Markets

3) Heavy heating oil, asphalt, oils.

4) Other – covers sales of other products, merchandise and materials of the segment, includes also revenues from sales of mandatory reserves for total amount of PLN 2,433,988 thousand and revenues from sales of services of the segment. Other volume- contains mainly brine, industrial salt and vacuum distillates

In 2012 and 2011 no leading external customers were identified in the ORLEN Group, whose share in total sales revenues would exceed 10%.

DIAGRAM 3. Assortment structure of sales revenue of the ORLEN Group in 2012 – 2011.

.

3.2.4 Markets

Wholesale activities of the ORLEN Group are carried out through units selling refining products in Poland, as well as foreign companies such as Unipetrol Slovensko s.r.o., Unipetrol RPA s.r.o. and Paramo a.s. (Czech Republic), and AB ORLEN Lietuva and UAB Mezeikiu naftos prekybos namai (Lithuania). In 2012, the ORLEN Group’s wholesale of the refining products mainly covered the territory of Poland, the Czech Republic, Germany, Slovakia, Lithuania, Latvia, Estonia and Ukraine and by sea, mostly to the US, Canadian and African markets, as well as loading terminals in the Western Europe.

TABLE 19. Assortment structure of sales volume on domestic markets of the ORLEN Group (in thousands of tonnes).

SALES 2012 2011 CHANGE CHANGE %

1 2 3 4=(2-3) 5=(2-3)/3

Markets

Poland 11 479 11 741 -262 -2.2%

Lithuania 8 402 8 440 -38 -0.5%

Czech Republic 2 702 2 852 -150 -5.3%

Total 22 583 23 033 -450 -2.0%

DIAGRAM 4. Structure of sales volume of the ORLEN Group on target markets.

Polish market

In 2012, the deterioration of the majority of macroeconomic indicators and the situation on the fuel market was observed in Poland, as compared to 2011. The GBP dynamics was lower than expected, according to the information of the Energy Market Agency, also, the gasolines consumption dropped by (-) 5.2% (y/y). The long-standing upward trend in respect of diesel oil consumption broke down and the diesel oil sale

ORLEN GROUP

MANAGEMENT BOARD REPORT ON THE OPERATIONS FOR THE YEAR 2012

(Translation of a document originally issued in Polish)

dropped by (-) 8.8% (y/y). The drop in consumption was due to the deteriorating economic situation in construction and transport industry and the takeover of part of volume by the companies operating in the so called “shadow economy”. Also, the fuels import diminished significantly in the traditional and official distribution channels.

The above factors influenced significantly the decrease of sales of medium distillates by (-) 9.5% (y/y) in relation to diesel oil and light heating oil. Year 2012 was in turn the year of further increase of Jet A-1 sales, which reflects the strengthening of ORLEN Group position in this fuel segment.

Significant increase in sales of LPG, with decreasing sales in gasoline resulting from decrease in consumption, contributed to improved sales of light distillated by 2.7% (y/y). Prosperity on LPG market was an effect of search for cheaper substitutes of fuels by the customers in situation of increasing retail prices of liquid fuels.

Increase in sales of heavy fractions resulted from active trading policy of ORLEN Oil Sp. z o.o., which influences the sales of oils and increased sales of heavy heating oil due to technical problems with vacuum pillar on TTD II installation in PKN ORLEN .

TABLE 20. Assortment structure of sales volume on the Polish market (in thousands of tonnes).

SALES 2012 2011 CHANGE CHANGE %

1 2 3 4=(2-3) 5=(2-3)/3

Polish market

Light distillates 1 717 1 672 45 2.7%

Medium distillates 4 474 4 942 -468 -9.5%

Heavy fractions 2 520 2 339 181 7.7%

Other 2 768 2 788 -20 -0.7%

Total 11 479 11 741 -262 -2.2%

DIAGRAM 5. Sales volume structure in 2012 and 2011 in Refining Segment on the Polish market.

Czech market

In 2012, the Czech fuel market was adversely affected by the macroeconomic environment. The business struggle was escalated by illegal fuels import from Germany, Slovenia and Austria. The share of the so called “shadow economy” in import to the Czech Republic was assessed to amount to 20-25% of the entire volume of the Czech foreign purchase. The unfavourable market situation was additionally deteriorated by the price war in the retail segment, which contributed to significant decrease in margins and sales volume. These factors deepened the downward trend, progressing for several years, in respect of gasolines consumption and resulted in the decrease of such fuel consumption by (-) 5.8% (y/y). Diesel oil consumption increased insignificantly by 0.3% (y/y).

Despite the difficult market environment, the sales volume of light and medium distillates was completed on the previous year level. Slight decrease in medium distillates sales, apart from being impacted by market factors, is also due to completion of production by Paramo refinery following the II quarter of 2012. From then on the infrastructure in Pardubice is used solely as the warehousing terminal.

In 2012, the cooperation with key fuel companies, independent wholesalers and retail chains was tightened. Unipetrol a.s. concluded contracts for the exclusive fuel supply with all hypermarket chains operating on the Czech market. Export to the markets of neighbouring countries, in particular Slovakia, was also developed. In the IV quarter of 2012, fuels from the refinery in Livinov commenced to be supplied to the chain of fuel stations of the ORLEN Group in Germany. The available warehousing and distribution network was also expanded, adding warehouses in Domazlice, Horovice and Pardubice and the terminal in Nové Zámky in Slovakia to the terminals in the refineries and Cepro network used until then.

ORLEN GROUP

MANAGEMENT BOARD REPORT ON THE OPERATIONS FOR THE YEAR 2012

(Translation of a document originally issued in Polish)

TABLE 21. Assortment structure of sales volume on the Czech market (in thousands of tonnes).

SALES 2012 2011 CHANGE CHANGE %

1 2 3 4=(2-3) 5=(2-3)/3

Czech market

Light distillates 738 738 0 0.0%

Medium distillates 1 592 1 622 -30 -1.8%

Heavy fractions 308 406 -98 -24.1%

Other 64 86 -22 -25.6%

Total 2 702 2 852 -150 -5.3%

DIAGRAM 6. Structure of sales volume in 2012 and 2011 in Refining Segment on the Czech market.

Markets serviced by ORLEN Lietuva

The traditional sales channels include inland markets: Lithuanian, Latvian, Estonian, and Ukrainian, where approximately 40% of the refinery production is located as well as seaborne markets, where approximately 60% of production is sold.

On inland markets, the ORLEN Lietuva Group maintains the established position of the largest supplier of the highest quality fuel products. The year 2012 was another difficult year in terms of sales of gasolines, consumption of which on the Lithuanian market decreased by (-) 9.8% (y/y).

Positive trends were observed in respect of diesel oil consumption, which increased by 6.6% (y/y).

In 2012, ORLEN Lietuva achieved a similar sales volume level (y/y), despite the adverse effect of the periodical overhaul turnaround. The increase by 2.1 pp. (y/y) of light distillates share in the sale structure, with the diminishing light distillates share, resulted primarily from market trends concerning fuels consumption.

ORLEN Lietuva, apart from operating on Baltic countries and seaborne markets, developed the sales of gasolines, diesel oil and Jet A-1 on the Ukrainian market. As in previous years, ORLEN Lietuva sold on seaborne markets 92 US gasoline, diesel oil and heavy heating oil, which were finally placed on American, Canadian and African markets and in the loading centres of western Europe. In the end of 2012 short-term contracts were executed (sea and inland) for the year 2013, ensuring the sustainable sales at the level of approximately 70% of the refining production.

TABLE 22. Assortment structure of sales volume on the Lithuanian market (in thousands of tonnes).

SALES 2012 2011 CHANGE CHANGE %

1 2 3 4=(2-3) 5=(2-3)/3

ORLEN Lietuva market

Light distillates 2 669 2 887 -218 -7.6%

Medium distillates 3 891 3 734 157 4.2%

Heavy fractions 1 727 1 742 -15 -0.9%

Other 115 77 38 49.4%

Total 8 402 8 440 -38 -0.5%

ORLEN GROUP

MANAGEMENT BOARD REPORT ON THE OPERATIONS FOR THE YEAR 2012

(Translation of a document originally issued in Polish)

DIAGRAM 7. Structure of sales volume in 2012 and 2011 in Refining Segment on the ORLEN Lietuva Group market.