I would like to emphasize that we have improved our asset availability in key areas. Our organization is driven by the Downstream core values which attach a great importance to safety, and together with leadership changes a promising value based culture development started in MOL Petrochemicals during 2015. We continued with the implementation of LEAN and started an HSE leadership training rollout, while NxDSP actions were also successfully implemented in Downstream Production. We are fully committed to continue towards operational excellence as we define our next strategic investments that will ensure future successes.

Miika Eerola – Group Downstream Production SVP

First year of Next Downstream Program 2015–2017 has been successfully closed

Building on the success and experience of the New Downstream Program, which delivered USD 500mn efficiency improvement between 2012 and 2014, MOL Group Downstream launched the Next Downstream Program, a new wave of efficiency improvement initiatives covering the entire downstream value chain. The Next Downstream Program, which runs between 2015 and 2017, continues to focus on long-term sustainable improvement in order to exploit market opportunities and meet both external and internal challenges. An ambitious USD 500mn EBITDA improvement target was set for the program by the end of 2017, based on:

• Asset and Market Efficiency Improvements
• Strategic Growth Projects

The program is an essential part of MOL Group Downstream Strategy for 2015-2017, serving as a measurement tool for the implementation of strategic goals.

After the first year of the program, the achieved results were above target with USD 210mn clean CCS EBITDA added from internal sources in 2015 vs. 2014. All companies and business lines outperformed their yearly target, thanks to the continuous activity of all stakeholders which focused on decreasing operational costs, achieving higher asset reliability, increasing sales margin and sales volume.

Asset and efficiency improvement measures added around USD 150mn to the program (versus our target of USD 110mn for the year), with particular successes achieved in white product yield improvement of 1.6%. Higher operational availability in petrochemicals and around 15% seaborne crude sourcing in our landlocked Danube refinery’s crude intake, coupled with improved retail performance contributed to the successes achieved during the first year of the program. Simultaneously, strategic projects contributed USD 60mn to the program, primarily on the back of retail acquisitions and improvements in IES. Favourable margin and price environment further boosted the Downstream clean CCS EBITDA by over USD 500mn, while a few unplanned events partly off-set the positive contribution of the actions above.

The future delivery of the Next Downstream Program and our general Downstream strategic goals rest on three pillars: our superior asset base, adopting to the needs of the market and the competencies of our employees.

We have indeed achieved our all-time best results in 2015. This is to some extent down to both the favourable business environment, whilst being able to influence the factors that are within our control. We have no control over crack spreads, however we do control the efficiency of our assets, the quality of our customer relations, and the engagement and development of our team. These are the three pillars of the strategy that we launched when we were facing a much more challenging environment. This strategy continues to be the backbone of our business decisions.

Ábel Galácz – Group Supply, Trading & Optimization SVP

Assets: superior asset base further developed

Significant efforts were put in increasing reliability of our assets during last year. Thanks for our efforts we managed to improve operational availability both at MOL Petrochemicals and Danube Refinery sites. In order to support good performance we have introduced the DS Production SVP Reliability Award as a recognition for the best Production asset teams for devoting efforts to achieve an increased availability of production units, the efficient use of complex maintenance spend and the guaranteed reliability of equipment. Turnaround Readiness reviews have been conducted for various topics, including HSE, for all the major turnarounds performed in DS Production during last year.

In 2015 we started to implement an energy management system in accordance with the ISO 50001 standard in order to meet the requirements of the European Union’s directive on Energy Efficiency.

Part of our petrochemicals business strategy was to strengthen competitiveness with a broader and higher-quality product portfolio, and increase our market share in captive markets. The 130 kt/year capacity Butadiene extraction unit successfully started its commercial operation in October 2015. All test-runs of the unit have been completed successfully and butadiene production commenced in 2015. Utilization level is driven by market demand since the commercial start-up. The Butadiene Extraction Unit project started in 2013, and with an average of 500 staff on site through the duration of project implementation, it achieved industrially recognized, outstanding level of safety performance as they completed more than 1.3 million man-hours without lost-time injuries (LTI).

The construction of the new 220 kt/year capacity Low Density Polyethylene (LDPE) unit in Bratislava reached mechanical completion in 2015 without any lost-time injuries. The new unit will increase production flexibility, improve product qualities and ensure higher naphtha off-take from the refinery.

In accordance with MOL Group’s strategy, we are also continuing to optimise our logistics network. Our RTC (Rail Tank Car) fleet renewal program has been continuing in order to reach an ambitious targeted 23 years average age of fleet by the end of 2016.

Logistics must be the differentiating factor, always showing agility to manage changes in supply and demand and looking for new ways to meet our customers’ expectations.

Howard Lamb – Group Logistics VP

Market: we need to find leverage to strengthen our captive market position

The Hungarian petrochemical company (formerly known as TVK) continued its operation from August 2015 as MOL Petrochemicals, in line with the group’s strategy. The Tiszaújváros based petrochemical operation is now fully merged and integrated with Downstream production and sales businesses, successfully extending the production value chain and improving efficiency.

In order to maximize commercial benefits, volumes of seaborne crude deliveries were increased via the Adria pipeline and brought over 1.2 million tons of crude oil into the Danube Refinery, increasing the ratio of alternative crude oil processing to 17% in 2015. Furthermore INA recorded an 18% increase in non-Russian crudes, from 43% to 61%.

After closing the conversion process of the Mantua refinery into a logistics hub, the Italian position is under transformation and sales portfolio optimization is ongoing in order to continue MOL Group’s wholesale activities in the Italian market and improve its market position.

In case of natural gas the focus is on harvesting synergies and cross-commodity gas, steam, and electricity margin optimization moving towards physical trading direction, while in biofuels we aim to maximize potential in double counting materials where bio content of fuel is coming from renewable sources and improve bio mix to prepare for hitting the blending wall.

The enhancement of logistics access to liquid/trading markets such as Koper in Slovenia is being planned, which could provide support to conclude trading deals closer to the sea. The establishment of an own depot in Serbia will ensure long term security of commercial and logistics operations of MOL Group on the Serbian market. With the planned Solin terminal upgrade of INA in Croatia a reduction in operational complexity of the terminal is being targeted by consolidating all the necessary assets and operation to a single location as opposed to the current two which are connected with product pipeline, thus leading to a reduction in operational costs and compliance with industrial standards over the next 10 years. In logistics, new technology standards are planned to be introduced in order to achieve standard asset and service quality across the whole group.

Retail continued the network expansion primarily through inorganic steps. As a result, a market leading position was maintained in Hungary, Slovakia and Croatia, whilst becoming the second player in the Czech Republic and the fourth player in Romania with market shares in excess of 10% in all five markets.

Our regional Retail market coverage and customer base will be further extended after signing purchase agreements with ENI and announcing the purchase of over 200 filling stations, as MOL Group takes over ENI’s entire network in both Hungary and Slovenia.

According to the new Retail strategic directions for 2015-2017, which sets MOL Group Retail to become the customer’s first choice in fuel and convenience retailing, the new non-fuel FRESH CORNER concept has been developed based on the needs of today’s customer and was successfully implemented in 28 stations across 6 countries in the region. At the same time MOL Group also initiated programs for the safety of customers and the environment, as defibrillators were installed on selected highway stations, visual checks were organized for drivers and over 4000 LED lights being installed across 6 countries in our energy efficiency programme.

We continue the journey towards delivering our strategic goals for 2017 by leveraging our selling points and understanding our customers better than anyone else on the market. FRESH CORNER is a great example of how we can maximize our relevant fuel and non-fuel offer in the CEE. Our aspiration is to be seen as real hosts and make customers smile and feel welcome. Our aim is to substantially increase retail’s financial contribution and provide stable cash-flow generation to the Downstream business overall.

Lars Höglund – Group Retail SVP

People: continuous development supports us to reach our aims defined in our strategy

In order to support the achievement of downstream overall strategic targets, organisational changes have been made to the structure of the Supply Chain Management and Supply / Trading functions by integrating them into a new Supply Trading & Optimisation organisation within the frames of the so called Next Generation Downstream project. As a result, the integration will enable further utilization of operational synergies whilst providing quicker reaction time and decision making process in line with market opportunities. A key metric of the project, in addition to a process change, was a cultural transition within the group. Following the new operational setup, enhanced third party purchases enabled keeping positions on the trading belt.

In addition, lean transformation continued successfully during 2015. Performance improvement of the sites will be additionally boosted with the introduction of an Operational excellence pilot, which will be launched at Bratislava site during the course of the coming year.

Downstream production HSE related targets set for 2015 were achieved, as the 2015 SD&HSE action plan completion was around 90%. We made a step change in Lagging Indicators acceptable limits set for 2015 and we set the limit for TRIR (Total Recordable Injury Rate) as opposed to LTIF (Lost Time Injury Frequency), providing a clearer picture on lower severity incidents like RC (Restricted Case) and MT (Medical Treatment). 2015 TRIR landed exactly on the acceptable limit set at 2.3. Downstream Production aims to devote additional focus on safety through the introduction of a new program pilot from 2016, which should dramatically reduce injuries, while simultaneously stepping up engagement at different sites.