Grupa Azoty reduces production in March and April after difficult first quarter in 2023 - Issue 391 || PKN Orlen-petrochemical production Jan-Apr 2023 - Issue 391 || Central European styrene trade Jan-Apr 2023 - Issue 391 || Polish polyethylene production & trade Jan-Apr 2023 - Issue 391 || Polish polypropylene production & trade Jan-Apr 2023 - Issue 391 || Polish synthetic rubber trade, Jan-Apr 2023 - Issue 391 || Central European MDI trade Jan-Apr 2023 - Issue 391 || Central European methanol trade Jan-Apr 2023 - Issue 391 || Russian chemical industry-new terminals required to serve Chinese market - Issue 391 || Russian butadiene production Jan-Apr 2023 - Issue 391 || Russian plastics and polyethylene production Jan-Apr 2023 - Issue 391 || Russian polyethylene trade Jan-Apr 2023 - Issue 391 || PTA deliveries from China to Kaliningrad - Issue 391 || Russian methanol production Jan-Apr 2023 - Issue 391 || Russian methanol exports, Jan-Apr 2023 - Issue 391 || Methanol plant at Volgograd signs agreement with Chinese company - Issue 391 || Russian polyurethane raw materials 2023 - Issue 391 || Uzbek methanol island-Air Products - Issue 391 || Russian Methanol Production, exports and domestic sales 2023 - Issue 392 || Polish petrochemical production Jan-May 2023 - Issue 392 || Olefin 111 project outline - Issue 392 || Polimex Mostostal and Naftoremont-Naftobudowa-Olefin 111 project - Issue 392 || Hungarian propylene exports Jan-Apr 2023 - Issue 392 || Central European styrene trade Jan-May 2023 - Issue 392 || Czech petrochemical trade, Jan-May 2023 - Issue 392 || Polish rubber trade Jan-May 2023 - Issue 392 || Hungarian TDI-MDI exports Jan-Feb 2023 - Issue 392 || Russian propylene exports & sales Jan-May 2023 - Issue 392 || KPI polypropylene outage & exports - Issue 392 || Russian methanol producer operational balances 2023 - Issue 396 || Russian Methanol Exports October 2023 - Issue 396 || Polish Polyol Exports 2022-2023 - Issue 396 || Polish Polyol Imports 2022-2023 - Issue 396 || Central European isocyanate trade Jan-Sep 2023 - Issue 396 || Czech polyol imports Jan-Sep 2023 - Issue 396 || Polish polyol trade Jan-Sep 2023 - Issue 396 || Isocyanate/polyol imports from China into Russia - Issue 396 ||
 


Russian Synthetic Rubber Market

Russian C4 sales & Synthetic Rubber Market, Jan-Feb 2016

C4 sales on the domestic market totalled 64,200 tons in the period January-February against 67,900 tons in the same two months in 2015.  The main domestic suppliers this year have included SIBUR-Kstovo and Stavrolen, which supplied 39,300 tons in 2016 or 61.6% of sales.  The Belarussian producer Naftan supplied 9,700 tons in the first two months this year against 10,200 tons in the same period last year. 

Nizhnekamskneftekhim purchased 30,900 tons of C4s in January to February 2016 against 19,700 tons in 2015, and Togliattikaucuk bought 27,000 tons against 24,200 tons.  Supplies from domestic plants have been tightened following the accident at Angarsk Polymer in February.  Deliveries of C4 from Angarsk to the domestic market declined by 2.3 times in February against January to 957 tons.  Angarsk Polymer Plant’s cracker is expected to remain inoperative until April after repairs have been completed.  Nizhnekamskneftekhim was the only Russian rubber producer to import C4s in February, importing 5,100 tons from Belarus.  Imports totalled 10,500 tons in the first two months, 26% down on the same period in 2015. 

Omsk Kaucuk was forced to switch suppliers of C4s in March from Angarsk Polymer Plant, which is down for repairs as part of the cracker renovation, to Tomskneftekhim, Kazanorgsintez   and   Ufaorgsintez.  In addition, the company buys C4s from Azerkhimya in Azerbaijan.  The Angarsk outage has impacted on C4 prices in March, Kazanorgsintez increased by 4% and Ufaorgsintez by 7%.  Naftan in Belarus expects to increase prices in April. 

Russian synthetic rubber production & trade

The Russian synthetic rubber market saw a volume improvement in 2015 over 2014, but was still slightly lower than in 2013.  The much weaker rouble in 2015 helped domestic rubber product manufacturers to acquire business from vacated importers, besides the economic attractiveness of exports.  Tyre manufacturers in Russia saw a direct benefit from the weak rouble, as numerous importers without production sites inside the country left the market, whilst at the same time export activity rose.  Continental at its Kaluga plant, which opened in 2013, expects to double the export of tyres in 2016 due to the currency advantages of producing inside Russia.

Russian Chemical Commodity Exports

 

Jan-16

Jan-16

Jan-15

Jan-15

Product

Kilo tons

$ Mil

Kilo tons

$ Mil

Synthetic Rubber

77

93

67

114

Production of synthetic rubber totalled 1.442 million tons in 2015 against 1.319 million tons in 2014 and 1.482 million tons in 2013.  Russian rubber producers started to raise capacity utilisation in the latter part of 2014, as the rouble declined in value making exports more profitable.  International markets also made a small recovery in the first half of 2015, but that seems to have since weakened and Russian production has slowed over the past few months.  Currently around 70% of synthetic rubber production in Russia is exported, with the main destinations including Central Europe, China and India.  Exports totalled 936,600 tons in 2014 against 826,100 tons in 2014 and 943,600 tons in 2013. 

Regarding investments in the synthetic rubber industry, the main flagship project involves Rosneft’s proposed jv with Synthos and Pirelli at Nakhodka in the Russian Far East.  At this stage the project concept remains in the early stages of assessment and depends on the time-scale for the construction of the refinery and petrochemical complex.  As part of the petrochemical complex Eastern Petrochemical Company (VNKH), butadiene capacity is planned at 200,000 tpa. 

Revised capacity of Amur Gas Processing Plant

Gazprom has decided to reduce the design capacity of the Amur Gas Processing Plant from 49 billion cubic metres per annum to 42 billion cubic metres.  The project has been revised down from seven plants each of 7 billion cubic metres per annum to six plants.  In addition to the six plants another three will be constructed for the production of helium and nitrogen.  The project revision was made after deciding that 42 billion cubic metres would be sufficient to meet the contractual requirements to China. The contract or at least an understanding was s concluded for a period of 30 years and involves the supply of 38 billion cubic metres per annum.  The launch of the plant is planned for 2021.  The revised capacity will have no impact on developments at the Chayanda and Kovytka fields according to Gazprom.

Gazprom processing Blagoveshchensk announces consultancy tender for Amur GPP

Gazprom processing Blagoveshchensk undertook a tender in March for the provision of consultancy services for the development of the business plan and the financial and economic study for the Amur Gas Processing Plant.  The starting price was 25,882,000 roubles including VAT. 

Key Points for Amur Gas Processing Plant

Location

Svobodny, Amur Oblast

Revised Capacity

49 billion cm per annum

Number of Units

6 gas, 3 helium & nitrogen

Start of Construction

July 2016

First Production

2021

Full Production

2024

Feedstock Sources

Chayanda/Kovytka

Investment for 2016

790.6 billion roubles

International Enginnering

Linde

Domestic Enginneering

NIPIgaspererabotka

According to the documentation, the consultant will prepare and provide the financial and economic criteria for the construction of a gas processing plant, justifying calculations before 1 June 2016.  It will also consider the business plan of the project in view of updating the financial and economic feasibility up to 2 September 2016. 

The service will be implemented in two phases. In the first phase it is necessary to evaluate the effectiveness of the project as a whole to Gazprom and separately for the Gazprom processing Blagoveshchensk, including the development of two financial and economic models, and justifying those calculations.   In addition, the document notes that the consultant is expected to evaluate the financing scheme for the project of construction of the Amur GPP, including short-term loans for Gazprom processing Blagoveshchensk, and interest accrued thereon.  The second phase is required to develop a business plan for the project of construction of the Amur GPP and implement the requirements set out in the first phase.  

The Amur Gas Processing Plant will be built near the town of Svobodny in the Amur Oblast. The design capacity of the plant will amount to 49 billion cubic metres of gas per annum.  The GPP will include the world's largest unit for helium production.  Through the pipeline Power of Siberia will come multicomponent gas Yakutsk and Irkutsk gas production centres, created by Gazprom in the framework of the Eastern Gas Programme. The construction of gas processing plant is scheduled for July 2016, previously reported by CEO of Gazprom processing Blagoveshchensk Ivan Afanasyev.   Gazprom estimated that it will invest 790.6 billion roubles in the project in 2016.

Gazprom Design-Amur GPP

Gazprom Design has been selected to undertake the design of power supply facilities for the Amur GPP and develop project documentation for at least one of the process units.  VNIPIgazdobycha and Gazprom Design signed a contract for a power plant of as part of the fourth phase of the Amur GPP project. 

Gazprom Design was founded in 2015, 100% owned by Gazprom.  The company specializes in the design and survey work, R & D, headquartered in St. Petersburg.  Under the contract, the company shall carry out all work to 15 April 2016.  The contract value is approximately 120.9 million roubles (including VAT).  The transaction was approved by the board of directors VNIPIgazdobycha at the beginning of March 2016.

Svobodny meeting in March, Amur GPP

In March a working meeting took place at Svobodny in the Amur Oblast regarding the construction of the Amur Gas Processing Plant and up to around 40 local companies that might benefit from the project.  Companies from Svobodny, Uglegorsk and Blagoveshchensk attended the meeting, which was also attended by the Mayor of the Amur Oblast, a representative of the President’s office and the General Director of SIBUR in the Amur Oblast (Vasily Orlov).   

SIBUR is following developments for the gas processing plant very closely and asked fundamental questions about the project including the number of contractors, the schedule, etc., all of which is considered vital information in preparation for the gas-chemical complex.  The NIPIGas office at Svobodny was opened in March 2016, starting with the employment of 27 people on the gas processing project, and this should rise to 50 by September 2016.  The office is located on Kruchina Street. 

Base Investments for the Amur Gas Processing Plant

Construction of the railway station

Construction of internal roads

Construction of temporary towns for contractors

Development of energy resources

Currently preparations are underway for the initial parts of the project.  In the near future work will begin on construction of the railway station, internal roads, temporary towns for the contractors, energy sources, etc. 

The peak of the construction process for the gas processing plant is expected in 2019 when up to 15,000 people could be involved in the project.  Energy for gas production is not yet organised, the local energy plant Bureysk hydro power plant is only capable of producing up to 320 megawatts against requirements of 300 megawatts.  Thus extra energy sources need to be constructed, whilst it will also be necessary to construct a railway station at Ust Pere.  SIBUR is particularly interested in the gas processing complex being constructed at the highest standard possible, taking into account the need to control costs. 

SIBUR starts preparations on the selection of the licensor for Amur Gas Chemical Complex

SIBUR intends to select the technology and project licensors for the Amur Gas Chemical Complex in 2016.  Potential licensors for the Amur Gas Chemical Complex include CB & I, KBR, Technip, Linde and Sinopec.  According to reports and statements made by SIBUR, a decision on the project of construction of the Amur GCC is not expected to be adopted prior to the end of 2017.

SIBUR’s Possible Licensors for

Amur Gas-Chemical Complex

CB & I, KBR, Technip, Linde and Sinopec

The Amur Gas-Chemical Complex is currently at the pre-development stage. Work is underway on the analysis and selection of the optimal pyrolysis capacity configuration depending on market factors and the volume of raw materials available from the Amur GPP.   Fluor and NIPIGas are involved in the pre-project analysis.  NIPIGas is also acting as the EPC-contractor for the Amur GPP which aims to extract helium, ethane, propane, butane and other fractions of the gas that will be supplied to China through the pipeline Power of Siberia.   Ethane will also be made available for SIBUR for the Amur Gas-Chemical Complex.  Funding for the complex has to be organised and SIBUR expects these arrangements to be similar to the project Yamal LNG, but that stage will only come after the project configuration has been decided.

Ethane from the Amur GPP is being considered as the potential feedstock for the Amur Gas-Chemical Complex, which is not expected to be completed before 2022-2023.  The acquisition late in 2015 by Sinopec of 10% ownership of SIBUR naturally provides some advantage over potential rivals for the licensing and contracting for the gas-chemical complex, but the decision is yet to be made.

 

 

Power of Siberia

Power of Siberia 2016

Gazprom will invest 92 billion roubles in the construction of gas pipeline Power of Siberia in 2016, whilst total costs are estimated at 800 billion roubles.  The length of the IHP Power of Siberia will be approximately 4,000 km (Yakutia- Khabarovsk-Vladivostok, 3200 km) and about Irkutsk region-Yakutia 800 km.  The pipeline route passes along the route of the main oil pipeline of the East Siberia Pacific Ocean (ESPO).  The capacity of the pipeline at peak rates will be 61 billion cubic metres per annum.  The resource base for the pipeline includes Chayanda with reserves of 1.2 trillion cubic metres and Kovytka at 1.5 trillion cubic metres.

Gazprom tender for 60.7 km section of pipeline Power of Siberia

Projects awarded by Gazprom for the Power of Siberia & Amur GPP by allocation rather than open tender

Company

Majority Owners

Billion roubles

Billion euros

Project Description

Stroygazmontazh

Arkady Rotenberg

197.7

2.474

Pipeline

NIPIgazpererabotka

Leonid Michelson

790.6

9.879

Gas Processing Plant

Stroytransgaz

Gennady Timchenko

46.5

0.581

Pipeline

Neftegazstroy has won the tender for construction of the section of the gas pipeline for the Power of Siberia, length of 60.7 km, put out to tender by Gazprom.  The winning company offered close to the maximum starting price which was set at 7.818 billion roubles.  Neftegazstroy from Kaluga beat four competitors by offering a price of 7 billion 814.8 million roubles (+VAT).  Other competitors included Yuzhneftegazstroy, Nova, EVRAKOR, and Tatnefeprovodstroy.  Gazprom has offered to European consumers the lowest price in eleven years about $200 per thousand cubic metres.  In 2015 Gazprom reduced gas production by 6% to 417.2 billion cubic metres.  

This plot length of 60.7 km (975-1035,7 km) located in the area of compressor stations Amga and Nimnyrskaya, whilst the duration of the project will last from February 2016 to December 2017.  The track is the first stage of the main gas pipeline Power of Siberia from by Chayanda to Blagoveshchensk which has a length of almost 2,200 km.

Power of Siberia-1 Project Overview

Stage 1

Chayanda-Belogorsk & Blagoveshchensk

2018-2020

Stage 2

Chayanda-Kovytka

2020-2025

Stage 3

Belogorsk-Port Komino (Vladivostok)

2025-2030

Gazprom cancelled two tenders in late 2015 worth 20.041 billion roubles for the Chayanda field, and has run into conflict with the Federal Monopoly Service (FAS) over an absence of competition.  Half of the pipeline construction project has been awarded without competition to Stroygazmontazh and Stroytransgaz.   Krasnodargazstroy recently was included in the group Stroygazmontazh, owned by Arkady Rotenberg and part of Putin’s inner circle, and will take responsibility for building the section 1029.8-1290.7 km. 

 

Gazprom purchases compressors for Power of Siberia

In March Gazprom ordered a three gas pumping unit GPA-32 Ladoga for the main gas pipeline Power of Siberia for 2,771 billion roubles.  The equipment will be delivered to the Zeya compressor station.  The contract is concluded with a single supplier, but it is not clear when the unit will be put into operation.  The Power of Siberia pipeline will include eight compressor stations with a total capacity of MW 1331.

In 2015 Gazprom completed the construction of 80 km of pipeline for the Power of Siberia project, and in 2016 the aim is construct around 800 km.  Investments in the construction of the pipeline, taking into account the development of Chayanda field in 2016 are estimated at 168 billion roubles.

Work on checkpoint on Amur-China border

Work will begin on the checkpoint between the Amur region and China in the area of ??Blagoveshchensk this year as the region continues preparations for the construction of gas pipeline Power of Siberia.   Agreement for the underwater crossing of cross-border gas pipeline across the Amur River was reached in December 2015.  The total first stage of the pipeline length will be 2200 kilometres, connecting the Chayanda field in Yakutia and the capital of the Amur region Blagoveschensk.

The pipeline will cross the Amur region diagonally, passing through the areas Natalinsk, Novopetrovsk, Michael, Markov Chigirinsk and village councils.  The width of the corridor for the pipeline is about 100 metres.  Land has had to be purchased from owners, although not all land users are willing to take up the offer.

Omsktransmash develops piles for permafrost, mainly for Power of Siberia

Specialists of Omsktransmash was sent to the city of Lensk Sakha machine for screwing piles ISM-219 and eight special test piles in permafrost conditions.  Equipment designed for work on thawed, frozen and rocky grounds. Tests will be conducted on-site home of one of the crawler linear sections of the pipeline Power of Siberia.  The purpose of the test - to prove the possibility of screw piles in the area of ??frozen ground to ensure all customer requirements.

NIPIGas-Amur GPP & domestic equipment.

SIBUR subsidiary NIPIGas, which was selected by Gazprom for the project management of the Amur GPP, is considering the possibility of attracting Russian equipment suppliers to replace imports.  The supply of auxiliary materials - concrete, cable, metal -will be carried out by Russian companies, which could also be extended to placing orders for shut-off control valves, separators, tanks, etc. 

NIPIGas is in close contact with the Russian machine builders and is ready to place orders with domestic suppliers if they can meet the project criteria.  The goal is not only location, but also the schedule, budget, cost-effectiveness, and the ability to attract project financing.  However, some imported equipment has already been ordered such as column equipment, heat exchangers, etc.  The imported pieces of equipment represent the most expensive part of the project, and the devaluation of the rouble has forced NIPIGas and Gazprom to examine local sources in much greater detail to achieve savings.  Investment in the project is evaluated at 790 billion roubles.

Surgutneftegaz, Jan-Feb 2016

Surgutneftegaz increased oil production at its fields in Yakutia by 5.8% up to 1.408 million tons in the January-February 2016 compared to the same period in 2015.   Total production of Surgutneftegaz for the period totalled 10.766 million tons, which is 1.4% more than in the first two months of 2015 (9.937 million tons).  Gas production in January-February this year amounted to 1.621 billion cubic metres. 

Power of Siberia Feedstocks

Kovytka-well drilling 2016

Four exploration wells are set to be built on the Kovykta gas condensate field in 2016.  Arrangements for well construction and completion of the exploration fields to the end of 2016 were made in February.  These wells take into account the interests of the region Buryatia to the south of the Irkutsk Oblast and the Trans-Baikal Territory.  In 2015 two wells underwent construction at Kovytka

Kovykta gas condensate field will become a deposit base of the Irkutsk gas production centre, its reserves of C1 + C2 category (subject to the license area and Khandinsk, Chikansk deposits) account for more than 2.6 trillion cubic metres of gas.  With full development, the field could produce up to 35.3 billion cubic metres of gas per annum.

Gas from the Kovykta field is also intended for part of the resource base for the Power of Siberia, which is planned for delivery to China.  Kovykta will be connected to the system in 2022 through the construction of a gas pipeline, connecting it to the Chayanda field, with a length of about 800 kilometres.

Winter road Chayanda-overloaded lorries

According to the Federal Road Agency, inspection of the winter road to Chayanda was carried out over three days, from 16 to 18 February, revealing that almost 90% of lorries travelled with too much weight.  The road travels from the south, in the direction of Ust-Kut in the Irkutsk Oblast, to the to Chayanda field in Yakutia using the federal highway A-331 Viluy.  Officially, the winter road will be closed on 1 April.

Amur project update

In late 2015 Gazprom and CNPC signed an agreement on the design and construction of cross-border gas pipeline Power of Siberia across the Amur River.  Agreement defines the basic technical requirements for the communication system, and the principles of its organisation during the construction and operation of cross-border area.   In December, Gazprom and the Chinese National Petroleum Corporation (CNPC) signed an agreement on the design and construction of cross-border gas pipeline Power of Siberia across the Amur River.

Construction of the pipeline Power of Siberia, which is being designed to pump 38 billion cubic metres of gas per annum, began on 1 September 2015.  The 30-year contract between Gazprom and CNPC stipulates that the launch date of the GTS into operation can be pushed together for a couple of years if China does not have time to prepare the necessary infrastructure for receiving Russian gas.  Commercial negotiations for this contract are being continued whilst there is an analysis of prospects for the creation of the second line and to increase the total volume of deliveries to 60 billion cubic metres per annum. 

The Power of Siberia will contribute to the development of Chayanda and Kovykta gas fields, as otherwise there is no way that would allow the resources to bring them to market. These deposits can be not only the resource base of the project Vladivostok LNG, and gas chemical enterprises in the region, especially since the Kovykta gas and Chayanda rich in gas chemicals used in components such as ethane and helium.

Amur gas processing plant-Linde

In late 2015 Gazprom selected Linde as the plant licensor for the Amur Gas Processing Plant (GPP), undertaking the project in five phases the last of which will be completed by 2024.  The first phase includes the construction of allocation blocks for ethane and wide fraction of light hydrocarbons (propane, butane, pentane, hexane), and the installation of the helium unit.  After the completion of the Amur GPP will be one of the largest companies in the world production capacity of 42 billion cubic metres of gas per annum (revised downwards from 49 billion originally. 

Linde is looking at the prospects for cooperation in projects and technologies that will contribute to Gazprom’s strategy of transforming the market for natural gas and by-products.  The agreement with Linde covers technology, engineering, expertise in purification and liquefaction of natural gas, as well as localisation of the equipment.  

In July 2015, it was announced that a subsidiary of SIBUR NIPIgazpererabotka will carry out the design, coordination, supply of equipment and materials, to manage the construction and give the customer the plant in the mechanical state of readiness.

The configuration of the project requires that the facilities of the Amur GPP will stand out from the incoming raw materials to the forces of Siberia, ethane, propane, butane and pentane-hexane fraction. It is also expected to create a large plant for helium production.  Part of raw materials will be exported, and some sent to the Amur Gas Chemical Complex which SIBUR is planning. 

The gas processing plant depends on the opening of a section of the Power of Siberia gas transmission system when ready.  2019 has been signalled as the earliest the gas plant could start production, but even then it could take several years to reach its full capacity.  The gas chemical plant is currently envisaged for a start-up date of around 2022, but this remains a provisional guideline. 

Regarding markets, the Russian Far East might only provide moderate opportunities for selling products from the Amur Gas-Chemical Complex, whilst China would provide the largest opportunity, particularly after Sinopec had gained the right to acquire 20% of SIBUR’s capital.  From the point of view of exports, the Asia-Pacific markets are attractive, but competition in them is greater, hence much will depend on the opportunity to compete in quality and price.

SIBUR-Tobolsk Gas Processing Expansion

SIBUR plans in mid-2016 to complete the expansion project for the gas fractionation capacity at Tobolsk-Neftekhim industrial site up to 8 million tpa.  The project involves increasing the capacity of the second gas fractionation plant (HFCs) from 2.8 to 4.2 million tpa by retrofitting internals, heat exchanger and pump equipment, the construction of the tower and expansion of commodity and raw material base.  As a result, the performance of the entire gas fractionation complex in Tobolsk will grow by 21% to 8 million tpa.

As a result of expansion the production of LPGs will rise to more than 6.5 million tons, which will fully cover the needs not only of existing production facilities, but also ZapSibNeftekhim which will need 2.5-3 million tpa of LPG.  According to preliminary estimates, investment in the project will amount to 5.5 billion roubles.

Tobolsk-Neftekhim was opened in 1984 with a capacity for gas fractionating of 2 million tpa of NGL. Since 2005, its performance gradually increased and reached 3 million in 2009.  A year later, the installation could take the processing of 3.5 million tons of natural gas liquids, two years later - 3.8 million tons.   In 2014, with the commissioning of the second gas fractionation plant total power Tobolsk site reached 6.6 million tpa.

SIBUR has launched the second stage of Vyngapur GPP, expanding infrastructure for the collection and processing of associated gas.  With the launch of gas processing plant ?2 (UPG-2) the capacity rose from 2.8 to 4.2 billion cubic metres to the degree of extraction of target hydrocarbon fractions up to 99%. The project was also laid 114 kilometres of gas pipeline to supply the processing of associated gas compressor station Variogan to GPP.  SIBUR investments totaled 16 billion roubles.

Expanding Vyngapur GPP is one of the final chords of infrastructure for the collection and processing of associated gas in West Siberia in the past 10 years.  SIBUR has in that time doubled the capacity for receiving APG in the region.  The project was implemented for the reception in the fields of associated gas processing with NK RussNeft.  The gas is sent to the Variogan compressor station and then transported by pipeline Variogan COP-Vyngapur GPP on Vyngapur GPP.  Produced on GPP dry stripped gas is sent to the gas transport system of Gazprom, broad fraction of light hydrocarbons (NGL).   At the Noyabsrk loading rack and product pipeline Purovsky-Tobolsk for further deep processing into polymers and other petrochemical products.

RussNeft is already supplying associated gas to the Nizhnevartovsk Gas Processing Plant and Belozerny SIBUR. In 2013, it signed a new long-term gas transportation agreement until 2025 to Vyngapur GPP. During this period, planned to supply about 16 billion cubic metres of associated gas.

Due to the continuous expansion and modernisation of the gas refining and petrochemical facilities and transport infrastructure SIBUR increased APG processing with 8.3 billion cubic metres in 2002 to 21.5 billion cubic metres in 2015. In recent years, the company in West Siberia were built and put into operation more than 10 billion cubic metres of gas processing capacity and more than 1,700 km of pipelines.

Irkutsk-Kovytka

To resolve the problem of ethylene supply to Sayanskkhimplast the government of the Irkutsk Oblast is considering alternative supply of raw materials that would provide a long term solution.  Dependency on Angarsk Polymer Plant for ethylene supply not only affects investment projects for Sayanskkhimplast but also existing production operations.  The current outage at Angarsk Polymer Plant, which started in February and is expected to last until the end of May, has forced Sayanskkhimplast to suspend full production of PVC, caustic soda, PVC plasticizers, etc.   The lack of alternative raw material supply could be overcome through the construction of the Kovytka-Sayansk-Irkutsk gas pipeline, which would allow Sayanskkhimplast to construct its own pyrolysis unit, but such a pipeline would take several years to construct and provides no short term solution to the question of ethylene supply. 

The previous owners of the Kovytka gas condensate field, TNK-BP, had formative plans more than a decade ago to construct a pipeline to Sayansk, but its successor Gazprom has shown little interest in the project.  However, Gazprom remains key to the project and the Irkutsk Administration is trying to persuade the gas company to change its development plans for Kovytka from 2024 to 2021.  In short the regional administration has indicated that without Gazprom bringing forward the development plans for the Kovytka field Sayanskkhimplast could be threatened by closure.

Rosneft suspends cracker project for Novokuibyshevsk

Rosneft’s plans for a petrochemical complex to be constructed at Novokuibyshevsk Petrochemical Company (SANORS) have been suspended or postponed.  Plans to construct a large-scale cracker of around a million tpa were confronted by numerous factors, including finance and the weakness of the domestic economy.  To some extent the Novokuibyshevsk cracker project depends on the construction of the Yamal-Volga gas liquid pipeline which shows no sign of starting. 

In fact, without support from the federal government, it is hard to envisage how construction of a pipeline transporting gas liquids from the Nadym-Pur-Taz region in Yamal will ever be undertaken.  Targets have been established to supply 2.6 million tpa of NGLs to Nizhnekamsk and 2 million tpa of NGLs to Novokuibyshevsk.  Other goals include supplying Kazanorgsintez with 1 million tpa of ethane and 500,000 tpa of propane.  Rosneft now is exploring options on how to use the existing assets that it acquired from SANORS in 2015.    

Nizhnekamskneftekhim to select licensors for ethylene project

Nizhnekamskneftekhim is conducting a tender for the selection of the licensor for the proposed olefin complex, which is planned to be constructed in two stages of 600,000 tpa.  Suppliers of equipment will be determined after the company chooses the licensor of the project.  The first stage of 600,000 tpa is provisionally targeted on completion and start-up by 2020 and the second stage of 600,000 tpa by 2025.

The first stage is planned to produce 300,000 tpa of polyethylene, 180,000 tpa of polypropylene and 200,000 tpa of polystyrene, 163,000 tpa of propylene derivatives and 110,000 tpa of ethylene derivatives. In the future, it planned to organize the production of 600,000 tpa of polyethylene, 180,000 tpa of polypropylene, 200,000 tpa of polystyrene, 93,000 tpa of MDI and 155,000 tpa of propylene derivatives.

Novy Urengoy Gas Chemical Complex

The VIS group of construction companies continue to build the Novy Urengoy Gas and Chemical Complex, and has assembled more than sixty% of the equipment, produced almost 164 thousand weld joints.  Technological pipe lines - the most important artery of the complex, which will supply raw materials, intermediates and final products. They connect with each other all the production sites Novy Urengoy Gas and Chemical Complex, closing the complex in a single technological chain. Installation work is done on plants produce ethane / ethylene and polyethylene.

Although this project has been dragging on for over two decades, the construction process is gradually heading towards conclusion.  Deadlines seem to have lost any significance in this project’s timetable, but the sheer fact that Gazprom has been determined to complete the construction process means that it should start production at some stage.  The plant design of 420,000 tpa of LDPE is intended to serve both domestic and export markets, including around 200,000 tpa intended for China.  In addition to polyethylene, the company will produce a wide fraction of hydrocarbons and methane fraction. The raw material for the production of ethylene and polyethylene is to be sourced from the Urengoy gas condensate field.

Gazprom plans to invest 150 billion roubles in the development of capacities for the processing of condensate in Urengoy.  The need for expansion is due, including, the start of the development of the Achimov deposits of the Urengoy gas condensate field.  OMV expects to complete the transaction on the exchange of assets with Gazprom in 2017.

Fitch Ratings downgrades SIBUR

Fitch Ratings has revised its assessment of SIBUR from a stable to negative outlook to BB + level.  The negative long term outlook was appraised in view of SIBUR’s high leverage in the 2017-2019 period due to the multi-billion-dollar petrochemical project ZapSibNeftekhim (ZapSib-2) in a period of low and volatile prices for petrochemical products.

Fitch expects net adjusted leverage funds from operations to grow to over 2,8x in 2017-2019 period, and 2x in 2020.  This increase is expected, despite the fact that the operating performance of SIBUR experience a beneficial effect of a weak rouble and a prolonged period of drawdown on the newly obtained credit lines for project ZapSib-2.  Fitch believes that after the project is completed in 2020, a significant improvement in the operational profile of SIBUR will be provided. 

The creditworthiness of the company is estimated the agency in the rating category BBB, which reflects its leading market position and a low cost base in the petrochemical sector, diversified portfolio and to demonstrate the access to raw materials at competitive prices.  It is expected that the ZapSib-2 project, at a cost of $9.5 billion, will provide an increase in the pyrolysis capacity by 1.5 million tpa and polymers by 2 million tpa will lead to the transformation of the operational profile of SIBUR.  By tripling the production capacity of polymers and doubling the domestic processing of LPGs the project will have a profound effect on the company’s revenues and profitability. 

The ZapSib-2 complex will reduce exposure to revenue risks associated with the volatility and associated to LPG and energy products, meaning that petrochemicals could rise from, around 40% to 60% around 401% of the group’s income to around 60%.   For ZapSib-2 SIBUR has attracted long-term debt financing, including funding from export credit agencies of $2.3 billion and credit from the National Welfare Fund worth $1.75 billion.  Another loan of $210 million has been sourced from the Russian Direct Investment Fund.  Fitch expects SIBUR’s capex to peak in 2016-2018. 

Products in the energy sector are diversified and include LPG, natural gas, naphtha, etc., and most of them have a significant correlation with the oil price.  Recent oil prices have led to a sharp drop in profitability in the segment of fuel and energy products in SIBUR, but had a less significant impact on the revenue from petrochemicals and supported margins due to lower raw material costs. 

The Amur Gas Chemical Complex (MCC) potential project is expected to be financed with project financing.  The 10% share of Sinopec represents a neutral factor whilst Fitch positively views this strategic partnership, as China is a growing market for petrochemical products.  SIBUR's costs are denominated in roubles, while around half of the group revenues comes from export and thus yields dollars. 

The overall impact of a weak rouble and low oil prices is neutral as the rouble smoothest out weak oil price environment.  However, the weak rouble affect the investments and dividends for SIBUR.  The overall weak   rouble has a positive effect on the side of the operating free cash flow, but, all things being equal, increases investments, dividends and debt. 

Overall SIBUR’s debt situation is manageable, and should be largely self-correcting after start-up of the ZapSib-2 complex.  Until then SIBUR will to some extent be dependent on oil prices and their association to energy product exports.  Historically SIBUR has a substantial short-term debt, which is 25%-35% of the total debt and cash exceeds the size of the company.  At the end of 2015 SIBUR had short-term debt in the amount of 84 billion roubles.

Svobodny meeting in March, Amur GPP

In March a working meeting took place at Svobodny in the Amur Oblast regarding the construction of the Amur Gas Processing Plant and up to around 40 local companies might benefit.  Companies from Svobodny, Uglegorsk and Blagoveshchensk attended the meeting, which was also attended by the Mayor of the Amur Oblast, a representative of the President’s office and the General Director of SIBUR in the Amur Oblast (Vasily Orlov).    

SIBUR is following developments for the gas processing plant very closely and asked fundamental questions about the project including the number of contractors, the schedule, etc., all of which is vital information in preparation for the gas-chemical complex.  Currently in the NIPIGas office at Svobodny, opened in March 2016, 27 people are employed on the gas processing project, and this should rise to 50 by September 2016.  The office is located on Kruchina Street. 

Currently preparations are underway for the initial parts of the project.  In the near future work will begin on construction of the railway station, internal roads, temporary towns for the contractors, energy sources, etc.  The peak of the construction process for the gas processing plant is expected in 2019 when up to 15,000 people could be involved in the project.  Energy for gas production is not yet organised, the local energy plant Bureysk hydro power plant is only capable of producing up to 320 megawatts against requirements of 300 megawatts.  Thus extra energy sources need to be constructed, whilst it will also be necessary to construct a railway station at Ust Pere.  SIBUR is particularly interested in the gas processing complex being constructed at the highest standard possible, taking into account the need to control costs. 



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