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The Warsaw Voice » Special Sections » August 29, 2012
Special Section: LOTOS
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Business Strategy until 2015 and Development Plans until 2020
August 29, 2012   
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The strategy of the Lotos group strengthens the position of Lotos as an organization that is making a major contribution to energy security.

The priorities for the operation of the Lotos group are defined by its strategy for 2011-2015 and development priorities until 2020. The main focus of the Lotos group is on expanding its hydrocarbon exploration and extraction operations and on improving sales efficiency coupled with optimized operational activity. The 10+ Program, which was successfully completed in 2010, has had a significant impact on progress in achieving the goals set by the strategy. Thanks to the program, the annual production capacity of the Lotos oil refinery in Gdańsk increased to over 10 million metric tons of oil.

The overriding strategic goal of the Lotos group is to increase shareholder value by making an optimum use of the group’s intellectual and financial resources and by pursuing development programs in the area of oil exploration and extraction, processing and sales. The expansion planned by Lotos will be in line with the principles of sustainable development, defined as a consistent effort to reduce its environmental impact, while appreciating the intellectual capital of the group and the experience of its staff.

In the area of exploration and extraction, the Lotos group has intensified activities aimed at expanding its raw material resources and benefiting from the projected high margins in the sector in the long term.

The most important strategic goals in this area include:
- extracting 24,000 barrels of oil equivalent a day, or 1.2 million tons of oil a year, in 2015,
- raising the extraction of hydrocarbons, in line with the priorities of Poland’s energy policy until 2030.
In its operations, the Lotos group has focused on making an efficient use of the Gdańsk oil refinery’s production capacity, which has been expanded thanks to the 10+ Program. The group also aims to exploit the synergy between the refinery industry and the energy sector.

The most important strategic goals in this area include:
- achieving the world’s best production standards and keeping a high level of competitiveness compared with other European oil refineries,
- making an optimum use of existing assets and assets taken over as a result of developing the group’s business,
- ensuring a safe and stable operation of production and auxiliary facilities,
- increasing the level of raw material processing.

In the area of sales, the Lotos group has focused on expanding its sales network and on increasing its oil and petroleum product sales.

The key strategic goals in this segment include:
- maintaining a 30-percent share in the domestic fuel market,
- achieving a fuel sales volume 15 percent higher than the fuel production potential of the Lotos oil refinery,
- achieving a 10-percent share in the Polish retail market by the end of the period covered by the strategy,
- expanding the existing chain of gas stations and intensifying sales,
- maintaining a leading position on the Polish gear oil market.

2011 was the first year with the new strategy. Despite the high volatility of the market and emerging signs of an economic slowdown, Lotos did not change its strategic goals. As the strategy is for the long term, it enables Lotos to carry out individual tasks in a well-planned and comprehensive manner, and to flexibly respond to opportunities and threats.

In 2011, Lotos pursued its strategic goals and achieved the indicators set for intermediate stages in keeping with the assumptions adopted for business operations and sales. The Lotos group’s share in the Polish fuel market—including diesel oil and gasoline—reached 33.5 percent, exceeding the minimum strategic target, while the group’s share in the retail market for diesel oil and gasoline reached 7.6 percent. Lotos will be consistently expanding the premium segment of its chain, including gas stations along freeways, and the Lotos Optima chain.

More intense exploration and extraction operations are a key condition that has to be met to ensure the success of Lotos’ sustainable development strategy. Lotos expects to attain this goal by 2015 by building a stable and strong oil group, generating a major part of its profit from extraction operations. In 2011, the group produced 227,100 tons of oil, of which 78,100 tons was extracted in Lithuania.

Development priorities until 2020
The expansion activities undertaken by Lotos are focused on efforts to increase the value of the group through sustainable development based on innovation and in keeping with the stakeholders’ principles and values. As oil prices are high and the situation on currency markets is unstable, the high percentage of oil extracted by Lotos from its own deposits relative to the total volume of petroleum processed by the refinery has a stabilizing effect and raises the profitability of the group. Lotos plans to build a vertically integrated and efficient organization, a goal that requires the company to strive to optimally develop the remaining segments.

Exploration and extraction segment
- proven resources of extractable hydrocarbons at around 330 million barrels of oil equivalent in 2020,
- raising the volume of oil extracted annually to around 5 million tons.

Market position
- maintaining at least a 30-percent share in the Polish fuel market,
- keeping sales 15 percent above the fuel production potential of the Lotos oil refinery,
- maintaining at least a 10-percent share in the Polish retail market.

- further optimization of the management model to achieve the highest efficiency possible,
- further improvement in oil processing efficiency, making it possible for Lotos to fully utilize its assets,
- efforts to optimize the energy management of the refinery by expanding connections with other energy systems
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