Sibur, Russia’s biggest producer of petrochemicals, has cut the timeline and reduced the estimated cost of its large-scale petrochemical project in Russia’s Far East, near the border with China. The company is now targeting mechanical completion of the Amur Gas Chemical Complex (Amur GCC) in mid-2024, having previously said that the project would likely be completed in late 2024 or 2025. Sibur also says that the budgeted cost of building the complex has been reduced to $10 billion or below, from a previous estimate of $10–11 billion.
The company’s experience of building the $8.8-billion ZapSibNeftekhim (ZapSib) petchem complex at Tobolsk, western Siberia, together with the sheer size of the Amur GCC, which will produce 2.3 million metric tons/year (MMt/y) of ethylene and have downstream polymers capacity totaling 2.7 MMt/y, have enabled the revisions, Alexander Petrov, board member/plastics, elastomers, and intermediates at Sibur, told CW in an interview after the release of the company’s fourth-quarter and full-year 2020 financial results.
"We have experience and we are going for scale,” Petrov says. "We learned a lot of lessons with ZapSib. It was our largest project, and we had built a propane dehydrogenation and polypropylene [PP] complex at Tobolsk seven years before. All this helped us to find a lot of new and smart solutions.”
Construction on the Amur GCC began last August, and Sibur and Sinopec formed a 60/40 joint venture (JV) in December for the complex. Sibur and Sinopec have a "good understanding,” Petrov says. "We believe we have a lot of reasons to do the project jointly. The Far East is a new territory for us, and the complex will definitely serve China because of the close proximity. And the Amur GCC is pretty capital intensive. So, it’s a new type of risk for us, and we know Sinopec as a shareholder and a business partner for many years.” Sinopec has a 10% stake in Sibur and the companies have a JV producing synthetic rubbers at Krasnoyarsk, Russia.
ZapSib, based on a 1.5 MMt/y steam cracker, started up at the end of 2019 and reached its design capacity in the fourth quarter of 2020, ahead of schedule. The complex had an average operating rate of 92% during the quarter and attained an operating rate of about 97% in December, Petrov tells CW.
China was the main destination for ZapSib’s polyolefin sales in 2020. ZapSib sold a combined 861,000 metric tons of polyethylene (PE) and PP to China last year, 53% of its total sales. The complex transports polyolefins to China by rail. In all, 70% of ZapSib’s sales were exports with 111,000 metric tons going to Turkey and 81,000 metric tons headed for Europe.
The figures reflect healthier demand from China over the year, Petrov says. "We redirected certain volumes [from Europe] to China after the first [COVID-19] wave in late February and March,” he says. "We had to take fast decisions.”
ZapSib still sold 486,000 metric tons of polyolefins in Russia during 2020. "It’s a large volume and it replaced a lot of imports,” Petrov says.
The breakdown of ZapSib’s sales is likely to change in 2021, according to Petrov. "There will definitely be more in Russia,” he says. "We are aiming to maximize our presence in Russia, in those PE and PP technical grades that are relevant for use in the country, and it saves on logistics to sell here.”
Petrov also anticipates a "big increase” in ZapSib’s sales to Europe and Turkey this year. ZapSib’s location midway between Europe and China gives it the flexibility to switch export destinations according to changes in the markets. "We try to react promptly,” he says. "We can make decisions monthly.”
The ramp-up of supply from ZapSib had a hugely positive impact on Sibur’s fourth-quarter and full-year 2020 results. But the company also benefited from robust demand for polymers in packaging and medical applications, among others, during the pandemic.
The packaging sector gained from greater home consumption of food and increased use of online delivery services for consumer goods. "Packaging demand inside and outside Russia was pretty good,” Petrov says. He estimates some decline in the first half of 2020 but only of a few percentage points, with demand in some segments improving.
Demand for Sibur’s plastics in medical applications benefited from the increase in consumption of PP in personal protective equipment such as face masks.
However, there was a "deep decline” in demand from other sectors such as automotive and construction, particularly in the first half of 2020, caused mainly by COVID-19, Petrov says. "We experienced a fast recovery in construction, especially in residential housing, in the second half,” Petrov says.
Sibur serves the automotive industry with synthetic rubber to manufacture tires. Petrov estimates there was a decline of about 20% in tire demand in Russia during 2020.
Petrov sees "good dynamics” in Sibur’s markets in early 2021, continuing from the fourth quarter, which was the strongest quarter of 2020. In the plastics, elastomers, and intermediates business, full-year 2020 EBITDA was down on lower margins, and sales decreased, but fourth-quarter EBITDA of about 8 billion Russian rubles ($109 million) was higher than in any other quarter in the past two years. "Growth in the first quarter is not so fast as in the fourth quarter, but it has become calmer and steadier—the direction is positive,” Petrov says.
The plastics, elastomers, and intermediates business faced a spike in butadiene feedstock prices in the second half of 2020 and demand for butadiene-based rubber for automotive and hygiene applications recovered in the fourth quarter. Sibur makes butadiene by butane dehydrogenation and produces 100,000 metric tons/year in an extraction unit at the ZapSib cracker, but the company became a merchant buyer of butadiene for the first time in 2020. The company was able to pass on the higher butadiene costs and maintain margins by increasing its elastomer and synthetic rubber prices, using "pricing mechanisms,” Petrov says.
Petrov forecasts good profitability in Sibur's chemicals business in 2021 with overall spreads estimated to be 30–40% higher than in 2020, and in line with general predictions for the rest of the chemical industry.
Meanwhile, Sibur launched construction in September 2020 at its Polief site at Blagoveschensk, Bashkortostan, Russia, on a project to produce primary polyethylene terephthalate (PET) granules partly from recycled PET. Polief will need to source 34,000 metric tons/year of used PET in the form of flakes, made from recycling PET packaging, that will be melted and mixed with 110,000 metric tons/year of virgin PET at the plant to produce 144,000 metric tons/year of PET. Start-up of the plant is scheduled for the second half of 2022. "The challenge is to accumulate enough flakes,” Petrov says. Sibur has signed several contracts to receive PET flakes from recyclers, he says.
Sibur recently completed construction of a 60,000-metric tons/year halobutyl rubber plant at Jamnagar, India, in a JV with Reliance Industries. The plant is in ramp-up phase and on its way to commercial production, Petrov says. Initial output at the plant "could be limited by its ability to sell,” given that the unit is relatively big and expected to have a worldwide market share of more than 5%, he says.
The JV with Reliance also operates a butyl rubber plant, which made 60,000 metric tons in 2020, having reached full capacity. This plant accounts for 20% of worldwide butyl rubber output and it exports worldwide, Sibur says.
Sibur, meanwhile, is building Russia’s first maleic anhydride (MA) plant. The unit, with capacity for 45,000 metric tons/year of MA, is taking shape at Tobolsk and completion is expected in the second half of 2022. "It is making good progress,” says Petrov. "There are 1,000 construction workers on site, and we are waiting for certain pieces of heavy equipment.”
Sibur started up a plant making phthalate-free dioctyl phthalate (DOTP) plasticizer at Perm, Russia, in 2019. The unit has a design capacity of 100,000 metric tons/year, making it Europe’s biggest facility for the product, but this has been "improved by capacity creep,” Petrov says.
DOTP is a new product for Sibur and the Perm plant has seen double-digit growth in demand in Russia during the last two years, Petrov says. "It has not just replaced imports but has stimulated demand in the Russian market,” he says.
Russia imported about 63,000 metric tons of plasticizers in 2018, which dropped 43% to 36,000 metric tons in 2020 following completion of the Perm DOTP plant, Sibur says. Meanwhile, DOTP accounted for 49% of plasticizer consumption in Russia last year, jumping from 2% in 2018. The Perm plant sold 81,500 metric tons of its 100,000-metric tons output in Russia in 2020, according to Sibur.
Sibur started up a styrene-butadiene-styrene (SBS) plant at Voronezh, Russia, with capacity for 50,000 metric tons/year in early 2020 and the unit is running at full capacity, Petrov says. The plant accounts for 3% of worldwide SBS capacity, according to Sibur. It sells in Russia and "supplies a lot of tons for export to China and the US,” Petrov says. The facility makes five new SBS grades. "The focus is to develop new grades for different applications,” Petrov says.