Business environment
External growth factors
In 2010, the Polish economy once again recorded good results, undisturbed by the global recession.
In 2010, global economy was marked by varied rates of growth in different geographical regions, albeit the disparities were less dramatic than in 2009, as developed economies recovered from the recession.
According to estimates released by the International Monetary Fund (IMF), in the whole 2010 global economy expanded by 4.8%, versus a contraction of 0.6% in 2009. The robust recovery was driven by strong GDP growth across key economies: 2.6% in the US, 2.8% in Japan, 1.7% in EU countries and 4.0% in Russia. In addition, the emerging economies recorded a growth of 7.1%, including 10.5% in China and 9.4% in India.
The actual growth in 2010 surpassed market expectations. The economy started to show signs of a recovery already in the first quarter.
Poland – Macroeconomic Environment
In 2010, the Polish economy performed well, continuing along a path of growth, without any setbacks of recession. The pace of GDP growth was strong, rising from quarter to quarter, to reach 4.2% (year on year) in the third quarter. The Central Statistical Office estimated Poland’s economic growth for the whole 2010 at 3.8%.
Condition of the Refinery Sector
The economic growth recorded last year around the world provided a boost to oil demand. According to estimates of the industry itself, the average demand for oil will reach in 2010 86.7 mb/d, an increase of roughly 2.5% relative to 2009 (with average consumption estimated at 84.6 mb/d)1. Oil demand grew stronger in developing countries (5.1%) than in developed ones (1.1%)2. Demand for oil reported on the European market was in excess of 15.2 mb/d in 2010, compared with less than 15.3 mb/d a year earlier 3. The consumption dynamics was negative at 0.5%.
The International Energy Agency (IEA) reckons that demand for oil and refined petroleum products will continue to be driven by developing countries. Based on the IEA’s projections, an annual average growth in oil consumption in 2009–2015 will stand at 1.6% globally, with 3.6% for developing countries and -0.3% for developed countries4.
The significant economic rebound after the first quarter of 2010 was also reflected in the oil demand dynamics. In the second quarter, demand for the commodity slightly exceeded the pre-crisis level recorded in 2008.
1 In-house calculations based data from OPEC (Monthly Oil Market Report, Jan 2011), IEA (Oil Market Report, Dec 2010), EIA (Short Term Energy Outlook, Jan 2011)
2 International Energy Agency (IEA), Dec 2010
3 Based on data from the Energy Information Administration (EIA)
4 International Energy Agency, Oil Market Report, Dec 2010
The strongest driver of refining margins in 2010 was gasoline. At the beginning of the year, its price rose and then it firmly remained the most valuable product. On the other hand, margins on diesel oil grew more slowly than expected.
International Fuel Market5
It is estimated that in 2010 demand for refined petroleum products grew by 1.9%. Considerable increases in demand were reported for LPG (4.3%) and diesel oil (3.6%). Estimated demand for engine gasoline was slightly higher (0.4%) than in 2009. By contrast, consumption of light fuel oil fell (-2.1%). Changes in global demand for fuels were attributable to the worldwide economy’s return onto a path of growth.
5 Based on JBC Medium-Term Oil Market Outlook 2010-2015, October 2010
In 2010, the European market saw a decline in demand by an estimated 1.5%, on the back of reduced consumption of gasoline (down by more than 4%), light fuel oil (down by 8%) and JET fuel (down by nearly 1%). On the other hand, consumption of LPG and diesel oil went up – by 2% and 1%, respectively.
The trends observed on the European market mirrored the developments in the automotive market. In 2010, in Europe there was a 7.7% increase in registrations of commercial vehicles (up to 1.6 million). At the same time, on the market of newly registered passenger cars, the share of vehicles powered by compression-ignition (diesel) engines exceeded – following a decline in 2009 – the 50% mark. The share of diesel-consuming vehicles went up on key European markets – Germany, Italy, France and Great Britain6.
Polish Fuel Market
Consumption of fuels in 2010 was driven largely by growing demand for diesel oil, whose sales remained on a rising trend which began in the previous years. According to estimates of the Polish Organisation of Oil Industry and Trade (POPiHN), the progressive dieselisation and rapid growth in car transport ramped up diesel oil consumption in 2010 by 3.5%. The market of diesel fuel is expected to continue to expand in the years to come, sustained by a stable rate of economic growth. Demand for diesel oil is generated to some extent at the expense of gasoline – the structure of the passenger car market is changing slowly – which in the long run may alter the structure of fuels consumed. According to POPiHN, demand for gasoline fell in 2010 by 6.4%, a level similar to 2008, but the decline in gasoline consumption was partly offset by an increase in demand for LPG, which in 2010 grew by 1.3% year over year.
In 2010, the market of light fuel oil saw a slight increase (equal to 1.2%).
The strongest upward trend in demand was seen in the segment of aviation fuel, whose consumption in 2010 rose by 11% from the previous year’s level. The demand was buoyed up by the economic recovery in Poland and globally. According to the Civil Aviation Office’s data, passenger traffic at Polish airports in 2010 rose by 8% on the previous year.
6 European Automobile Manufacturers’ Association, www.acea.be
The current demand trends on the Polish fuel market show no signs of reversing in the coming years. Assuming stable rates of economic growth in Poland and worldwide, the combined demand for the above fuels in 2011–2015 should grow steadily at an annual rate close to 3%.
Conditions on the Retail Fuel Market in Poland
The most prominent trends on the retail fuel market in recent years have been a steady increase in demand for premium fuels and ongoing consolidation. These developments suggest that the number of premium stations in Poland may increase going forward. Also, new road projects and Motorway Service Areas offer development opportunities for facilities located near those sites, including LOTOS petrol stations. Additionally, an important factor bearing on Grupa LOTOS’ strategy is the number of independent petrol stations operating in Poland. On the one hand, they account for a significant portion of the market and compete with LOTOS, but on the other – they are potential franchisees, and thus may contribute to further development of the LOTOS chain.
In 2010, the retail market saw further consolidation of the segment of independent stations, optimisation of the number of stations owned by domestic operators and an increase in the number of stations owned by foreign networks. The activities of petrol station operators in 2010 resulted in the addition of 40 new locations. Moreover, 10 new locations were launched in the segment of motorway stations. As at the end of 2010, there were 31 petrol stations located along motorways, seven of which operated under the LOTOS brand. Towards the end of 2010, the number of petrol stations in Poland was 6,755 altogether.
