Assistant for
sales and products
How is it more convenient for you to contact us?

Your browser is out of date. Please update to view the site

Your browser is not supported by the site. Please use another to further use the resource

All sites

«SIBUR» LLC is the managing organization of PJSC «SIBUR Holding».

117218, Moscow, Krzhizhanovsky st., 16/1

Russian petrochemicals sector to be transformed

Although the development of Russia's petrochemical industry has slowed since the demise of the Soviet Union two decades ago, ambitious plans laid out by the Russian government could transform the country's fortunes.

Russia's potential is vast, just like its oil and gas reserves, and the development of its chemical industry is critical to its future growth prospects. As a result, the Ministry of Energy is formulating comprehensive plans through to 2030 to build new facilities and infrastructure. As part of the first stage, six petrochemical clusters are to be built over the next decade at locations spread across the country.

Russia is keen to emulate the success of one of its closest neighbors and set equally challenging targets, says Andrew Sparshott, senior consultant for UK consultancy Chemical Industries Russia and Eastern Europe (CIREC).

China based its economic model and five-year plan on the Soviet system in the 1950s, and it is slightly ironic that it is making much more economic progress than the Russians today, he adds.

China will become the largest chemical market in the world by the end of 2011, according to US-based consultancy Deloitte.

Ambitious plans

"There are an awful lot of projects taking place, or being thought about at least, so the next few years will certainly see changes and a lot more production coming out of Russia," says Sparshott. "Had the Soviet Union not collapsed, I think a lot of these projects would have already been built; there were huge plans but the situation meant there was no financial backing. It's taken almost two decades to get back into this way of thinking."

Maxim Savchenko, director of strategic development at the Russian producer SIBUR adds: "In the Soviet Era, we were much more ambitious and enthusiastic in the implementation of new materials and technologies in chemistry that used to be well developed in our country.

"These are the most ambitious plans in our country in terms of scale for at least the last 20 years. Now we are starting to redevelop this industry, which is important for the whole economy," he says.

"Russia does not have well-developed infrastructure for petrochemicals, despite that we have one of the best gas and oil pipeline systems in the world. We understand that without substantial governmental support, the ability to build both large complexes and infrastructure of private companies is rather limited," says Savchenko.

The government plans to promote the construction of vast petrochemical clusters at either end of the country, which need substantial investment. Approximate locations have been specified, but they depend on the proximity of key feedstock and whether they can be linked to existing infrastructure and plants. The development of some of these clusters is already underway, particularly in the Volga, Caspian and West Siberian regions, adds Sparshott.

Chemical hub

In the Volga - traditionally a hub for petrochemical projects - Russian petrochemicals producer Gazprom Neftekhim Salavat is investing Russian rouble (Rb) 140bn (€3.5bn, $4.9bn) in a petrochemicals expansion at its site in Salavat. The project, which involves upgrading existing facilities and building new plants, will see ethylene capacity rise from 300,000 tonnes/year to 1.4m tonnes/year by 2022.

Meanwhile, Nizhnekamskneftekhim is planning a new 1m tonne/year ethylene facility, while RusVinyl, a joint venture between SIBUR and SolVin, will build a new 330,000 tonne/year polyvinyl chloride (PVC) plant in Kstovo.

Whereas the Caspian region is already home to some facilities, including an existing complex in Stavrolen, the area is expected to be significantly expanded in the coming years. West Siberia has also seen plenty of investment with SIBUR's Tobolsk steam cracker and polyolefins project due onstream after 2015, as well as a propane dehydrogenation (PDH) and polypropylene (PP) project scheduled for completion in 2013. Gazprom subsidiary Novy Urengoy also has a low density polyethylene (LDPE) plant under construction.

East Siberia, the Northwest coast and Far Eastern parts of the country remain fledgling areas and are yet to see largescale development, adds Sparshott.

"The investment curve is going upwards, and there will be more capacity added in the next two to three years and beyond. The issue is when you look further than 2015, it's very difficult to be specific about when, how and which plants are going to come onstream," he says. "Crackers need feedstocks and feedstocks need pipelines."

The government therefore has some big decisions to make in the coming years and faces several hurdles regarding finance and poor infrastructure that needs to be heavily developed.

Hurdles ahead

"Some of these projects are overambitious and perhaps push things beyond the scope of reality; there's an awful lot to do before they can even get to build plants because of the infrastructure investments required," says Sparshott.

"There are no pipelines, railroads or housing for the workers. There are an awful lot of complications, and the government has also got to decide whether it wants to go for export or develop the domestic economy. Almost inevitably, it will be a complex mixture of export strategy and domestic orientation, but it remains too early to forecast what sort of ratio of exports to output can be expected by around 2020," he adds.

"A lot depends on feedstock supply and available finance, but another key factor is the construction ability [of our country]. Engineering and construction services are not very well developed for large-scale petrochemical projects at the moment, but the situation should be changed," adds Savchenko.

"These clusters will have different time scales and, from my point of view, different probabilities of being built. Given the feedstock availability, I think at least two or three big crackers are quite likely, for all the others only time will tell," he says.

Production is set to outstrip demand as these new complexes are built, their construction transforming the country from a net importer of chemicals to a net exporter, adds Sparshott. Currently, the Russian export market is seriously lacking, so some strategic ports will have to be built so that product can be easily moved.

"It's all market- and feedstock-driven. Russia is the leading country in the world in gas and oil production but is not so strong in petrochemical development. A maximum of one or two complexes could satisfy internal demand for base polymers, the rest could be used for export. I believe these clusters will include derivative units; you can not just sell ethylene from a petrochemical plant as we have no widespread ethylene pipelines to deliver it to other locations or countries."

Strategic decisions

Delays are commonplace in Russia, and the ongoing global financial crisis has already slowed development. Plenty needs to be done before the country can consider itself a powerhouse in the petrochemical market with important strategic decisions made over the location of the clusters and how best to integrate them with existing infrastructure. Should these issues be addressed, it looks likely that Russia can indeed play at least a more significant role than it is now, especially in the polymers and synthetic rubber sectors.

The plans are certainly ambitious, but over the longer term they are more than likely to come to fruition. The question then will be whether Russia can compete with more advantaged regions such as the Middle East and Asia and with the emergence of the abundant shale gas in the US.

"Currently, I don't think anybody can compete with Middle Eastern ethane producers but the price of ethane as it is now won't last forever, and I don't think the situation with shale gas in the US will last forever either," says Savchenko. "But there is much more demand for polymers, and Russia at least could try to compete with other regions."

Contacts for Media

Press Office

Anna Lebed

International Media Relations

We use cookies to improve the services we provide. By continuing to browse the site, you agree to the cookie policy