Mechanical completion for SIBUR Tobolsk megaproject in Q2 2019

SIBUR’s ZapSibNeftekhim complex under construction. Source: SIBUR

LONDON (ICIS)–SIBUR’s flagship ZapSibNeftekhim petrochemicals complex is expected to reach mechanical completion in the second quarter of 2019, the chairman of the management board of the Russia-headquartered petrochemicals producer said on Tuesday.

The $9.5bn project, which is expected to triple the company’s polymers capacity and nearly double Russia’s total polyolefins output, was nearly 75% complete as of the end of this February, with $4.2bn of investment earmarked for 2018-2020, according to management board chairman Dmitry Konov.

The site is not expected to be operational for around nine months after mechanical completion, Konov added, with production ramp-up expected to happen gradually after that.

The unit is expected to add 1.5m tonnes/year of polyethylene (PE) and 500,000 tonnes/year of polypropylene (PP), as well as 1.5m tonnes/year of ethylene, 500,000 tonnes/year of propylene, and 100,000 tonnes/year of C4.

Capitalising on gas reserves in western Siberia, material from the site is expected to be produced at costs competitive with new large-scale US Gulf Coast petrochemicals capacity at crude prices of $50/bbl.

55% of the remaining budget is expected to come from SIBUR’s capital reserves, with 10% from Russia’s VEB bank and Direct Investment Fund (RDIF), and 35% from export credit agencies, with 40% of the project funding denominated in Russian roubles, 30% in US dollars, and 30% in euros.

“Zapsib was a serious decision, even painful for some of us, and in 2014 we decided not to run it on project finance and instead to finance it off balance sheet,” said Konov.

The feedstock requirements of the complex, which currently employs 12,000 workers in the construction phase, are expected to change SIBUR’s overall external sales profile, toward petrochemicals and away from petroleum gas.

“We currently produce about 1m tonnes of polymers, ZapSibNeftekhim will add 2m tonnes,” Konov said.

“After the start-up [of Zap], we will stop selling about 3m tonnes of LPG [liquefied petroleum gas] which are sold externally today and use them in polymers production,” Konov said.

LPG comprised 60% of revenues for the company’s feedstock and energy division revenues in 2017, and the sharp increase in captive use is also likely to shift the company’s overall geographic sales mix, according to Konov.

“Today we sell 60% of our products into Russia, and another 5-7% into what we believe are our domestic markets, CIS,” he said.

“This proportion will probably change after Zapsib. Look at our portfolio of exports today, we export roughly half of our synthetic rubber output, mostly to European and Asian tyre manufacturers, which have been pretty stable sales for many years.

“Another big product is LPG, which we sell to eastern, southern and northwestern Europe, and we expect to take that LPG and convert it into polymers after Zapsib is onstream,” he added.

Clarification: Re-casts paragraph 10