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

117218, Moscow, Krzhizhanovsky st., 16/1

SIBUR fires up Baltic LPG export route

Russian petrochemicals company Sibur will this month take delivery of its first time-chartered LPG carrier — the 20,600-cbm newbuilding Sibur Voronezh — as it brings a new export terminal onstream.

The vessel, which is being chartered in from SCF Group (Sovcomflot) on what market brokers detail as a 10-year deal, is the first of four ships taken on by Sibur as its fledgling LPG export operations get underway from its new facility in the Baltic seaport of Ust-Luga, 110 kilometres (68 miles) west of St Petersburg.

By the end of the year, Sibur will also be in control of the sistership Sibur Tobol and Navigator Gas's two existing vessels, the 20,700-cbm Navigator Libra (built 2012) and Navigator Leo (built 2011).
This quartet, along with other ships that Sibur International chartering manager Alexei Marichev says the company will charter from the spot market when they are required, will allow it to export 1.5 million tonnes per annum (mtpa) of LPG and 2.5 mtpa of light oils once full commissioning of the terminal has been completed by the end of this year.

Sibur is not particularly big on infrastructure projects, says Alexey Rodichev, commercial director of the company's Hydrocarbon Feedstock Division, preferring instead to stick to its core business. But this opportunity stacked up.

Russia has been one of the world leaders in flaring gas, he tells TradeWinds.

‘‘A lot of feedstock is going up in the air and it is bad for ecology,’‘ he said. ‘‘Oil companies are basically burning money.’‘

Consultants have forecast that the country's LPG production could climb to 16.4 mtpa by 2015.

‘‘We expect Russian LPG exports to grow really dramatically and there are several good reasons for that,’‘ Rodichev said. He lists these as the strong government push for a higher utilisation ratio — about 95% up from just over 50% in 2007 to 2008 — of associated petroleum gas (APG), gas companies increasing their gas condensate processing volumes and a rise in oil and gas production, the latter two of which are increasing LPG volumes.

Rodichev says Russian domestic demand for LPG is not large and there are a few new projects coming on stream before 2020, which can use the new volumes.

‘‘So, for the next five years, all incremental extra LPG production will most likely go to the export market,’‘ he said.

But Sibur's Ust-Luga terminal represents a new, rather than a first, LPG-export route. Russia shipped out three million tonnes of LPG last year, the bulk of which was sent to Poland, Turkey and Eastern Europe via the Black Sea.

‘‘We had to build this new terminal to give us a new channel for the incremental LPG,’‘ Rodichev said.

To date, Sibur has shipped out five LPG cargoes and one of naphtha from Ust-Luga. Marichev says the new two-berth terminal will be able to accept vessels of up to 50,000 dwt and also facilitate the transhipment of naphtha. Cargoes from the new facility are expected to go to Northern Europe, Poland and Scandinavia.

‘‘We do not expect to go much further than the English Channel when shipping from the Ust-Luga terminal,’‘ Rodichev said.
For now, Sibur has no ambitions to own any ships. Marichev says the company specifically wanted to charter the four semi-refrigerated vessels because they are 1B ice-class, which is required for Ust-Luga in winter, and to make sure the company achieves good operational efficiency using ships it can operate.

Rodichev adds that Sibur prefers to sell its LPG on term contracts. For its Black Sea exports, the company is not insisting on sending its cargoes on a delivered basis, but if that is what its customers prefer then it is ready to go to the market for more chartered vessels.

‘‘It is not a policy to deliver or not to deliver, it is a goal to give the customer the best solution they can get from the market,” he said.
Rodichev is unfazed by the prospect that Sibur's cargoes will end up competing with huge shale gas-backed LPG volumes that are expected to come from the US. Aside from being closer to their market, he added: ‘‘When US [traders] bring their LPG, they are hoping to get European prices and that this will justify the long voyage. We bring a different product with a different cost structure to the same market that has the same price for all the producers that are willing to sell there.’‘

Sibur is not allowed to give figures in its forecasts. But TradeWinds understands a new fractionation unit planned for one of its existing plants will be capable of processing 2.8 mtpa of feedstock. This should provide an additional 2.5 mtpa of LPG, all of which is likely to go for export.
Rodichev says there is always potential to increase the throughput at Ust-Luga by either physically expanding the terminal or by operating more efficiently.

‘‘For now, our priority is to fully commission the terminal and achieve the best operational efficiency that we can practically get,’‘ Rodichev said.

He admits the company is thinking about plans to develop the terminal further.

‘‘It is one of the really interesting questions that we ask ourselves right now,’‘ he said.

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