To facilitate an assessment of the impact of changes in global raw material and product prices on the refinery’s profitability, Grupa LOTOS S.A. resumed publishing the model refining margin and provided an updated margin calculation model.
Grupa LOTOS S.A. model margin on a monthly basis
The refinery of Grupa LOTOS on a weekly basis optimizes the selection of utilities for processing processes in relation to the price conditions on the market of raw materials and petroleum products, strongly limiting the use of natural gas in an environment of high prices. During the fourth quarter of 2021, the reduction of the volume of natural gas consumption by the Company, resulting directly from the increase in the price of this raw material, was even up to 70%.
The revised model margin calculation methodology is as follows:
- the model margin is calculated for a yield structure in the averaged scenario of the refinery operation (without taking into account annual seasonality);
- the annual throughput was assumed at a level equivalent to 94% capacity utilisation;
- it was assumed that 100% of the feedstock is Urals crude, whose value is determined as the sum of Dated Brent price and the Brent/Urals spread;
- the margin calculation is based on a simplified yield structure, with the following price tickers:
- 23% gasoline (including xylenes, reformate, naphtha) – Gasoline Premium Unleaded, ticker: PU-10PP-ARA,
- 63% diesel oil (including aviation fuel, light fuel oil, base oils) – Diesel, ticker: ULSD10-C-NEW,
- 8% heavy fuel oil (including bitumen, petroleum coke) – Fuel Oil 3.5%, ticker: HFO-ARA,
- 6% of the feedstock is the refinery's own consumption
- in the calculation, the margin was reduced by the estimated cost of natural gas (the main fuel used in refining processes)used per barrel of crude processed, calculated as the product of 0.1 and the gas index for the Day-Ahead Market of the Polish Power Exchange (TGEgasDA index), converted into USD/MWh.
The mathematical formula for Grupa LOTOS S.A.’s model margin is as follows:
The model is based on simplified assumptions, i.e.:
- it aggregates yields in three key product groups,
- it does not account for differences in the prices obtained by Grupa LOTOS S.A. on different geographical markets, including on the Polish market (premia and discounts vs benchmark),
- it disregards the different types of crude used as feedstock for the refinery.