Interview: Russia's SIBUR targets export markets for Zapsib petrochemicals output

Russian petrochemicals producer Sibur plans to export some 60% of the polyethylene and polypropylene output fr om its under-construction Zapsib petrochemical complex in the West Siberian city of Tobolsk, helping Russia expand its share of the global petrochemical market in the medium term.

Exports from Zapsib, also known as ZapSibneftekhim, could be as high as 900,000 mt/year of polyethylene and 300,000 mt/year of polypropylene once the facility reaches its full capacity, Sibur's executive director Sergey Komyshan told S&P Global Platts in an interview.

Once completed, Russia's largest modern petrochemical complex will have a nameplate production capacity of 1.5 million mt/year of ethylene, 500,000 mt/year of propylene and 240,000 mt/year of high-margin byproducts from the steam cracker.

The complex will also include total PE production capacity of 1.5 million mt/year and PP capacity of 500,000 mt/year.

Sibur expects to complete ZapSib's construction in the second quarter of 2019 and bring it on stream fully within three to six months after that, Komyshan said. The work is about five months ahead of schedule, he added.

Sibur is looking at exports both to Europe and Asia, with some 30% of the output is likely to go to China -- but a lot "will also depend on how the Russian market performs," Komyshan said.

"We have witnessed significant growth in domestic demand [recently], which is always our priority," he said.

Domestic demand for petchem products, however, is set to remain limited in a country with a population of around 150 million people, he said, explaining the company's focus is on international markets, with strong demand for PE/PP and elastomers forecast.

In particular, two grades of ZapSib'S PE "will be produced according to the specific requirements of the Chinese market: those for multilayer flexible packaging and stretch films," Komyshan said, underlining the importance of the Chinese market in Sibur's export plans.

INCREASED INTERNATIONAL COOPERATION

Amid fierce competition on the market, with a whole string of new petrochemical complexes under construction around the world, Sibur hopes to take advantage of cheap, plentiful feedstock in Russia and also capitalize on joint ventures with international partners. 

"However, [feedstock advantage] is partially offset by the cost of transportation and logistics," Komyshan said of the key challenges his company is facing on the market.

While Sibur's inland facilities are well positioned to serve domestic demand, it faces challenges transporting products for export over longer distances by rail and overseas via seaports.

"To make sure we can overcome this deficiency we try to be close to our clients by improving... our supply chain," he said.

 "So to that end, we're looking at partnership with other companies todevelop transport infrastructure, like in the Russian Far East, in order to find ways of streamlining operations," he said.

 Together with India's Reliance Industries, Sibur is building a butyl and halogenated-butyl rubber production facility in India's Jamnagar, the first in South Asia, with a designed capacity of 120,000 mt/year, which will target India and other Asian countries.

 The butyl rubber plant commissioning is expected this year, followed by the halobutyl rubber plant by 2019.

 Sibur is also considering a joint venture with Saudi Aramco as Moscow and Riyadh are both eager to capitalize further on their close partnership within the OPEC-led production cut deal.

 "We are discussing different options for possible cooperation to produce synthetic rubbers in Saudi Arabia," Komyshan said.

 "Though there is no demand for SR in the Middle East, Saudi Arabia is situated near Asian markets wh ere we see increasing demand," he said, without elaborating further.

 BULLISH DEMAND FOR POLYMERS

 Sibur's expansion of its polymer capacity comes against the backdrop of expectations of strong demand growth for polymers, particularly in Asia.

 "Most of the polyolefin capacity expansion has already been factored by the leading industry experts in a mid-term horizon. With new major additions coming from the US and China the market still looks balanced through the cycle with operating rates slightly above the historical averages," Komyshan said.

S&P Global Platts Analytics data had shown earlier that demand growth in Asia per capita in 2018 was forecast at 6-7 kg, up 6% from the year before, in line with GDP growth forecasts over most of Asia, and slightly higher in China and India.

 Additionally, the impact of new PE plant startups in Asia in the secondhalf of 2018 is seen likely to be modest initially, as the new plantstypically do not operate at 100% of capacity during the first year of operation, with the average operating rate around 50% initially.