OUTLOOK '11: Russia market to be transformed by extra capacity

03 January 2011 15:00  [Source: ICIS news]

By Sergei Blagov

MOSCOW (ICIS)--Recently completed projects and extra production capacity will lead to significant changes in the Russian petrochemical market in 2011 and beyond, with the domestic polymer sector set to be the most affected.

In November 2010, Russian major Salavatnefteorgsintez, based in the internal republic of Bashkortostan, announced it had started full-scale production of high density injection polyethylene (HDPE) at a new 120,000 tonne/year facility.

This is expected to add about 20% to Russia's total HDPE capacity, although Salavatnefteorgsintez produced little more than 20,000 tonnes of HDPE in test mode in 2010.

The country's HDPE sector has suffered supply interruptions and price volatility in recent years, so the extra capacity is expected to have a moderate effect on the market.

Russia's Alco-Nafta said it would start production at its new 240,000 tonne/year bottle-grade polyethylene terephthalate (PET) plant by the end of 2010.

The company had previously expected to start the new plant, in Russia's western enclave of Kaliningrad, in 2009 and then in the first half of 2010.

Now the PET plant is set to start full-scale production in 2011, which will nearly double the country's total capacity.

Because of this the Russian PET market is expected to become less dependent on imports, and probably more export-oriented, in 2011.

In November Sibur-Khimprom, a subsidiary of Russian petrochemical holding company Sibur based in Perm in Russia's Ural region, started operating a new 50,000 tonne/year expandable polystyrene (EPS) unit.

Despite its relatively modest production volume, Sibur-Khimprom became the country's first plant producing EPS in line with international standards.

The company aims to target the domestic market in 2011, which will reduce imports from Europe and Asia.

In 2010, Sibur intensified its efforts to build a new 500,000 tonne/year polypropylene (PP) facility on the premises of its subsidiary, Tobolsk-Neftekhim.

Sibur had been mulling the idea of a building a new PP plant since 2006, with earlier plans involving a capacity of 900,000 tonnes/year of PP and up to 500,000 tonnes/year of polyethylene (PE) in Tobolsk.

The project now appears to be moving forward, with Sibur beginning imports of heavy equipment for the new PP plant in July 2010.

The planned new plant in Tobolsk, not far from the country's main gas producing areas in western Siberia, is set to nearly double the country's total capacity.

Although the project is not due to come on stream until 2012, its looming presence appears to have affected the market.

A competing PP project involving a planned 180,000 tonne/year plant in the Omsk region of western Siberia is now facing insolvency, despite direct support being pledged by regional authorities.

Russia's polyvinyl chloride (PVC) market also saw moves in 2010 that will lead to major changes in the sector.

On 12 July 2010, Sibur started building a new 330,000 tonne/year PVC plant at Kstovo, in the Nizhny Novgorod region of central Russia, where the company operates the existing Kstovo Petrochemical Plant.

The plant's capacity could eventually be raised up to 500,000 tonnes/year at its second stage.

The plant was previously expected to come on stream in 2010, but Sibur now aims to complete the project in 2012. However, even at its first stage the plant is due to entirely replace PVC imports.

Russian oil companies have also been considering major petrochemical projects.

In December 2010, Lukoil said it could build a new PVC unit in southern Russia with a capacity of up to 500,000 tonnes/year. However, this is not expected to come on stream before 2017.

Lukoil has long planned to build a new gas-chemical complex in southern Russia, designed to utilise natural gas from its offshore Caspian gas fields.

It would include a gas processing plant and a new 600,000 tonne/year PE production facility at Budyennovsk in Stavropol region, close to Lukoil's existing PE/PP plant.

The complex was previously due to be built in 2010, but is now expected on stream in 2016, and full details of what is planned may be released in 2011.

Russian state-controlled gas giant Gazprom has also considered petrochemical projects, including a plant to produce 650,000 tonnes/year of PE and 450,000 tonnes/year of PP in Orenburg region. However, it has now announced that the Orenburg project had been delayed until 2015.

So Russian companies have major plans to boost domestic capacities in 2011 and beyond, and these ambitious moves are set to have a major impact on the market situation in the country.

For more on PE, EPS, PP, PET and PVC visit ICIS chemical intelligence
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By: Sergei Blagov
+44 20 8652 3214

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