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Lotos and Grupa Azoty to spend billions on petrochemical unit

9th December 2013
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The oil and chemical giants want to build a petrochemical production unit in Gdańsk for zł.12 billion

Chemical holding Grupa Azoty and oil firm Grupa Lotos have signed a letter of intent to establish an SPV responsible for conducting feasibility studies regarding a potential plant worth zł.12 billion. 

The facility will make semi-finished products for Grupa Azoty
Courtesy of Lotos

We want to create a link between the refinery and chemical sectors that will be beneficial for the Polish economy,” said Lotos CEO Paweł Olechnowicz.

The facility would use materials derived from crude oil processing which are perfect for petrochemical use. “The products made in the facility will be diverse and will ensure the development of many industrial sectors in this part of Europe,” said Paweł Jarczewski, CEO of Grupa Azoty.

In short, the facility would use materials provided by Lotos and produce semi-finished products for Grupa Azoty which will turn them into end-products.

Currently the chemical giant spends some zł.700 million a year on importing various products that it processes in its plants. Lotos has already announced that it doesn’t produce enough crude oil to satisfy its investment needs and the company will have to look elsewhere for the resources.

Where is the money?

With such a huge project, the question remains who will finance it. So far, the government-run Polskie Inwestycje Rozwojowe has announced its involvement in the project, but it cannot put up more than zł.750 million on a single project, which is just a drop in the ocean.

Both companies might look for a third partner, possibly from abroad. “If another company would be interested in acquiring large quantities of semi-finished products from the facility it would be logical for them to join our enterprise,” said Grupa Azoty deputy CEO Witold Szczypiński.

The Lotos CEO added that the number of shares for each investor shouldn’t exceed 30-35 percent, adding that going public with the project is also a possibility.

European hub

The project, located in Gdańsk, would be one of the most expensive ones currently developed in Poland. By comparison, the Opole power plant extension is expected to cost some zł.11.5 billion.

The project involves building an ethylene and propylene production plant. The companies plan to make a final investment decision in 2014 and construction could take place in 2016-2018. The plant would then launch production in 2019.

Mr Jarczewski said that he hopes that thanks to the investment, Gdańsk will become the third biggest petrochemical center in Europe, after Antwerp, Belgium, and the German city of Ludwigshafen, where the BASF headquarters are located.

Jacek Ciesnowski

From Warsaw Business Journal

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