Poland's Orlen says Olefins project may incur more losses

WARSAW (Reuters) -Polish oil and gas company Orlen's flagship petrochemicals project may see further losses due to problems in the planning and construction process, the firm said on Tuesday.

The initial cost of the project was started under the former management and estimated at 8.3 billion zlotys ($2.11 billion), but has now soared to 25 billion zlotys, while its scale and efficiency estimates have been reduced.

Orlen pledged to decide on the future of the project, which already saw investment writedowns, before the end of this year.

"Verification of the planning and construction process of the Olefins (III) complex indicates a number of errors and abuses that may result in the identification of further losses," Orlen said in a statement on Tuesday.

Orlen said it has carried out over 50 audits of projects implemented by the former management, a similar amount of audits is in progress, while prosecutors are carrying several probes related to the actions of the former management.

"In the case of two of them, the actions or omissions of the previous Orlen management board resulted in losses of over 5 billion zlotys", Orlen said.

Key probes include the abuse of powers that led to losses of about 1.6 billion zloty by Orlen Trading Switzerland (OTS) in prepayments for mostly Venezuelan oil. An unjustified use of "mandatory reserves" to keep fuel prices low ahead of the October election, which cost the refiner over 3.5 billion zloty, the company said.

Members of the former management board spent 43 million zloty without business justification, while the expenses of the former chief executive included costs of prosthetic and aesthetic medicine services, Orlen said.

"There is a reasonable suspicion that they were not covered by the agreed management package and should not be paid for using a company credit card."

($1 = 3.9301 zlotys)

(Reporting by Marek Strzelecki, additional reporting by Tymon Miller; Editing by Kim Coghill and Chizu Nomiyama)