11. Property, Plant and Equipment and Prepayments for Tangible Assets under Construction

PLN ‘000 Dec 31 2008 Dec 31 2007
(audited) (audited)
Land 227,871 214,173
Buildings and structures 1,705,246 1,729,902
Plant and equipment 616,571 679,138
Vehicles and other tangible assets 235,464 255,868
Tangible assets under construction 2,747,460 592,166
- including capitalised financing costs 161,033 3,860
Total property, plant and equipment 5,532,612 3,471,247
Prepayments for tangible assets under construction 1,200,713 781,780
- including capitalised financing costs 37,612 6,953
Total 6,733,325 4,253,027

 

Changes to Property, Plant and Equipment and Prepayments for Tangible Assets under Construction

PLN ‘000 Land Buildings and structures Plant and equipment Vehicles and other Tangible assets under construction Prepayments for tangible assets under construction Total
- mineral resources exploration and appraisal assets (1) - mineral resources exploration and appraisal assets (1)
Gross book value as at Jan 1 2007
(audited)
218,769 1,933,758 128,016 1,175,822 543,414 353,335 58,240 148,018 4,373,116
Increase, including: 3,790 172,575 136 62,369 (47,795) 288,703 10,799 681,601 1,161,243
- purchase 38 - - 389 16,059 470,193 10,799 681,601 1,168,280
- transfer from investments 4,453 82,933 136 59,125 11,810 (181,834) - - (23,513)
- transfer - 78,983 - (13) (78,991) - - - (21)
- reclassified to assets available for sale (1,144) (3,429) - (183) (68) - - - (4,824)
- reclassified from assets available for sale - 451 - 59 13 - - - 523
- changes in the structure of the Group 443 13,626 - 2,920 3,376 335 - - 20,700
- other - 11 - 72 6 9 - - 98
Decrease (1,133) (10,186) (3,878) (6,091) (23,438) (7,274) - (47,839) (95,961)
- sale (1,133) (435) - (1,229) (5,672) (141) - - (8,610)
- liquidation - (8,591) (3,878) (4,348) (4,989) - - - (17,928)
- assets related to decommissioning of the Offshore Oil Rigs - (923) - - - - - - (923)
- currency translation differences on foreign operations - - - (378) (12,762) - - - (13,140)
- other - (237) - (136) (15) (7,133) - (47,839) (55,360)
Gross book value as at Dec 31 2007
(audited)
221,426 2,096,147 124,274 1,232,100 472,181 634,764 69,039 781,780 5,438,398
Gross book value as at Jan 1 2008
221,426 2,096,147 124,274 1,232,100 472,181 634,764 69,039 781,780 5,438,398
Increase 17,597 90,561 2,430 78,067 51,510 2,229,361 25,671 778,958 3,246,054
- purchase - - - 1,412 17,017 2,241,124 28,049 748,294 3,007,847
- transfer from investments 18,255 69,137 2,430 76,057 15,930 (187,922) (2,430) - (8,543)
- transfer (443) (1,726) - 104 8,689 (3,010) - - 3,614
- reclassified to assets available for sale (1,165) (122) - - (4,546) - - - (5,833)
- reclassified from assets available for sale 933 - - - 1 - - - 934
- currency translation differences on foreign operations - - - 494 14,247 - - - 14,741
- assets related to decommissioning of the Offshore Oil Rigs - 23,094 - - - 6,950 52 - 30,044
- borrowing costs - - - - - 157,173 - 30,659 187,832
- other 17 178 - - 172 15,046 - 5 15,418
(1,984) (4,802) - (4,994) (17,854) (76,076) - (360,025) (465,735)
Decrease
- sale (1,984) (4,335) - (1,252) (15,348) (74,964) - - (97,883)
- liquidation - (292) - (3,736) (2,503) (45) - - (6,576)
- currency translation differences on foreign operations - - - - (3) - - - (3)
- other - (175) - (6) - (1,067) - (360,025) (361,273)
Gross book value as at Dec 31 2008
(audited)
237,039 2,181,906 126,704 1,305,173 505,837 2,788,049 94,710 1,200,713 8,218,717
Accumulated depreciation as at Jan 1 2007 (audited) 6,069 249,892 16,159 424,921 183,525 - - - 864,407
Increase 1,384 115,228 6,584 130,466 44,638 - - - 291,716
- depreciation 1,450 105,070 6,584 130,335 55,051 - - - 291,906
- transfer - 10,887 - (16) (10,984) - - - (113)
- reclassified to assets available for sale (66) (810) - (139) (67) - - - (1,082)
- reclassified from assets available for sale - 55 - 44 9 - - - 108
 changes in the structure of the Group - - - 229 584 - - - 813
- other increases - 26 - 13 45 - - - 84
Decrease (211) (1,795) (1,047) (4,323) (12,665) - - - (18,994)
- sale (211) (27) - (791) (3,859) - - - (4,888)
- liquidation - (1,631) (1,047) (3,186) (3,857) - - - (8,674)
- currency translation differences on foreign operations - - - (282) (4,925) - - - (5,207)
- other - (137) - (64) (24) - - - (225)
Accumulated depreciation as at Dec 31 2007 (audited) 7,242 363,325 21,696 551,064 215,498 - - - 1,137,129
Accumulated depreciation as at Jan 1 2008 (audited) 7,242 363,325 21,696 551,064 215,498 - - - 1,137,129
Increase 1,568 108,832 8,006 135,315 57,677 - - - 303,392
- depreciation 1,529 109,345 8,006 135,058 50,591 - - - 296,523
- transfer - (513) - (132) (23) - - - (668)
- reclassified from assets available for sale 39 - - - 1 - - - 40
- reclassified from assets available for sale - - - 389 7,008 - - - 7,397
- other increases - - - - 100 - - - 100
Decrease (67) (483) - (3,181) (10,965) - - - (14,696)
- sale (67) (417) - (739) (8,492) - - - (9,715)
- liquidation - (37) - (2,439) (2,472) - - - (4,948)
- currency translation differences on foreign operations - - - - (1) - - - (1)
- other - (29) - (3) - - - - (32)
Accumulated depreciation as at December 31 2008
(audited)
8,743 471,674 29,702 683,198 262,210 - - - 1,425,825
Impairment losses as at Jan 1 2007
(audited)
329 6,632 - 3,934 2,265 10,692 8,147 - 23,852
Increase 11 922 - 516 699 31,916 7,231 - 34,064
Decrease (329) (4,634) - (2,552) (2,149) (10) - - (9,674)
Impairment losses as at Dec 31 2007
(audited)
11 2,920 - 1,898 815 42,598 15,378 - 48,242
Impairment losses as at Jan 1 2008
(audited)
11 2,920 - 1,898 815 42,598 15,378 - 48,242
Increase 414 3,135 - 4,199 8,138 401 66 - 16,287
Decrease - (1,069) - (693) (790) (2,410) - - (4,962)
Impairment losses as at Dec 31 2008
(audited)
425 4,986 - 5,404 8,163 40,589 15,444 - 59,567
Net book value as at Jan 1 2007
(audited)
212,371 1,677,234 111,857 746,967 357,624 342,643 50,093 148,018 3,484,857
Net book value as at Dec
31 2007
(audited)
214,173 1,729,902 102,578 679,138 255,868 592,166 53,661 781,780 4,253,027
Net book value as at Dec
31 2008
(audited)
227,871 1,705,246 97,002 616,571 235,464 2,747,460 79,266 1,200,713 6,733,325

(1) Mineral resources exploration and appraisal assets disclosed under property, plant and equipment and prepayments for tangible assets under construction include the value of production wells and exploration wells.

As at December 31st 2008, the net value of the items of property, plant and equipment serving as collateral for the Group’s liabilities was PLN 1,698,295 thousand (as at December 31st 2007, it amounted to PLN 575,331 thousand).

The cost of servicing the liabilities incurred to finance tangible assets under construction and prepayments for tangible assets under construction in the year ended December 31st 2008 amounted to PLN 187,832 thousand (PLN 10,813 thousand in year ended December 31st 2007).

As at December 31st 2008, the net value of the asset related to the decommissioning of the oil rig, referred to in Note 10.5, amounted to PLN 75,076 thousand (PLN 58,005 thousand as at December 31st 2007).

The cost of depreciation of mineral resources exploration and appraisal assets in the period of twelve months ended December 31st 2008 amounted to PLN 9,375 thousand (PLN 6,754 thousand in the year ended December 31st 2007).

In the period of twelve months ended December 31st 2008, the impairment losses on mineral resources exploration and appraisal assets amounted to PLN 66 thousand (PLN 7,231 thousand as at December 31st 2007).

As at December 31st 2008 and December 31st 2007, the fair value of perpetual usufruct rights to land obtained by virtue of administrative decisions and disclosed as off-balance-sheet items was PLN 163,446 thousand.

Prospects for Development of B-4 and B-6 Gas Fields

The item “Tangible assets under construction” includes expenditure of PLN 47,937 thousand incurred by Petrobaltic S.A. in connection with exploration for gas at the B-4 and B-6 fields. Petrobaltic S.A. commissioned an analysis of the economic viability of development of these fields. According to the findings of the analysis, significant capital expenditure is required to obtain profitable commercial production of hydrocarbons. Despite the envisaged excess of revenue from sale of products to be obtained by exploitation of the reserves over the cost of their development and production, no expenditure on this project is expected in the medium term. The Management Board of Petrobaltic S.A. maintains that, regardless of the necessity to make significant investments, in view of the strategic nature of the reserves and the changing prices and terms of delivery of imported energy materials, their development is possible if the investment plans of Petrobaltic S.A. and Grupa LOTOS S.A. are synchronised.

The activities currently under way amongst other things take into account the possibility of finding a partner with whom the company would be able to jointly develop the B–4 and B–6 gas fields. The geological analyses and analyses of reserves carried out to date by Petrobaltic S.A.’s potential partners have confirmed the positive assessment of the fields, opening up a possibility for future collaboration that would lead to the implementation of a joint project. The Company addressed to its potential partners terms of reference for bids related to development of the B-4 and B-6 fields on a partnership basis.

Information on Interests in Norwegian Production and Exploration Licences

The item “Tangible assets under construction” includes expenditure of PLN 1,091,974 thousand incurred by LOTOS Exploration and Production Norge AS for the purchase of interests in Norwegian production and exploration licences (interests in the YME field).

Purchase of Interests in Norwegian Production Licences

On May 20th 2008, LOTOS Exploration and Production Norge AS signed an agreement with Norwegian company REVUS Energy ASA concerning purchase of 10% of interests in the North Sea production licences Nos. PL 316, PL 316B, PL 316CS and PL 316DS. The purchased licences cover the YME field and an additional exploration area. The YME field is located 110km off the coast in the southern part of the Norwegian sector of the North Sea. The recoverable crude oil reserves of the YME field which correspond to the 10% interest held by LOTOS E&P Norge AS were estimated by the operator (Talisman) at ca. 6.8 million bbl (about 900 thousand tonnes). Production from the field is expected to start in the second half of 2009.

The value of the transaction was USD 52.5 million (the equivalent of PLN 114,770 thousand, translated at the USD/PLN mid exchange rate published by the National Bank of Poland for May 20th 2008). The acquisition of rights to tax exemptions held by the seller in connection with the investments made, accounted for about 20% of the price.

The agreement’s entry into effect was conditional upon its approval by the General Shareholders Meeting of Petrobaltic S.A. and the Norwegian Ministry of Energy and Petroleum. The Ministry could only issue its approval after the process of formal prequalification of E&P Norge AS to conduct business on the Norwegian Continental Shelf has been completed.

Upon the fulfilment of all the conditions precedent (including the relevant approvals from the General Shareholders Meeting of Petrobaltic S.A. and from the Norwegian Ministry of Energy and Petroleum), on August 29th 2008 LOTOS Exploration and Production Norge AS acquired all rights and obligations connected with the ownership of the 10% interest in the production licences. The value of the agreement was USD 52.5m (the equivalent of PLN 119.1m, translated at USD/PLN mid-exchange rate quoted by the National Bank of Poland for August 29th 2008). That value is to be increased by the amount of the investment expenditure made by REVUS Energy ASA during the jointly agreed period preceding the assumption of rights and obligations connected with the licences, of approximately USD 12m (the equivalent of PLN 27.2m, translated at USD/PLN mid-exchange rate quoted by the National Bank of Poland for August 29th 2008). The investment expenditure which remained to be made after August 29th 2008 (corresponding to the 10% interest in the YME field) before production could be started was estimated at about USD 65m (the equivalent of PLN 147.5m, translated at USD/PLN mid-exchange rate quoted by the National Bank of Poland for August 29th 2008).

The transaction was financed using a loan and the proceeds from an increase in the company share capital by Petrobaltic S.A.

The transaction was secured with an unconditional and irrevocable guarantee issued by Petrobaltic S.A. for the benefit of REVUS Energy ASA. Following the performance of the agreement by LOTOS Exploration and Production Norge AS, the guarantee expired and the guarantee document was returned to the issuer by REVUS Energy ASA (see Note 42).

The total acquisition price of the 10% interest in production licences Nos. PL 316, PL 316B, PL 316CS and PL 316DS in the North Sea, comprising the purchase price (USD 52.5m), the advance payments made and the amount corresponding to the 10% share of LOTOS Exploration and Production Norge AS in the capital expenditure incurred by REVUS Energy ASA in the period from the agreement effective date until the day on which the conditions precedent were fulfilled, amounted to NOK 367,775 thousand.

On October 22nd 2008, LOTOS Exploration and Production Norge AS (a member of the LOTOS Group) signed an agreement with Norwegian company Det Norske Oljeselskap ASA concerning purchase of another 10% interest in the North Sea production licences No. PL 316, PL 316B, PL 316CS and PL 316DS. The transaction was the second transaction of purchase of interests in the YME field by LOTOS Exploration and Production Norge AS in 2008. The agreement provided for its entry into force after its approval by the Norwegian Ministry of Energy and Petroleum and the Norwegian Ministry of Finance.

The value of the transaction was NOK 390m (the equivalent of PLN 161m, translated at the NOK/PLN mid-exchange rate published by the National Bank of Poland for October 22nd 2008). The acquisition of rights to tax exemptions held by the seller in connection with the investments made accounted for about 30% of the price. In addition, the price is to be increased by the amount of capital expenditure (corresponding to the 10% interest in the YME field) incurred from January 2008 to the transaction closing date, estimated at NOK 180m (the equivalent of PLN 74m, translated at the NOK/PLN mid exchange rate published by the National Bank of Poland for October 22nd 2008). Other capital expenditure (in the amount corresponding to the 10% interest in the YME field) to be incurred before production from the field could be started was estimated at approx. USD 50m (the equivalent of PLN 144m, translated at the USD/PLN mid-exchange rate published by the National Bank of Poland for October 22nd 2008).

Upon the fulfilment of all the conditions precedent, on December 30th 2008 LOTOS Exploration and Production Norge AS acquired all the rights and obligations connected with the ownership of 10% interests in the North Sea production licences PL 316, PL 316B, PL 316CS and PL 316DS covering the YME field. The licences purchased from Det Norske Oljeselskap ASA cover the YME field development plan and exploration areas. In connection with the transaction, on January 20th 2009, the company paid the amount of NOK 547m (the equivalent of PLN 257.8m, translated at the NOK/PLN mid-exchange rate published by the National Bank of Poland for January 20th 2009), covering: the purchase price, capital expenditure connected with the development of the YME field and costs of exploration work in the licence areas incurred between the economic date of the transaction and the date of its settlement, plus the interest accrued for the period. The transaction was financed using a loan and the proceeds from an increase in the company share capital by Petrobaltic S.A.

As a result of the finalisation of the two transactions carried out in 2008, LOTOS Exploration and Production Norge AS has come to hold in total 20% of the interests in the YME field, which corresponds to recoverable crude oil reserves (as estimated by the operator – Talisman) of 13.6 million barrels (approx. 1,800 thousand tonnes).

Purchase of Interests in Exploration Licences by LOTOS Exploration
and Production Norge AS

On August 26th 2008, LOTOS Exploration and Production Norge AS entered into an agreement on the purchase of a 20% interest in exploration licence PL455, covering an area of 1,365km2 located in the southern part of the Norwegian sector of the North Sea. LOTOS Exploration and Production Norge AS signed the agreement with Noreco, a Norwegian exploration and production company. LOTOS Exploration and Production Norge AS will acquire a 20% interest in the licence in exchange for covering 40% of the estimated expenditure to be incurred by Noreco on the performance of seismic surveys under the PL455 licence, i.e. approx. NOK 38m (the equivalent of PLN 15.9m, translated using the mid-exchange rate for NOK quoted by the National Bank of Poland for August 26th 2008). The transaction was to take effect once relevant approvals have been obtained from the Norwegian Ministry of Finance and the Ministry of Energy and Petroleum. Licence PL455 was granted to Noreco as part of the qualification round APA 2007. Noreco is also the licence operator and – after the transaction with LOTOS Exploration and Production Norge AS – holds a 50% interest in the licence. The seismic survey is scheduled for the years 2008–2009, and in 2010 the licence area will be drilled to confirm its potential. In accordance with the Norwegian tax law, if the exploration proves unsuccessful, 78% of the incurred expenditure may be reimbursed.

On October 31st 2008, after all conditions precedent had been fulfilled, LOTOS Exploration and Production Norge AS acquired all rights and obligations related to the ownership of a 20% interest in exploration licence PL455.

Volume of the Crude Oil and Natural Gas Reserves Held by the LOTOS Group

As at December 31st 2008, the LOTOS Group had the following reserves of crude oil and natural gas:

Crude oil (category 2P*) – 5.0m tonnes,
Natural gas (category 2P*) – 4.4m cubic metres.

*2P – proved and probable reserves.

The 10+ Programme (Comprehensive Technical Upgrade Programme)

An element of the growth strategy of the LOTOS Group is the implementation of the 10+ Programme, designed to increase the throughput capacity of the Gdańsk Refinery by approximately 75%, that is to 10.5m tonnes of crude oil p.a., at a higher conversion ratio.

Following the completion of the preparatory phase, the Programme’s implementation commenced. The following units at the Gdańsk Refinery of Grupa LOTOS S.A. are to be completed by the end of 2010:

The construction of the heavy residue gasification unit for treating the residue from crude oil processing, designed to be used mainly for generation of hydrogen and energy carriers, is expected to commence between 2012 and 2015, depending on the conditions on the bitumen market.

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:

According to the government’s strategy and the National Roads Construction Programme for 2008–2012, the bitumen market is expected to grow from 2010 at least until 2012, both in terms of product volumes and prices (or margins). Following completion of the 10+ Programme, Grupa LOTOS S.A. plans to increase its annual sales of bitumens to approx. 1,100 thousand tonnes. At present, the Parent Undertaking is making preparations to implement the heavy residue gasification and energy generation project (IGCC), which will enable it to launch, in 2012–2015, the second phase of the 10+ Programme, which will focus on the construction and commissioning of the heavy residue gasification unit. As at December 31st 2008, capitalised expenditure on the IGCC project was PLN 45,853 thousand. The Company’s Management Board expects that the financial benefits to be derived from the project will be no less than the expenditure incurred.

The expenditure on the 10+ Programme until 2012 is planned to amount to ca. EUR 1.47bn.

Implementation of the 10+ Programme – Oil Distillation Unit

On July 19th 2007, Grupa LOTOS S.A. and LURGI S.A. of Kraków signed a contract for the engineering design, procurement and management of the construction work for an oil distillation unit.

It will be the second unit of this type to be constructed at Grupa LOTOS S.A.’s Gdańsk Refinery. Its annual capacity will be 4.5m tonnes of crude oil, which will make it possible to increase the oil throughput capacity at Grupa LOTOS S.A. to. 10.5 million tonnes of crude oil p.a., that is by ca. 75%. Once completed, the new unit will also help increase the supply of fuels on the domestic market.

The performance of the contract is scheduled to be completed in October 2009.

On August 1st 2007, Grupa LOTOS S.A. and LURGI S.A. of Kraków executed an annex to the contract of July 19th 2007 for the engineering design, procurement and management of the construction work for an oil distillation unit. Under the annex, LURGI S.A. of Kraków will also deliver the installations for the planned oil distillation unit.

The annexes executed on January 7th 2008 and January 17th 2008 extended the scope of the services to be provided by LURGI S.A. under the contract, to include the delivery of bulk materials for the relevant mechanical, electrical and automation works under the contract. Overall, the annexes executed by the end of 2008 increased the value of the contract with LURGI S.A. in relation to the CDU/VDU units to approx. EUR 130.61m.

The execution of the annexes made the contract for the construction of an oil distillation facility covering the engineering design, delivery of installations and materials, and management of construction work on the oil distillation unit, the largest transaction concluded between the two parties.

The agreement provides for contractual penalties. The limit of financial liability for failure by LURGI S.A. to properly perform the contract is equal to 8% of the contract value.

Implementation of the 10+ Programme – Diesel Hydrodesulphurisation Unit (HDS)

On November 11th 2006, Grupa LOTOS S.A. signed a turnkey contract with ABB Lummus Global (CB&I Lummus GmbH) for a diesel hydrodesulphurisation unit (HDS). The contract covers the engineering design, procurement of materials and equipment, construction works and works supervision by CB&I Lummus GmbH.

The performance of the contract is scheduled to be completed in May 2009.

The contract value, including the Change Orders executed in 2008, is EUR 112.87m.

Implementation of the 10+ Programme – Hydrocracking Unit (MHC)
and Amine Sulphur Recovery Unit (ASR)

On June 21st 2007, Grupa LOTOS S.A. and Technip Italy S.p.A. as the general contractor, together with Technip KTI S.p.A., Technip Polska Sp. z o.o. and KTI Poland S.A., signed an EPC LSTK (lump-sum turnkey) contract for the engineering design, procurement and construction of a mild hydrocracker (MHC) and an amine sulphur recovery unit, that is a complex comprising hydrogen sulphide recovery unit (ARU), sour water stripper (SWS), sulphur recovery unit/tail gas treatment unit (SRU/TGTU) for Grupa LOTOS S.A. under the 10+ Programme.

The scope of implementation of the MHC, ARU, SWS and SRU/TGTU units is adapted to the planned crude oil throughput capacity of 10.5m tonnes p.a. The performance of the contract is scheduled to last until November 2010. The contract value is EUR 583.6m.

On May 7th 2008, an annex to the above contract was executed. Under the annex, the scope of work was modified according to the Change Orders, and the contractors remuneration increased to EUR 589.8m.

The contract provides for contractual penalties payable to Grupa LOTOS S.A. for a delay or failure to achieve the agreed parameters of the units built under the contract. The contractor’s total liability towards Grupa LOTOS S.A. is limited to 8% of the contract value.

Implementation of the 10+ Programme – Hydrogen Generation Unit (HGU)

On June 28th 2007, Grupa LOTOS S.A. and LURGI S.A. of Kraków signed an EPC LSTK (lump-sum turnkey) contract for the engineering design, procurement and construction of a hydrogen production unit based on the technology delivered by Lurgi AG of Frankfurt, as part of the implementation of the 10+ Programme of Grupa LOTOS S.A. The hydrogen production unit will be supplying hydrogen necessary for the production of clean fuels. The new unit is adapted to the planned crude oil throughput capacity of 10.5 million tonnes. The performance of the contract is scheduled to last until September 2009.

In 2008, annexes to the above contract were executed. Under the annexes, the value of the contract was increased to EUR 82.57m, in connection with additional deliveries and work done for the needs of the HGU construction.

Implementation of the 10+ Programme – Residue Oil Supercritical Extraction (ROSE)

In line with the Early Work Agreement (EWA) concerning the construction of the ROSE/SDA unit, signed on June 27th 2008, the terms and conditions of the contract were negotiated by the end of July 2008 and then submitted for review to the bank consortium co-financing of the 10+ Programme. Once the approval of the financing institutions was obtained, the contract for the execution of the ROSE project, providing for engineering design, delivery of materials and equipment, and technical advisory services during the construction work, was signed with Technip Italy S.p.A. on September 10th 2008.

With the signing of the ROSE contract in September 2008, the list of major contracts for construction of the production units under the 10+ Programme, adopted by the Management Board of Grupa LOTOS S.A., was closed.

The contract value is EUR 62.75m and PLN 21.12m.

The unit is scheduled to be commissioned in December 2010.

Implementation of the 10+ Programme – Utilities and Off-Sites

On June 19th 2007, Grupa LOTOS S.A. and FLUOR S.A. signed an engineering, procurement and construction management services contract to build the utilities and off-sites under the 10+ Programme. The construction of the utilities and off-sites will enable the Company to comply with the EU requirements concerning the quality of diesel oils, which will be in force as of 2009. The scope of the construction is adjusted to the planned annual oil processing volume of 10.5 million tonnes. The performance of the contract is scheduled to last until August 2010. The contract is an element of the growth strategy of the LOTOS Group, providing for the construction of the Programme’s production installations. The contract is the second of a series of contracts, after the EPC contract for the construction of a hydrodesulphurisation unit (HDS) for diesel oil.