Today, Grupa LOTOS S.A. and Przedsiębiorstwo Eksploatacji Rurociągów Naftowych Przyjaźń S.A. have signed a letter of intent concerning joint construction of underground storage facilities for crude oil and liquid fuels. The plans provide for the facilities to be built in Pomerania, which will additionally strengthen the energy security of Poland and other states of the Baltic Sea region.

The geographic and geologic considerations, as well as direct access to the sea and well developed port infrastructure makes the Gdańsk Province a perfect candidate for the role of a regional energy sector centre. The issue of constructing storage facilities in caverns has for a number of years been a subject of discussion concerning the energy security, primarily given the gradually increasing diversification of supplies of various grades of crude oil, as well as the need to achieve such total per capita capacity of underground caverns as is seen in Germany or France.

The construction of storage facilities for crude oil and liquid fuels, such as diesel oil or light fuel oil, is planned to be implemented in two phases by 2020, when the total joint capacity of storage facilities is to reach 7m cubic metres. Therafter, in line with the growing needs of the market, the capacity of storage facilities may increase to as much as 15m–20m cubic metres. It should be stressed that both companies intend to develop and implement the abovementioned project in compliance with the domestic and European requirements concerning environmental protection and with all applicable regulations.

- We are happy to be able to pursue such a material project in coopperation with Przedsiębiorstwo Eksploatacji Rurociągów Naftowych Przyjaźń. This company undoubtedly has the largest experience among Polish companies in storage and transmission of crude oil and liquid fuels over pipelines - said Mr Paweł Olechnowicz, the CEO of Grupa LOTOS S.A. - We also expect other domestic companies to join the project, so that we can jointly build Poland's energy security.

- The PERN Group, and in particular PERN Przyjaźń and OLPP, have for several years now been working on the cavern construction project. We treat the project primarily as a way to enhance the county's energy security, but, of course, we also see the commercial aspect connected with the option to make significant storage capacities available to the market - says Mr Robert Soszyński, President of PERN Przyjaźń S.A. - Cooperation with LOTOS, given its key position on the refining market in the Baltic Sea region, as well as its determination to implement large and difficult investment projects, as best exemplified by the 10+ Programme, is for us a perfect solution.

As announced earlier, the cost of construction of the storage facilities and the necessary logistics infrastructure is to be partially financed with EU funds. It is important that LOTOS will not be involved in the financing of the project. - We are preparing a financing structure where the entire project would be financed with funds invested by external companies - adds President Olechnowicz.

In addition to the construction of storage facilities in salt caverns, the project also includes the construction of surface infrastructure, including pumps, pipelines, water-supply and power networks, roads and interconnections to the national logistics systems for crude oil and liquid fuels.

A special purpose vehicle will be established for the project. The detailed shareholder structure of the SPV will be defined in the course of further negotiations. The project will also be supported by Central Europe Energy Partners (CEEP), which has performed a number of analyses pertaining to the project implementation.

It needs to be remembered that Poland has to steadily increase its storage capacities for crude oil and petroleum fuels, in order to fulfil its obligations towards the European Union and International Energy Agency. Construction of storage facilities in salt caverns is the most economically effective and safest solution to the problem of storage of crude oil and liquid fuels. The construction of storage facilities in Pomerania will enhance the energy security of Poland, states of the Baltic Sea region, as well as member states of NATO and the EU.

Grupa LOTOS is also commencing negotiations with PERN Przyjaźń concerning prospective cooperation in PERN's investment projects in Gdańsk and at the Poland-Belarus border (pipeline connection of the Małaszewicze depot with Belarus).

Marcin Zachowicz, spokesperson for Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. +48 58 308 75 70, +48 505 050 454, e-mail: marcin.zachowicz@grupalotos.pl