Poland Petrochemicals Report Q2 2008

Polish petrochemicals producer PKN Orlen is planning an ambitious strategy of expansion, allocating
PLN5.8bn (US$2.4bn) for capital expenditure on petrochemicals for 2008-2012. BMI?s latest Poland
Petrochemical Report is optimistic that Orlen will achieve its goal of petrochemicals EBITDA of
PLN2.5bn in 2012, up from PLN900mn in 2007. We also believe that the plans should help raise national

ethylene output to 1.4mn tpa and propylene output should reach up to 1.1mn tpa by 2015, up from the current levels of 700,000tpa and 380,000tpa respectively. This will alleviate shortages, which are a growing problem in Poland.

Orlen is also studying a third olefins complex at Plock and a polybutylene terephthalate (PBT) plant at the
Wloclawek, which is the site of its Anwil subsidiary. Orlen?s biggest projects include a 600,000tpa

purified terephthalic acid (PTA) plant at Wloclawek, due for completion by October 2010, and a

400,000tpa paraxylene plant at Plock. The PTA plant will make Orlen the CEE region?s first PTA

producer. Orlen hopes to tap the growing Polish market for PTA, with demand rising 8-10% per annum.

Orlen?s PVC capacity is also due to rise. The company makes 300,000tpa of PVC at Wloclawek and
130,000tpa at Neratovice. Orlen plans to raise its total PVC capacity to 485,000tpa, with expansion

focused on its Wloclawek plant. The PVC projects will be accompanied by an expansion of Orlen?s chlorine capacity, which currently consists of 195,000tpa at Wloclawek and 130,000tpa at Neratovice.

Orlen will raise capacity at Neratovice by 70,000tpa to 200,000tpa.
The capacity of the proposed new olefins complex planned for Plock has not been announced. Existing

olefins capacity at the site?s two olefins units is 700,000tpa of ethylene and 385,000tpa of propylene.

Output from a third plant would be used to feed the expansion of Basell Orlen Polyolefins? (BOP)

polyolefins capacity at Plock. However, Orlen?s olefins supply deal with BOP has caused a shortage of feedstock for some Polish petrochemicals companies, notably the companies of [the] Great Chemical Synthesis (WSCh). They are now forced to buy olefins at higher prices.

Poland has retained its second place in our Petrochemicals Business Environment matrix, scoring 57.1

points. It is just 0.8 points ahead of Hungary and 4.0 points behind Russia, which has a commanding lead due to the scale of its petrochemicals industrial base. Poland?s main petrochemical producer, PKN Orlen, is set for further expansion in coming years, which will lead to an improvement in its petrochemicals composite score. Diversification of market suppliers and increased feedstock availability would further improve Poland?s score, although it will not exceed Russia which will retain its dominant position in

Eastern Europe.