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The Warsaw Voice » Business » January 28, 2015
The Lubelskie Voice
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Supporting Intelligent Farming
January 28, 2015   
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Marian Rybak, CEO of the Azoty Puławy group, talks to Bartosz Grzybiński.

The Puławy nitrogen plant is the Azoty group’s largest consumer of natural gas; it consumes 1 billion cubic meters of this fuel a year. Puławy is also the member of the group that is the most vulnerable to political unrest—as exemplified by recent events in Ukraine and the related disruptions in the supply of natural gas from Russia, which is the largest supplier of this fuel to Poland. To what extent will your newly launched storage facility for ammonia make Puławy less susceptible to political risk?
To start on a positive note, let me say that Poland has done its homework and the last few years have seen a major leap forward in terms of liberalizing the natural gas market and in the construction of transmission infrastructure connecting our country with countries west and south of Poland. Today, the Azoty Puławy Group buys 30 percent of gas outside of its contract with [Polish gas company] PGNiG —from suppliers other than Russia. We buy gas from foreign corporations such as RWE and Statoil. The raw material comes from beyond our western border and is imported to Poland using a reverse flow system on the Yamal pipeline. In addition, we purchase gas on the commodity exchange, where at the moment it is cheaper than that we get under the contract with PGNiG. Chemical plants, unlike other companies, do not use natural gas for energy purposes, but only for chemical processes as a result of which they produce ammonia and subsequently nitrogen fertilizers. For this reason, we cannot replace gas with another raw material, and that’s why the security of supplies is so important.

The desire to preserve the continuity of production and of risk management was another factor that determined why we decided to increase our storage capacity for ammonia because the previous capacity was only about 3,500 tons. The new facility, which cost zl.108 million in capital expenditure, increases our storage capacity fivefold. In a sense it is a buffer that enables us to flexibly schedule any repair work on ammonia and processing units without limiting production. The facility is also a form of safeguard in the event of interruptions in gas supplies.

A fertilizer producer needs to have a good working relationship with customers, which means farmers. Intelligent and precise fertilization is a key reason why Polish farmers report high crop yields despite difficult soil conditions. What does Puławy do to support intelligent farming methods?
We place special emphasis on this aspect of our business. What we are concerned about is not just selling a wide range of modern fertilizers to customers but also providing them with advice on fertilization. That’s why, in 2011 we initiated the establishment of an agricultural think-tank known as the Puławy Center of Excellence, which combines three different sources of skills: the sensitivity and experience of agricultural entrepreneurs, the know-how of the manufacturers of the means of agricultural production and the expertise and vision of research institutions dealing with agricultural issues. The center’s mission is to promote a model of modern agricultural entrepreneurship and ensure tangible benefits to all agricultural market players. This is a modern center of cooperation and, above all, of exchange of information and experience for farmers, advisers, research institutions and business in the broad sense.

In our core business, we are also active, building a modern fertilizer complex at a cost of nearly zl.200 million that will provide agricultural producers with modern fertilizer formulas (solid and liquid) enriched with appropriate micronutrients and adapted to specific crops.

Agriculture is a strategic sector of the economy, so fertilizer production is of strategic importance to the state. What kind of collaborative ties and protection are needed in the production of mineral fertilizers?
Agriculture is currently the fourth-largest sector of the Polish economy. Agri-food products account for over 12 percent of the total value of Poland’s exports. The value of Polish agri-food exports increased from 4.01 million euros in 2003 to 19.96 million euros in 2013, and Poland is the eighth-largest food exporter in the EU. We are attentively watching all these changes in Polish agriculture. We have just put together a publication on the changes that have taken place in Polish agriculture over the last 25 years. Over this time, there has been a significant increase in agricultural product exports, an improvement in farm management and a shift towards precision agriculture, innovative technologies and modern commercial farms. The publication shows that Poland joining the European Union in 2004 has turned out to be a catalyst of positive change, and agricultural entrepreneurs today are competitive on European markets. The report also addresses the most important questions about the Polish food sector and offers solutions to the key challenges of the coming years. The authors of the study believe that the future of the Polish food sector is linked to the development of commercial farms, which have a chance to become even more competitive and modern, both technically and economically. We want to continue to work closely with agricultural producers and the science sector to ensure further development of a sector that is of strategic importance to the Polish economy.

As for market protection measures, all we expect is that attention will be paid to ensuring a level playing field for all market players.

How important to you was the EU’s decision to keep anti-dumping import duties on Russian ammonium nitrate in force?
Very important. Puławy is Poland’s largest producer of ammonium nitrate, which is the most popular nitrogen fertilizer in the country. When Russia joined the WTO it pledged to introduce uniform gas prices for all customers. Meanwhile, it is using a dual pricing system with low prices for Russian producers and much higher prices for Western producers. As a result, gas is far more expensive for us, and EU duties protect us from unfair/inappropriate competition. Moreover, Russia has a selective policy whereby it has introduced an embargo on Polish agricultural products but at the same time wants to sell fertilizers to Polish farmers—anyone can see that this is not very fair.

Your business expansion strategy is not only about the market and production of fertilizers. Puławy has plans to team up with Malaysian petrochemical giant Petronas. How will this work in practice?
How will your company benefit?
We have great expertise in the production and processing of urea. We produce multi-purpose solutions, fertilizers and melamine from it. This expertise has been noticed by Petronas. The Malaysian giant wants to see us as their partner. Right now we are analyzing the possibilities and how we can work together. With us or without us, they will probably carry out this project with someone, and Malaysia has access to cheaper raw materials than Poland so the project looks interesting.
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