(Bloomberg) -- Poland’s largest company, Orlen SA, is convinced that previous employees at the firm’s Swiss trading unit cost the business $400 million in questionable crude oil deals last year. 

One of the individuals embroiled in the case, Orlen’s former head of logistics and trading, says he’s being scapegoated. Michal Rog, who was removed from his post in February, argues those who replaced him were too quick to cancel what were genuine trades, and incorrectly blamed the old guard — including him.

However the situation plays out, there will be tough questions about corporate controls to address for a state-controlled company that supplies energy and fuel to more than 100 million Europeans. Even before Orlen announced the loss, the nation’s premier, Donald Tusk, had warned Poland could be in “serious trouble” because of something that had happened at the firm’s Swiss unit.

The bulk of the losses pertained to purchases of oil from Venezuela: on that both Rog and Orlen agree. The Latin American country has used little-known companies to sell its oil since Petroleos de Venezuela, the state oil company, was hit with US sanctions five years ago. The trade is rife with stories of illicit oil sales, creating an extra motivation for due diligence. 

For its part, PDVSA as the Venezuelan oil company is known, says that it had no contracts with Orlen — or with at least one of people involved who the Polish firm said was working as an intermediary.

“The situation is super-, super-simple,” Rog said in a phone interview on Tuesday. “The new management didn’t think through the issue and acted according to a rule that all that the predecessors had done is wrong and it needs to be canceled.”

Advance payments were made to intermediaries in December and January and Orlen says the barrels needed to have been loaded onto tankers during those two months.

There was, however, a significant time pressure. 

The prepayments were made at a time Venezuela was enjoying a window of relief from US sanctions. 

That relief was to end April 18 as President Joe Biden’s administration determined that Nicolas Maduro’s regime failed to honor an agreement to allow a fairer vote in elections scheduled for July.

Orlen says that the unsupplied oil — in tandem with the fast-approaching deadline for the expiry of sanctions relief to expire — created an extra concern was that buyers might insist on big discounts by the time the barrels were due to be delivered to customers. 


The company also wanted to stop accruing heavy waiting costs known as demurrage — which topped $30 million — for the tankers it had hired to collect the cargoes.

Soon after Tusk’s comments, it turned out the company had paid several unknown intermediaries 1.6 billion zloty ($391 million) for oil and fuel without any security and is unlikely to recoup it.

Orlen said this week that the never-before-used intermediaries included, as a major beneficiary, a 25-year-old Chinese citizen at a Dubai-based company that received more than $200 million. 

A high-ranking official at Petroleos de Venezuela said: 

  • PDVSA has no contract with Orlen, or any relationship with a person of Chinese origin allegedly involved — neither under current administration at the Venezuelan oil company, or the previous one
  • PDVSA conducted an investigation within its Trading & Supply vice presidency and Venezuela’s Embassy in Poland

But Rog insisted the trades were real and that it was the new management of Orlen’s Swiss unit that erred. 

“It wasn’t motivated enough to talk with the suppliers and they banned the people that remained at the company from continuing the transactions,” he said. “The deals simply stopped.”

Real Response

Orlen said it did contact the intermediaries, but that it canceled the deals in conjunction with legal advice and after it didn’t get what it deemed a real response from them.

Rog said that the intermediaries might have wanted some additional documents or other type of confirmation to complete the deliveries, but that once the talks were halted, they “probably held on to the pre-payments until the matter is resolved.”

Asked why the Swiss unit paid hundreds of millions of dollars to new intermediaries without using a escrow account, Rog said that it was normal for new market entrants, like Orlen Trading Switzerland, to do what it did.

He also said that most of the deals, especially those involving prepayments, were approved by a special unit at the parent company in Poland, and that all its business partners were thoroughly checked by a security specialists at the headquarters.

The high demurrage costs that the company was incurring might have been worth it as gross margin on this deal was “very high,” he added.

In the end, the profits never materialized, but spiraling costs did. Orlen’s bill for the six vessels exceeded $30 million at the end of February, and was growing by $600,000 a day.

Rog was pivotal to setting up OTS in August 2022, arguing that Orlen needed to be present on international markets — like its competitors. 

The company made its first deal in March 2023 and two months later transfered its first prepayment — probably for oil from South Sudan, according to Rog. The next advance payment was carried out in August and the last ones for the crude from Venezuela, in December and January.

He couldn’t confirm whether oil ordered in May, August or December was eventually delivered, but said that OTS did complete more than 300 successful deals under previous management. Orlen’s new management has said that it has never received any crude from the transactions that were subject to prepayment.

Orlen said Tuesday that it has notified prosecutors about a potential irregularities at the Swiss unit. Rog says he’s ready to answer all the questions, and has nothing to hide. He isn’t being accused of anything, or called in for questioning, he said.





--With assistance from Fabiola Zerpa.

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