From mid-December 2020 mass media was posting interview with Aušrys Macijauskas, President of the Lithuanian Grain Processors' Association, according to which due to the decision of ORLEN Lietuva to 'replace Lithuanian biofuels with imported feedstocks agricultural sector would lose over 48 MM EUR in revenue' . It is said in articles that Lithuanian farmers are to approach ORLEN Lietuva with a request to explain why controversial palm oil by-product (PFAD) is blended into biofuels instead of Lithuanian rapeseed oil.
Let us point out that though the aforementioned interview was first published on 16 December, ORLEN Lietuva so far has never been requested for any explanation by the farmers as mentioned there. Furthermore, let us note that Palm Fatty Acid Distillate (PFAD) is not palm oil product. PFAD is a residue which results in production of palm oil used in food and cosmetic industries. According to criteria established in Commission Delegated Regulation (EU) 2019/807 this residue is not listed as high indirect land-use change-risk feedstock therefore is allowed for use in the production of biodiesel. In fact it is deemed that this is one of the most efficient methods to use this residue, therefore biodiesel and paraffinic diesel producers opt for this production process feedstock.
In interview with A.Macijauskas posted in mass media it is specified that 'until now, ORLEN Lietuva has used biofuels made from fatty acid methyl ester (FAME) obtained from local rapeseed oil for its diesel.' This information is not accurate - FAME blended by ORLEN Lietuva into diesel in 2020 was produced not only from local rapeseed (harvested in Lithuania) but also from used cooking oil. It should be noted that all biodiesel produced from rapeseed oil (Rapeseed / Canola) sold in 2020 in the market was procured by ORLEN Lietuva in the form of tender from Lithuanian and Latvian biodiesel producers. Lithuanian origin rapeseed oil made 66 percent, the rest 34 percent according to declared origin were Russian (13 percent), Latvian (10 percent), Ukrainian, Belarussian and other.
Mandatory requirement to blend 7 percent of biofuel into diesel (without any reservations) came into effect in April 2020. The fact that this imperative requirement would turn into challenge for the quality of artic diesel was actively communicated by ORLEN Lietuva both to competent authorities and committees of the Parliament of Lithuania. ORLEN Lietuva keeps to the position that the quality of biofuel blended into artic diesel should not be worse than the quality of base mineral fuel. FAME, irrespective of the feedstock it is produced from, in terms of its quality does not satisfy this condition. Please note that the quality of FAME and artic diesel blend deteriorates with time. These technical challenges and possible consequences of such blending were repeatedly discussed in public and ORLEN Lietuva was repeating that it would never compromise the quality of fuel.
In aforementioned publications Aušrys Macijauskas, the President of the Lithuanian Grain Processors' Association, says that 'every euro earned is important, so we are anxious about the situation in the rapeseed market, when local products are being pushed out by cheap imports from Asian countries'. Let us point out that ORLEN Lietuva has not imported any biofuels in 2020 from any Asian countries. Paraffinic diesel (HVO) intended for blending with arctic diesel in winter season of 2020-2021 has been procured from the producer registered in EU and has been produced in Europe.
Let us also stress out that ORLEN Lietuva does not blend and does not plan to blend biofuels made from crude palm oil. Crude palm oil as a biofuel feedstock is not acceptable to ORLEN Lietuva and we have included this as part of the requirements for all biofuel tenders in 2020. Part of our customers, namely gas station networks have included this feedstock in the list of undesirable feedstocks. We understand concerns of users about the use of this feedstock for production of biofuels. During public discussions in the Environmental Protection Committee of the Seimas of the Republic of Lithuania, ORLEN Lietuva supported the position of the Ministry of Energy of the Republic of Lithuania on earlier ban than required by EU ban on biofuels produced using feedstocks identified as high indirect land-use change-risk feedstock in accordance with the criteria laid down in European Commission Delegated Regulation (EU) 2019/807, i.e. from 31 December 2023.
We would like to note that end users, such as farmers or agricultural companies, as well as Lietuvos Geležinkeliai have positively assessed the quality of the fuel and biofuel blend supplied by ORLEN Lietuva that meets the requirements applicable during the cold period. ORLEN Lietuva has been selling diesel blended with paraffinic diesel (HVO) in the wholesale market since 23 November 2020. To date, our company has not received any quality complaints from its customers. This confirms that we have chosen the right fuel quality solution. Please note that ORLEN Lietuva has not received any inquiries regarding the feedstocks used in the production of blended biofuels, but we have received a number of inquiries regarding the confirmation of information that fatty acid methyl ester will not be blended into fuels during the winter.
Let us point out that physical properties of paraffinic diesel produced by hydrotreatment are fundamentally different from the fatty acid methyl ester produced in Lithuania, the comparison of their prices is not reasonable. Due to production costs and yields paraffinic diesel produced by hydrotreating the same feedstock will be more expensive but its quality and stability at low temperatures is a factor that offsets the difference in price. In compliance with the requirement to blend 7% of biofuels into diesel, ORLEN Lietuva offered a high quality blend of Class 1 arctic diesel and paraffinic diesel (HVO) to the market. It is pleasant to know that in December of last year the customers of ORLEN Lietuva chose to purchase this fuel. In December 2020, wholesale companies have not acquired any Class 1 arctic diesel for blending with biofuels. We reasonably believe that customers have appreciated ORLEN Lietuva's efforts in the market not to compromise on quality.
ORLEN Lietuva inf.