Shale-driven US petchem revival may hurt €1.5bn Polish project - bank

26 November 2012 11:48  [Source: ICIS news]

LONDON (ICIS)--Poland-based refiner Grupa Lotos and chemical group Zaklady Azoty Tarnow (ZAT) will have to take note of the shale-gas driven petrochemical revival in the US when deciding whether their newly-announced petrochemical project should centre on an ethylene steam cracker, analysts said on Monday.

“We believe it is the gasoline/naphtha surplus of the refinery that has made Lotos think in this direction,” said Bram Buring, an analyst at Prague-based investment bank WOOD & Company, in a note to investors.

“However, given the petchems renaissance in the US (on very cheap shale gas feed), it appears to make no sense to build oil-based steam crackers in Europe, with no captive markets and no logistics/inland market advantages,” he said, adding the bank expects the petrochemical capacity of Polish group PKN Orlen may be, for now, enough for the domestic market.

As well as a cracker, with dependent polymer units, the Polish zlotych (Zl) 6bn ($1.9bn, €1.5bn) Lotos/ZAT project, which is currently in the feasibility stage, is also looking at constructing an aromatics extraction plant with additional downstream units.

“Aromatics may be a slightly different [proposition than a cracker with polymer units], particularly if ZAT may indeed be a captive buyer, but the economics may still be questionable,” Buring added.

A decision on whether to go ahead with the petrochemical park is expected by the end of 2013.

If the project is rolled out, adjacent to Lotos’ refinery in Gdansk on the Baltic Sea coast, initial production is expected to start in late 2017 or early 2018.

Both Lotos and Grupa Lotos are controlled by the Polish treasury ministry.

The ministry is supportive of the project on the basis that Poland’s annual chemical trade deficit of more than €5bn shows there should be demand for its products.

($1 = Zl3.17, €1 = Zl4.11)


By: Will Conroy
+44 20 8652 3214



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