Russia's Baltic Chemical Complex PE project aims to add 3m tonnes/year by 2025

Author: Will Beacham

2021/09/24

BARCELONA (ICIS)--Russia's Baltic Chemical Complex €10bn project, one of the world’s largest polyethylene (PE) expansions, will start commercial production from mid-2024, targeting its domestic market as well as export destinations including Europe, Asia, Latin America, and Africa, according to the CEO at the producer.

The PE project, near the Baltic Sea’s Ust-Luga port, will use ethane from a nearby gas processing facility, processing 3.6m tonnes/year of ethane to produce up to 3.1m tonnes/year of ethylene and up to 3m tonnes/year of PE.

The project is timetabled in two phases, with the first 1.5m tonnes/year facility due onstream from mid-2024 and the second, with the same capacity, from 2025.

There will be six PE reactors with US company Univation supplying the technology for polymerisation.

Pyrolysis technology for the ethane cracker will be sourced from US-headquartered Lummus, with both companies also supplying all catalysts and reactors.

The project has an Engineering, Procurement and Construction (EPC) contract with China National Chemical Engineering & Construction Corporation Seven.

An engineering and procurement  contract is in place with US group McDermott for pyrolysis and with South Korea’s Daelim for PE and  linear alpha olefins (LAO).

It includes around 1.6m tonnes/year of high density polyethylene (HDPE) and 1.3m tonnes/year of linear low density polyethylene (LLDPE) and metallocene LLDPE (MLLDPE).

“The first line is going to be in the stage of mechanical completion by the end of 2023 and we plan to finish all starting up and adjustment works by mid-2024," the CEO of RusGasDobcha, which owns the project, told ICIS.

"The second line will be in the stage of mechanical completion by late 2024 and production will start in 2025," added Konstantin Makhov.

RusGazDobycha is owned by the country’s National Gas Group. The CEO declined to name the shareholders of National Gas Group, citing commercial confidentiality.

The site was chosen because of access to the biggest and deepest port in the Baltic, plus a major trunk gas pipeline which runs nearby.

“We would like to emphasise that our structure is fully transparent - we have undergone due diligence by major companies from different countries, including the US. Of course, we do so subject to non-disclosure agreements signed with our counterparts,” said Makhov.

Out of €10bn capital expenditure (capex) for the gas processing and polymer plant, around $6bn of the funding in place.

Construction began in 2020 and at present piles are being sunk and foundations prepared for the project.

The CEO said that in October 2021 the first equipment should be delivered to install on the foundations.

The project includes LAO, with technology licenced from Axens for a 120,000 tonnes/year butene-1 plant and 50,000 tonne/year hexene-1 facility.

These will be constructed in parallel with the gas to chemical facility with the same timelines for completion.

NO POLYMER OVERCAPACITY
Makhov said the capacity of the plant would be absorbed by rising global PE demand, which he forecast would increase by around 20%, or 20m tonnes, from 2020 to 2025.

“We are in the first quartile of costs and we don't think that an oversupply situation is likely. We think that general market consumption growth will absorb all volumes coming from new cost-effective facilities,” he said.

According to ICIS analyst James Wilson, ICIS projects global PE demand will grow by around 20% in 2020-2025 to reach around 200m tonnes/year.

“The current wave of mainly US and Chinese expansions will be complete by 2022/2023 so the Baltic project will come onstream at a time when demand will be catching up with capacity, pushing up operating rates,” said Wilson.

Source: ICIS Supply & Demand widget, ICIS Dashboard

IPO PLAN
The CEO said an initial public offering (IPO) will be an important step in the development of the business.

“So far, we cannot tell you the exact year because we would like to firstly complete this huge project and start to reimburse our senior debt. We don't think an IPO initiative is reasonable until 2027,” concluded Makhov.

Front page picture: Baltic Chemical Complex's facilities in Russia's Leningrad Oblast region
Source: Baltic Chemical Complex 

Interview article by Will Beacham