UPDATE: Orlen energy expects decarbonisation costs at PLN 183 bln by 2035, time as key

"From the Orlen Group's perspective, the trend is clear for us [decarbonisation - PAP ed.]. We are fully aware that we have to fit into this trajectory [of climate neutrality by 2050]," head of the international regulation office at Orlen Damian Fogel told reporters.

He added that the key challenge for the company is the European Commission's approach to meeting this target (whether it will be leapfrogging or linear) and associated financing - a leapfrogging approach assumes a 90 percent reduction in EU CO2 emissions by 2040.

The EC has announced a legislative proposal with such a target, but there is currently an EU discussion on the issue and the industry is hoping to soften the approach.

"The discussion on the 2040 target is also a discussion that will go as far as talking about competitiveness. For us, security of supply remains a priority, and this security is understood in the traditional sense, i.e. ensuring continuity of energy supplies of products to consumers, but we also look at security from the economic point of view, i.e. social security - supplying our products at prices acceptable to consumers in Poland," Orlen's expert explained.

As Fogel pointed out, the decarbonisation cost estimate of PLN 183 billion (EUR 42.75 bln) is based on the company's strategy for the next 10 years and this is what the company is able to finance based on its own resources and loans.

"If more would be needed (in the event of a leapfrogging approach), then we would need external financing for this, i.e. state aid for decarbonisation," he explained.

Orlen's executive director for risk management and compliance Jakub Ruszel pointed to the cumulative cost of implementing the EU Green Deal requirements in the group's various business segments and their cumulative impact on the risk of affecting the prices of fuels, energy or regulated services.

"The main risk we see in the public dialogue is that the discussion of these requirements is atomised: we discuss either the ETS or the RED (directive) and we say: let's look at it holistically," Ruszel said.

"The amount of cumulative requirements determines what the final impact of the Fit for 55 package will be on the different segments of our business," he added.

Ruszel pointed in particular to the economy-intensive combined impact of the requirements up to 2030 from the ETS and RED III directives on possible fuel prices in the transport and heating sectors.

"We see the need to open a discussion at the European level (...) on the feasibility of meeting (...) these targets in this form," Orlen's head of risk management and compliance department stressed.

"We need money, funding - without that, these targets cannot be met. Despite the fact that we have allocated more than PLN 180 billion in the 2035 perspective, like all large industrial or electro companies, we communicate that the funds are insufficient, we need time," he emphasised.

Ruszel stressed that time is key here, calling it a 'drip'.

"The flattening, the discussion about easing certain targets over time - in the 2030, 2040 perspective - is a discussion about whether this can be achieved in a sustainable and safe way for the economy," he concluded.

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