SIBUR Spearheads Russian Petchem Expansion

Sibur, Russia’s largest petrochemical company, is nearing the completion of the $9 billion Zapsibneftekhim petrochemical plant that, after starting this year, will kick-start the country’s lackluster petrochemical sector, which is increasingly regarded as a potential economic growth driver.

Zapsibneftekhim, which covers some 300 hectares of territory near Tobolsk in West Siberia, should become the largest petrochemical plant in Russia and one of the five largest worldwide. More to the point, it will significantly strengthen Russia’s position on the world scene, lifting the country’s position for polyethylene capacity fr om 14th to eighth and for polypropylene fr om 12th to eighth, the plant’s general director, Igor Klimov, tells Energy Intelligence in Tobolsk.

Over the past decade, Russia’s petrochemical complex has achieved little progress of note despite grandiose plans outlined in a 2012 strategic development plan. The share of petchems in the nation’s GDP grew from 1.29% in 2006 to only 1.35% in 2017, and not one new steam cracker, the cornerstone of petrochemical refining, was put into operation. By contrast, Saudi Arabia saw its petchem industry grow from 2.6% to 3.5% over the same period.

Moscow believes its vast resource base, measured at some 35 million metric tons of naphtha, liquefied petroleum gas (LPG) and ethane, coupled with a recently approved road map to support the industry, should give a new impetus to development.

As of Apr. 1, construction of Zapsibneftekhim was 95% complete. Klimov says all construction works should be wrapped up in the second quarter, most likely in May. Three to six months will then be required to fine-tune all the units, with the official launch scheduled toward the end of the year. Since there were no plants of such scale in Russia, Sibur expects the plant might reach its full capacity in 12 months.

The heart of the complex is a 2 million ton per year pyrolysis furnace, or steam cracker, the first to be launched in Russia in a decade. The unit will use LPG feedstock to produce olefins. Associated gas, which is processed to become natural gas liquids (NGLs) from oil firms, and NGLs from gas producers, will originate from various West Siberian fields and go to Tobolsk through an 8 million ton/yr products pipeline starting at the Purovsky gas processing plant operated by independent producer Novatek, whose key shareholder, Leonid Mikhelson, is also one of the largest Sibur shareholders.

Zapsibneftekhim will produce 1.5 million tons/yr of polyethylene and 500,000 tons/yr of polypropylene, which will be railed to both the domestic and external markets. The initial aim of Zapsibneftekhim is to cover domestic needs and replace imports. Of the total 2 million tons/yr of polyolefins, some 400,000 tons/yr will be delivered domestically, wh ere consumption is growing by 2%-3% annually. Klimov said that for some products, Zapsibneftekhim will be able to replace 85%-95% of imports. The rest should be exported.

Target markets include China, wh ere consumption of polyolefins is growing faster than the country’s GDP, CIS countries, Europe, and Turkey. Russia exported some 6.5 million tons of LPG in 2018, of which some 54% was shipped by Sibur. The launch of Zapsibneftekhim will require an additional 3 million tons of LPG, which will be removed from core export destinations. However, this will allow Sibur to double profits since it will sell highmargin products. According to Sibur’s calculations, it will receive some $1,190 per ton of polypropylene and $1,371/ ton of polyethylene, which compare to LPG sales of some $500/ton. In addition, Sibur will be able to cut transportation costs because it uses more expensive and more dangerous gas tankers for LPG that come back empty, while polymers are transported in granules by railway and trucks.

The plant is among a few largescale projects built within budget and on time — even several months ahead of the initial schedule. The timing was a particular challenge for foreign firms providing their technologies for Zapsibneftekhim. German’s Linde, for example, is the license-holder for the steam cracker, while the UK’s Ineos and the Netherlands’ LyondellBasell licensed the use of the polyethylene and polypropylene units, respectively.

For Moscow, the plant represents only the beginning. But the government will need to provide a number of incentives to further develop the industry given its long history of exporting oil and gas rather than more marginal products. Prime Minister Dmitry Medvedev at the end of February signed the road map for the sector’s development until 2025, and one measure under consideration is a negative excise tax for ethane, which worldwide is considered to be the cheapest petchem feedstock