SIBUR’s huge Amur cracker project will transform company, pivot to China

BARCELONA (ICIS)–SIBUR’s enormous Amur cracker project in eastern Russia will be transformational, doubling the company’s polymer capacities and making it one of the biggest producers in Europe. It also ties in perfectly both with China’s Belt and Road initiative and Russia’s desire to diversify its economy and boost exports.

Ground broke this week on the 2.3m tonnes/year polyethylene (PE) and 400,000 tonnes/year polypropylene (PP) project which is located in the far east of Russia, near the border with China. The project, due onstream in 2024/5, will use ethane from Gazprom’s Amur Gas Processing Plant as it ramps up over the same time frame.

For SIBUR the project will double its existing polymer capacity to 5.51m tonnes, according to the company. Under the leadership of Dmitry Konov, Sibur has grown aggressively over the past few years. The $9bn world scale ZapSibNeftekhim project at Tobolsk is ramping up this year, with capacity of 1.5m tonnes/year of PE and 500,000 tonnes of PP.

The expansions will catapult SIBUR up the global rankings of petrochemical companies over the next few years. In 2019 Sibur was Number 45 in the ICIS Top 100 Chemical Companies with sales of $8.198bn.

It will also become one of Europe’s largest polymer producers by 2024, according to SIBUR’s analysis.

SIBUR PIVOTS TO CHINA
The Amur project, and the connected Gazprom development, have been driven by the Russian government’s strategy of exploiting the country’s huge untapped natural resource reserves, even in more remote places. Amur, closer to the Chinese border than any significant Russian cities, dovetails with a wider strategy between the two powers to strengthen ties.

China is the world’s largest chemical market, with a big polymer deficit. Sibur is already shipping PE and PP to China  from the Tobolsk plant, with a recent rail freight initiative cutting journey times from 30 to 10 days.

A SIBUR spokesperson said on Friday that delivery of polymers to China from Amur will be carried out both by rail and by sea. Berthing infrastructure will be used by Sibur and Gazprom’s neighbouring Amur Gas Processing Plant with a hub planned for the port city of Vladivostok. The complex will also use the Trans-Siberian Railway with a connecting branch to be built.

The Amur project will increase SIBUR’s exposure to China’s polymer markets. Sinopec is likely to to be a major shareholder in the project, expected to take up to a 40% stake in the complex.

The company has been closer connections to SIBUR since 2015 when it took a 10% stake in the Russian group. The following year China state investment vehicle the Silk Road Fund also acquired a 10% stake. Then in 2019 Sinopec and SIBUR signed a deal to form a joint venture to produce 50,000 tonnes/year of nitrile butadiene rubber (NBR) in China.

The company has been planning an initial public offering (IPO) for several years, but CEO Konov said in February that this is unlikely to happen this year.

BIGGER PICTURE – RUSSIA AND CHINA’S BELT AND ROAD
The Amur project gels with China’s Belt and Road initiative which aims to create a vast trading bloc encompassing China, Russia, parts of Europe plus swathes of the Middle East, Asia and Africa.

The project will enable China to access new sources of raw materials, such as Russian oil, gas and polymers. It also provides a huge market for Chinese manufactured goods.

Russia’s government has been trying to diversify its economy from a reliance on oil and gas production. It also seeks to boost exports and increase self-sufficiency in higher technology products. SIBUR’s growth strategy ties in well with these aims.

After the Amur expansion, Russian polymer capacity will double, pushing it from 12th in 2020 to 5th place in global PE capacity, according to the ICIS Supply & Demand database.

This week’s SIBUR press release on Amur has a big emphasis on the use of Russian technology and expertise, where possible.

Focus article by Will Beacham.

Additional reporting by Yashas Mudumbai, ICIS analyst James Wilson and Tom Brown.