refineries to produce Euro V quality motor fuels. While our refineries enjoyed the direct pipeline access to Russian crude supplies, seaborne crude markets provided an opportunity to select the optimal crude slate. The division optimized refinery operation to exploit synergies available in regional markets. Our extensive logistics network coupled with well positioned commercial activity reaching end-users continued to be key advantages of capturing sales margin revenues.

Retail Division is responsible for strengthening market position of fuel sales via convenience retailing activities across 11 countries. After a period of dynamic growth in the number of filling stations as well as in their geographic distribution, the key challenge now is to consolidate the existing filling station portfolio and improve its efficiency.

Petrochemical

Our petrochemical business is the leading polymer player in CEE and among the top ten players in the European polymer market supplying polymers mainly to European plastic processing companies. Our production facilities are located in Tiszaújváros (Tisza Chemical Group Plc., TVK) and Bratislava (Slovnaft Petrochemicals, s.r.o., SPC). They are integrated with MOL Group refineries and support the Downstream segment as captive market.Beyond the naphtha processing to ethylene and propylene, the Petrochemical segment produces polymers in competitive quality, which are fundamental for a wide range of industrial applications and for the production of a vast number of consumer goods that are essential to everyday life. The polyethylene product range includes low density polyethylene (LDPE), high density unimodal and bimodal polyethylene (HDPE). The polypropylene (PP) product range includes homopolymers, random copolymers and impact copolymers. TVK and SPC are operated in integrated manner, selling the majority of products through TVK sales subsidiaries under the brands of Tipelin, Tipolen, Bralen (polyethylene) and Tipplen, Tatren (polypropylenes).

Higher utilization of olefin co-products
Focus on regional markets in polymer sales
Well managed general overhaul and maintenance
Process Safety Management system implemented
Strategic focus on energy efficiency improvement

In Hungary and Slovakia we serve our customers directly from TVK and SPC. Our sales subsidiaries are operating in five countries – Germany, Poland, Italy, France and Ukraine. Above all, our sales activity is also conducted through MOL subsidiaries in Austria and Romania, where we exploit synergies from the presence of other MOL businesses. Sales as well as customer support in technical issues to the key accounts and on other markets are managed from TVK and SPC. We supply feedstock especially to European plastic converters – more than 97% of our polymer production has been placed in European markets in 2010. Proximity to rapid growth regions of Central and Eastern Europe provides firm basis to fully satisfy customer needs, supported by tailor made sales services and product quality, which is strategically important in keeping position as leading regional polymer player. Based on its long time experience in the petrochemical industry, MOL Petrochemical segment’s main internal strengths are the skilled sales and engineering staff.

Competitive advantages

Our competitive strength is supported by our geographical position and competitive asset base with a well-balanced product and customer portfolio, as well as refinery integration.

Integrated operation: According to our ‘crude to plastic’ philosophy we optimize our refining and petrochemical production through the whole hydrocarbon value chain, which not only maximizes our profitability, but also reduces the risk at group level. Integration between petrochemical plants and refineries improves the competitive position for both sides. This segment represents captive-market for MOL Downstream segment by purchasing 13% or 2.3 Million tons of MOL Downstream sales as petrochemical feedstock. MOL Petrochemicals sales to MOL refineries amounting to 30% of the total petrochemical feedstock. The majority of these co-products produced by olefin plants are sold as components to the fuel production.

Good geographical location: Our sales and marketing strategy focuses on increasing sales in the fast growing CEE region, where we can benefit from central position in the landlocked markets and our special understanding of customer requirements. Shorter sales radius can reduce transportation and other logistics costs. Value added services in logistics and technical support are the key factors to differentiate MOL Petrochemicals. These services together with regional expertise represent the main advantages in MOL’s core region.