Sector News

Sibur seeks JV partner for petchem project in far eastern Russia

April 21, 2016
Energy & Chemical Value Chain

Sibur (Moscow) has confirmed earlier reports that the company’s previously announced gas-based petrochemical project in the Amur region of far eastern Russia will be a joint venture.

The complex would be built near Russia’s border with China and based on an ethane cracker with capacity for more than 1.5 million m.t./year of ethylene. The Amur project “presents an execution challenge,” Sergey Komyshan, executive director and board member at Sibur, told a media briefing held in London today. “The region is remote and not well known to us, so the project will be a joint venture.” Sibur is holding discussions with potential jv partners for the Amur project, Komyshan says.

Sinopec acquired a 10% stake in Sibur in December 2015 and CW reported at the time that Sinopec was expected to take part in constructing Sibur’s major petrochemical projects in Russia, including the Amur complex, particularly since most of that project’s output would be exported to Asian markets. “We’re open to projects with Sinopec,” Komyshan told the briefing.

Sibur and Sinopec are waiting to make a final investment decision on a previously announced nitrile butadiene rubber (NBR) jv at Caojing, China, near Shanghai, Komyshan says. The proposed jv is awaiting regulatory approval from the Chinese authorities, he says. Sibur and Sinopec also have an NBR jv at Krasnoyarsk, Russia. “I won’t be surprised if we expand on our joint-venture experience with Sinopec,” Komyshan says. “Both companies see the Chinese jv as a basis for further cooperation. But there are no agreed and firm plans yet.”

The eventual timeframe for the Amur gas-chemical project depends on Gazprom’s (Moscow) progress with a planned gas-processing plant (GPP) that would separate ethane and other gas fractions from natural gas, and supply the ethane to Sibur’s Amur complex, which would be built nearby. “Gazprom’s GPP would produce ethane that we would like to utilize,” Komyshan says. “We are in negotiations with Gazprom.”

Sibur’s Amur project would produce a combined 2.4 million m.t./year of ethylene and derivatives. The complex would be “comparable in terms of capital expenditure and derivatives” to Sibur’s biggest petrochemical investment so far, the ZapSibNeftekhim project at the company’s Tobolsk, Russia, site, Komyshan says. The originally announced cost of ZapSibNeftekhim is $9.5 billion, and the remaining budget between 2016 and 2020, when the complex is due to be onstream, is $7.2 billion, Sibur says. About 35% of this figure is in rubles, 35% in dollars, and 30% in euros. Sibur says that it will meet about 50% of the residual budget from the company’s own funds.

The ZapSibNeftekhim complex, as previously announced, will include a cracker with capacity for 1.5 million m.t./year of ethylene and 500,000 m.t./year of propylene, and plants with combined capacity for 1.5 million m.t./year of polyethylene (PE) and 500,000 m.t./year of polypropylene (PP). The project is 20% complete with front-end engineering design 100% complete and detail engineering 47% complete. “ZapSibNeftekhim will change the landscape of the Russian petrochemical industry,” Komyshan says. “It will double the amount of olefins produced in Russia, change the shape of Sibur’s financial results, and make us much more export oriented.” The project will also approximately double the area of the existing Tobolsk site, where Sibur currently operates propane dehydrogenation and PP plants, and makes butadiene and methyl tert-butyl ether.

Local construction costs are more or less unchanged from 2014 levels on the back of weaker demand for construction services in Russia, caused by the country’s economic slowdown. “This helps us to keep the budget within target,” Komyshan says.

ZapSibNeftekhim will likely be a competitive production facility despite concerns about a build-up of petrochemical capacity in Russia and worldwide, Komyshan says. “The economics still look pretty solid,” he says. The ZapSibNeftekhim cracker will consume mainly liquefied petroleum gas (LPG) sourced from local gas-processing operations. “We think that [LPG-to-polyolefin] spreads will stay healthy, if perhaps not at current strong levels, and ZapSibNeftekhim will place us among the first quartile of ethylene and PE producers, in profitability terms,” Komyshan says.

More than 50% of ZapSibNeftekhim’s output will be sold in Russia and the other former Soviet countries. The rest will be exported to markets such as China, Western and Central Europe, and Turkey. The planned complex “will not take a share of more than 2% of any market we sell into,” Komyshan says. “We think there is room for us in these markets.”

ZapSibNeftekhim is also likely to spur an expansion of downstream PE- and PP-processing capacity in Russia, Komyshan says. The complex’s PE capacity—consisting of two slurry-process high-density PE (HDPE) lines and two swing HDPE and linear low-density PE (LLDPE) lines—will be based on different catalytic systems. “This will change the supply-demand balance for HDPE and LLDPE in Russia,” he says. “We will be able to offer as much product as needed in the local market. It will bring lower PE and PP prices in Russia and give a strong push to the domestic processing industry, partly through import substitution.”

By Ian Young

Source: Chemical Week

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