OREANDA-NEWS. Grupa LOTOS S.A. and Grupa Azoty S.A. signed an agreement on the future formation of a special purpose vehicle to conduct a comprehensive feasibility study on the construction of a new petrochemical complex, in the vicinity of both LOTOS and Grupa Azoty's existing installations. The two companies have also signed a preliminary agreement with Polskie Inwestycje Rozwojowe, as a potential financial investor in the project.

The project's value is estimated at approximately PLN 12bn, making it the largest investment in the Polish industrial sector in recent years. The complex will help reduce Poland's chemical trade deficit, and will create between 5,000 and 7,000 jobs during the construction stage, and approximately 2,000 new jobs following commencement of its commercial operation.

Under the agreement, Grupa LOTOS and Grupa Azoty will use a special purpose vehicle to run the project, with project costs (preparation of the feasibility study and financing of the SPV's operations) shared equally between both parties. The separate agreement with Polskie Inwestycje Rozwojowe is for provision of expert support in the financial and contractual structuring of the project.

Upon completion of the feasibility study, an investment decision is expected to be made, in 2014. If the project is given the green light and the financing structure agreed, construction of the complex will occur throughout 2016-2018, with operations commencing in 2019.

Currently, Poland imports large volumes of chemical products, with the country's balance of trade at a negative PLN -16.7bn in 2012 (organic chemicals and plastics in primary form).

Meanwhile, Polish refineries are holding a surplus of light fractions from crude oil processing, including raw gasoline and LPG, which are the perfect feedstock for petrochemical production. Furthermore, integration of Grupa LOTOS and Grupa Azoty's raw materials bases will benefit the entire economy, while the companies themselves will be able to diversify their production and revenue streams by introducing a range of new high-margin products.