Refining and Marketing Division operates five refineries in the CEE region under joint supply-chain optimisation with 23.5 mtpa capacity on adjacent markets. Bratislava and Duna refineries have outstanding complexity and efficiency. MOL has been fully consolidating INA from mid-2009, expanding the Group’s refinery pool significantly with the coastal Rijeka and the landlocked Sisak refineries. The IES operated Mantova Refinery in North Italy has been member of the Group since 2007.

Crude supply and product distribution are supported by an extensive pipeline and depot network. Retail Services Division operates a modern filling station network of over 1,600 sites in 11 countries and manages 7 brands within its multi-brand strategy, providing captive channels for the refineries within their supply radius. 

Competitive advantage

The refineries of Bratislava and Duna are well-known for their high complexity, exceptional efficiency, quality leadership and outstanding operational excellence. These refineries have had one of the highest net cash margins in Europe year by year since 2003 according to Wood Mackenzie studies. The joint supply-chain optimisation among the refineries and petchem units is supported by extensive logistics, such as the crude and product pipeline system and storage depos. Though INA refineries have lower level of efficiency and complexity yet, MOL’s proven track record of cutting edge asset development and operation competencies will provide significant further organic growth for the Group.

Retail Services Division provides strong captive market for the refineries. This Division has taken advantage of market opportunities through the application of advanced micro-market pricing, retail knowledge gained on mature markets, the introduction of new services, the successful integration of new businesses and a focused investment program in markets with strong organic growth.

Key Achievements

Quick and adequate response to the economic crisis

The economic crisis hit Central and Eastern Europe, though to a lesser-than-expected extent in volume demand versus matured part of Europe.  Motor fuel demand in our core sales region dropped by 1%, while EU average was 4%. MOL also strengthened its market presence and market shares in adjacent markets with the consolidation of INA.

The company focused on cash generation performance in all activities. While inventory levels and operation unit costs have been lowered, strict control procedures have safeguarded credit performance. As part of the quick and adequate response to the economic crisis, MOL decided to cut its original CAPEX plan for this year, resulting in focused investments and revaluation of projects on MOL Group level. The large scale hydrocrack conversion project in Duna Refinery has been rescheduled to an early revisit in 2010. The review of the technical scope and timing of the project will be carried out in the light of new synergies in the larger group.

Solid base for organic growth

MOL operates five refineries in the CEE region under joint supply-chain optimisation with 23.5 mtpa capacity on adjacent markets. The refineries of Bratislava and Duna are well-known for their high complexity, exceptional efficiency and outstanding operational excellence. The operational control over INA brought two refineries to MOL’s refinery pool. Rijeka Refinery provides direct connection to the Mediterranean region and gives, the opportunity to procure and sell crude oil and oil products by cargo, while the landlocked Sisak Refinery is located in the vicinity of the main Croatian consumer market. INA also owns 11.8% interest in JANAF, d.d., the company which owns and operates the Adria pipeline system providing an alternative source of crude supply and option for opportunity crudes for Duna, Bratislava and Sisak refineries as well. Although the new refineries have lower complexity and efficiency levels, MOL is committed to improve the efficiency level of the new portfolio elements to its standard level. The extended portfolio also allows MOL to leverage all the development and operational synergies among the refineries and petrochemical units. MOL can optimise its asset developments on a higher level and can exploit the advantages of the joint stocking and scheduling of its units, the feedstock and product transfers among the refineries and harmonized logistics and commercial activity. Our vision is to develop a competitive refinery pool and product slate with an optimised supply chain management to meet the regional demand for high quality products and services and strengthen the regional market position with INA.

Common optimisation system to harmonize five refineries and two petrochemical units

The operation of five refineries and two petrochemical units has significant synergies for the Group. A cutting-edge planning tool handling seven sites at same time was introduced in 2009 in order to implement the maximum exploitation of the operational opportunities and harmonising the investment decisions among the refineries. The operational structure has been modified to implement common planning and optimisation, increasing INA’s efficiency to Group standard level. In the meantime, the knowledge transfer and sharing have been commenced.

Market driven investment program continued 

INA Modernisation programme Phase One continued. New units in Sisak Refinery have already come on stream both to produce Euro V motor gasoline and to reduce emission to local environment. New units in Rijeka are in-construction to process Euro V motor fuels from 2010 and to comply with local environmental legislation.
IES Modernisation programme continued with the addition of new hydrotreater capacities to serve local markets with Euro V gasoils.
MOL and Slovnaft refineries completed the planned diesel production revamps and their capacities have been lifted to serve long term market dieselisation trends.
Slovnaft heavy-fuel-to-electricity upgrade project gained momentum. The increased capacity of the local power plant will satisfy the electricity and heat demand of the refinery thus providing value creating captive market for all Slovnaft processed heavy residue fuels.

Project EIFFEL (Efficiency Improvement Framework)

MOL Group continues and extends its Project EIFFEL (Efficiency Improvement Framework) in order to support its strategic pillars: growth, efficiency and capabilities. The strengthened cost conscious perspective of employees is the main driver of the program. The majority of savings is due to new creative and flexible solutions or small technology modification. Beside the significant direct cost savings, the real added value of Project EIFFEL is the creation of a self-improving organisation and establishment of a modern knowledge sharing environment, which supports the cooperation within MOL’s multinational and -cultural operational area. In 2009, more than 1000 ideas came from the Division, initialising more than 25 solutions or modifications.

Renewable fuels added momentum

In line with the EU objectives and in order to secure our regional markets, the bio-component ratio of the marketed motor fuels continued to increase in 2009. MOL Group now offers bio-component containing motor fuel product portfolio in all relevant markets.
Preparation for a carbon constrained world has continued. MOL has successfully finished the first phase of developing its proprietary second generation bio-diesel production technology and is now lining up for pilot scale application. Focus was also spent on waste plastics recycling into light and middle distillate fractions. The pilot plant is expected to start up during 2010 in Bratislava with 10kt capacity.

Retail Business Development

MOL Group currently operates more than 1600 filling stations in 11 European countries in a multi-brand structure with 3 international (MOL, Slovnaft, INA) and 4 country-specific (IES, Tifon, Roth, Energopetrol) brands. The full consolidation of INA not only added approximately 500 filling stations to our retail portfolio, but also provided new markets for the products. MOL is moving forward via INA, Energopetrol and the formerly established InterMOL to expand operations in the South-Eastern European markets.
The retail visual identity of the MOL brand and regional partnership with Marché International further enhanced the brand awareness in 2009 and made the portfolio more attractive for customers.
The design and characteristics of MOL fuel card portfolio has been updated and a new MOL Group Cards logo has been introduced in order to help recognition and to make acceptance clearer. As a long term goal, MOL aims at extending MOL Group Card usage in the region by the introduction of mutual acceptance at all subsidiaries.
MOL strengthened its sustainability approach in the retail network through the implementation of energy saving lighting methods and by the application of renewable energy sources. The launch of organic food corners at retail stations, the driving safety campaign and the collection of recycled packaging materials are also tangible actions of MOL’s commitment to responsible business operation.

Outlook

MOL has proven track record of cutting-edge development and operation practices and is committed to elevate newly consolidated assets to MOL standards. Our vision is to become the premium refinery group in Europe.
INA Modernisation Program Phase One will thus be completed in 2010 both in Sisak and Rijeka refineries. The most important part of the remaining investment of the Phase One program is the Mild Hydrocracker unit in Rijeka, with the expected completion by mid-2010. With the completion of these investments, Rijeka site will produce Euro V diesel and motor gasoline, while Sisak reaches Euro V gasoline production. With the EU standard motor fuel pool, the Group will be able to serve local markets. Continued focus will be given to the market driven planning of Phase Two to elevate conversion level and competitiveness of the refineries on mid-term. 
MOL is keen on harmonising the strategic storage opportunities in regional core countries, by exploiting the benefits from common inventory optimisation.
The efficiency improvement actions will be continued at all locations supported by extensive knowledge transfer and harmonised operation across all business segments.
We keep focus on unit costs of our activities, asset maximisation of our production and distribution and commercial chains and will exploit cross-border synergies made available by the organic growth of the previous years.