Warsaw, February 19th 2009

Press Release

Zakłady Azotowe Puławy: Feasibility Study for the Coal Gasification Project Completed

The findings of the feasibility study for the coal gasification project, prepared on request of Zakłady Azotowe Puławy S.A., prove that the project is viable and should be continued. On February 19th 2009, the Company received from Bechtel Corporation a full analysis of the project involving construction of a unit for producing synthesis gas to be used in ammonia production.

“The findings of the feasibility study for the coal gasification project to be implemented at ZA Puławy, are very promising. We are determined to proceed with the project. In the coming weeks, we will initiate the process of selecting legal and financial advisers,” said Paweł Jarczewski, President of the Management Board of the Puławy-based company.
 
The coal gasification project is to enable the company to diversify its feedstock sources in reliance on domestic coal supplies. The supplier of coal and ZA Puławy’s partner in the project will be Lubelski Węgiel Bogdanka S.A. In November 2008, the two companies signed an agreement on strategic cooperation in joint implementation of projects involving the use of hard coal. Both Lubelski Węgiel Bogdanka S.A. and ZA Puławy declared their intention to  participate financially in the investment projects, including the coal gasification plant project.

“Economic feasibility analyses, made based on the assumed technological solutions and feedstock and energy prices, have proved viability of the project implementation by ZA Puławy. Major advantages of the investment project include relatively low coal transportation costs and high production capacities of the Polish mines, including Bogdanka, which is the closest one to ZA Puławy,” says Jan Łaski, President of Bechtel Polska. “It is a promising and forward-looking project for the Puławy-based company. I can only add that it is based on a proven technology. Currently, over 50 similar units designed for industrial purposes are being built or operated around the world.”

An additional asset of the Puławy-based company is the fact that it possesses the appropriate infrastructure, comprising the oxygen generation plant, the coal unloading terminal, the power infrastructure, and the sulphuric acid unit (allowing the company to utilize additional sulphur volumes). Additional measurable benefits will be gained thanks to the possibility to implement the coal gasification project within the Starachowice special economic subzone in Puławy.

The technologies which enable to gasify coal or other fuels to produce synthesis gas (or syngas) have been known for at least half a century. Due to the increasingly difficult access to crude oil and natural gas and the rising prices of the two commodities, the coal gasification technologies are again gaining in attractiveness. According to the most recent statistical data, over 150 gasification units based in 27 countries are currently in operation. As far as the production of synthesis gas is concerned, the Asia/Australia region, driven by the fast growth of China, occupies the first position (accounting for a 34-percent share of the total production capacity). The Africa/Middle East region’s share of the total syngas production capacity has declined from 34% to 27%. Europe comes only third, with a 25-percent share (taking Western and Eastern Europe together).

At present, all over the world there are 51 gasification units (either producing syngas at commercial rates or under construction) which are fuelled by coal. The fact that hard coal is used in 85% of all the gasification units built over the past three years is evidence of that fuel’s dominant position relative to other fuels. Since 2004, the importance of hard coal as the leader among fuels used for gasification has increased by 6%: now coal accounts for as much as 55% of total syngas production. In the years 2008-2010, another ten units will be commissioned, out of which seven will be fuelled by hard coal.