Wholesaler Orlen reorganizes fuel selling due to bureaucracy considerations

The price of diesel on April 30 Source: Anna Aurelia Minev/ERR

The biggest fuel wholesaler in Estonia Orlen stopped selling fuel directly, due to environmental requirements and increased bureaucracy, it says. This doesn't mean that Orlen is no longer selling fuel to retailers, however.

Orlen Eesti announced on January 1 that they would no longer be selling goods which are permitted for consumption in accordance with the requirements for the content of bio-additives established in Estonia in order to ensure compliance with the provisions of the Liquid Fuel Act and the Atmospheric Air Protection Act.

While previously, Orlen sold fuel to gas stations from the excise warehouse land loaded on to fuel trucks, now the company will sell the fuel to the terminal.

Previously, selling fuel was consumated legally on behalf of Orlen, and the company also paid taxes resulting. The change in fuel selling methodologies derives from the requirements of biofuel, which has two aspects. First, the biofuel requirements themselves, which mean combining biofuel with fossil fuels.

Second, according to the Air Protection Act, companies bringing fuel into consumption from the excise warehouse get an obligation to reduce the percentage of greenhouse gases by 6 percent.

80 percent of the fuel sold in Estonia comes from Orlen and the rest is brought to Estonia by Neste, who brings it from Finnish refinery.

In the first quarter of this year, Orlen paid €8 million in taxes; the same period in the previous year this stood at twice that, i.e. €16 million. In the fourth quarter of last year, the figure was €22 million.

Alan Vaht, board member of retailer Alexela, which buys fuel from Orlen, said that the change in the market comes purely from the peculiarities of reporting. He noted that the 6 percent greenhouse gas reduction obligation, in addition to the 10 percent biofuel requirement, is in real proportion to the approximately 13-14 percent biofuel obligation.

Vaht told ERR that the law requires presenting a declaration together with the new obligation in force. Fuel sellers which purchase fuel from Orlen are selling gas, which enables balancing out the environmental requirements, he said.

Vaht added that Alexela could strike a balance via LPG fuel they brought into consumption, but only if the fuel report demanded by the state is submitted.

Other companies are also buying from Orlen, and the obligation the wholesaler continues with these companies; in this case, they would also need to present their reports with Orlen.

When fuel retailers purchase fuel from a terminal, petrol and diesel are purchased on the retailer's balance sheet, and no joint declaration or risk-sharing with other fuel sellers is required.

Vaht said that this will also increase Alexela's administrative burden, but will make it easier for market participants to buy fuel. At the same time, the company has had to hire more employees, to deal with compliance reporting in the new system.


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Editor: Roberta Vaino

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