Execution of EPCM Contract (for Engineering, Procurement and Construction Management Services, to build the utilities and off-sites under the Comprehensive Technical Upgrade Programme).
Report no. 96/20052007-06-20

The Management Board of Grupa LOTOS S.A. reports that on June 19th 2007 Grupa LOTOS S.A. and FLUOR S.A. executed an EPCM contract for Engineering, Procurement and Construction Management Services to build the utilities and off-sites for Grupa LOTOS S.A.’s Comprehensive Technical Upgrade Programme (the PKRT Programme). The construction of the PKRT units will enable the Company to comply with the EU requirements concerning the quality of diesel, which will be in force as of 2009. The scope of the construction is adjusted to the planned annual crude oil throughput of 10.5 million tonnes. The contract is to be executed over a period of 34 months. The contract is executed as part of the development strategy of the LOTOS Group, which provides for the construction of production units under the Comprehensive Technical Upgrade Programme. The Programme’s objective is to increase the annual throughput capacity of the Gdańsk refinery by approximately 75%, to 10.5 million tonnes of crude oil, with a higher conversion ratio. The above contract is a second of a series of contracts to be executed under the PKRT Programme. Following completion of the preparatory phase, the Programme’s execution has been divided into stages: Stage 1 provides for the construction of the following units at the Gdańsk refinery of Grupa LOTOS S.A. until 2010: - Crude Distillation Unit (CDU) - Diesel Hydrodesulphurisation Unit (HDS) - Mild- Hydrocracking Unit (MHC) - Heavy Residue Processing Unit - Hydrogen Generation Unit (HGU) - Amine-Sulphur Recovery (ASR) The project to be executed under the next stage is the construction of a unit for heavy residue gasification after 2012. The modification of the Programme schedule is intended to enhance the Programme’s efficiency and security. Thanks to the modified structure of the project it is possible to: - minimize the risk related to shortages of staff and materials as well as mitigate limited availability of contractors, - Reduce the costs of the Programme and better adapt the financing strategy for the Programme to the Company’s capabilities, - take advantage of favourable trends on the asphalt and heavy fuel oil markets by Grupa LOTOS S.A.; the Company expects that a growing trend on the asphalt market will be observed until 2012, which will enable it to increase the annual sales of asphalts to 1,300 thousand, i.e. by more than 60% relative to 2006. In the event of a downturn on the market for heavy products, such as bitumens and heavy fuel oil, the next stage of the Programme will be launched, following which the Company will be able to process the heavy residue remaining after crude distillation. The expenditure on the PKRT Programme until 2012 is planned to amount to ca. EUR 1.43bn. In accordance with the financing strategy, 70% of the funding required to carry out the Programme will be raised from external sources. Legal basis for the report: Art. 56.1.1 of the Act on Offering – Inside Information