Polish state energy giant Orlen reveals details of $400m lost on undelivered Venezuelan oil

A Swiss subsidiary of Polish state energy giant Orlen has revealed details of the roughly $400 million (1.6 billion zloty) it lost on prepayments made without collateral under the firm’s previous management for Venezuelan crude oil and petroleum products that were never delivered.

Orlen Trading Switzerland (OTS) reported that over half the money was paid to a Dubai-based intermediary run by a 25-year-old from Hong Kong. The firm says it has notified prosecutors regarding the actions of the former management in relation to the case.

Szanowny Panie, jestem księciem Nigerii i….

Zaliczki za ropę której nie było, Orlen miał przelać jakiemuś 25-latkowi 😅https://t.co/wtPy1RdsY9

— Piotr Cymcyk – Merytorycznie o Finansach (@DnaRynkow) April 23, 2024

The case is related to the decision last year by the United States to lift sanctions on Venezuelan oil between 18 October 2023 and 18 April 2024. In November, Orlen announced that OTS had chartered the first of six supertankers to transport such oil.

Meanwhile, according to OTS’s announcement today, the firm, under its previous management, made advance payments for oil to several intermediaries, including around $240 million to a firm founded in Dubai in 2021 by a 25-year-old who has been identified as a Chinese or Hong Kong national.

The payments were made without collateral, contrary to normal standards, and to entities with which Orlen had never previously cooperated.

The oil was due to be delivered in December and January but never arrived. OTS says the former management took no action to enforce or break the contracts, despite the firm paying around $600,000 per day to keep the tankers moored in harbours. The final bill reached around $30 million.

Polish state energy giant Orlen has chartered a supertanker to transport Venezuelan oil – reportedly to China – following a temporary easing of US sanctions on Caracas https://t.co/mgvmJtOOyT

— Notes from Poland 🇵🇱 (@notesfrompoland) November 24, 2023

Orlen first announced on 10 April that $400 million allocated to unfulfilled deliveries needed to be written off as a loss in their financial statement for 2023. However, no details of the deals were given until today’s statement.

The firm also today confirmed that it has cancelled the contracts to buy the oil, reports the Polish Press Agency (PAP). But the new management added that no traces of Iranian or Russian oil – about which the media have speculated in recent weeks – have been found in company documents.

Orlen’s press office confirmed that a notice has been submitted to the public prosecutor’s office regarding the actions of the group’s former management with regard to OTS. It said it was also conducting an internal audit of operations.

Zawiadomienie do prokuratury zarządu Orlen ws. utraty 1,6 mld złhttps://t.co/fsi9sTQkvD

— Krzysztof Brejza (@KrzysztofBrejza) April 22, 2024

OTS was founded in August 2022, a few months after the outbreak of war in Ukraine and a crisis in the energy market caused by the implementation of sanctions on Russia. The company is based in Switzerland, which is known for its looser regulation of commodity trading.

Earlier this month, Prime Minister Donald Tusk said that “there are legitimate concerns that Poland will be exposed to very serious trouble in connection with the activities of [OTS]”.

Tusk also accused his predecessor Mateusz Morawiecki, who headed the former Law and Justice (PiS) government that left office in December, of ignoring the problem “despite warnings”. Orlen’s former CEO, Daniel Obajtek, who was fired on 1 February this year, had close ties with PiS

Orlen is also being investigated over accusations that, during Obajtek’s tenure, it artificially lowered fuel prices to boost PiS’s re-election campaign and that it sold assets to Saudi Aramco at billions below their value.

Poland’s audit office has found that state energy giant Orlen sold assets to Saudi Aramco at billions below their value.

It also says that the sale, which gave the Saudis partial control of a Polish oil refinery, “resulted in significant security risks” https://t.co/5DUnyxKQcs

— Notes from Poland 🇵🇱 (@notesfrompoland) February 5, 2024

However, according to a former member of Orlen’s board, Michał Róg, who was among those removed earlier this year as the new government made changes at state-owned firms, it was the decision to change OTS’s management in February 2024 that was the real reason behind the problems with its oil contracts.

“Advance payments were made on these transactions, which is a standard action in international trading,” Róg told PAP earlier this month. “Orlen’s then acting board had knowledge of the amount of these prepayments and open trades and knowingly took the financial and business risks associated with the dismissal of OTS’s board.”

Obajtek himself also told broadcaster Radio Zet that the allegations against Orlen and OTS are “total nonsense”. Like Róg, he said it was “irresponsible to suddenly fire the entire management board of the company”.

A propos spółki OTS ⬇️ https://t.co/VudxCtsbFF

— Daniel Obajtek (@DanielObajtek) April 12, 2024

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Main image credit: Orlen press materials