A Swiss subsidiary of the Polish state energy giant Orlen 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.
The case is related to the decision last year by the United States to lift sanctions on Venezuelan oil between October 18, 2023 and April 18, 2024. In November 2023, Orlen announced that OTS had chartered the first of six supertankers to transport such oil.
Meanwhile, according to OTS’s announcement, 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 had 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 2023 and January, but never arrived. OTS said 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.
Orlen first announced on April 10 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 the latest statement.
The firm also confirmed that it had cancelled the contracts to buy the oil, reported the Polish Press Agency (PAP). However, the new management added that no traces of Iranian or Russian oil – about which the media had speculated in recent weeks – had been found in company documents.
Orlen’s press office confirmed that a notice had 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.
OTS was founded in August 2022, a few months after the outbreak of the Russian 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 2023, of ignoring the problem “despite warnings”. Orlen’s former CEO, Daniel Obajtek, who was fired on February 1, 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.
However, according to a former member of Orlen’s board, Michal Rog, 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 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,” Rog 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 were “total nonsense”. Like Rog, he said it was “irresponsible to suddenly fire the entire management board of the company”. (Notes from Poland)
