MOSCOW (ICIS)--Russian petrochemical producers have continued pursuing major new projects despite the country's economic problems.
Many of these petrochemical projects are aimed at substituting imports and rely on direct government support, despite the continued deficit of the federal and local budgets.
The Russian authorities have repeatedly pledged tax breaks and direct subsidies to support new chemical and petrochemical projects.
The stated goal of these support measures was so-called "import substitution," aimed at limiting the country's dependence on imports of chemical and petrochemical products.
Notably, the Russian authorities have pledged government funding amounting to nearly $2bn to support a project of Russia's leading petrochemical holding SIBUR to build the west Siberian petrochemical plant, also known as ZapSibNeftekhim.
In November 2017, SIBUR announced that the ZapSibNeftekhim project was 65% completed. SIBUR also pledged to finish construction works by mid-2019.
By October 2017, the ZapSibNeftekhim construction site employed nearly 14,387 workers. The petrochemical plant, in Tyumen region, western Siberia, is expected on stream in 2020.
The project's total capacity is due to reach 1.5m tonnes/year of ethylene, 500,000 tonnes/year of propylene, 1.5m tonnes/year of polyethylene (PE) and 500,000 tonnes/year of polypropylene (PP). This project is supported by the government despite signs of domestic PP overproduction.
The government also pledged to grant direct financial support to infrastructure projects needed to build the major plant of the Eastern Petrochemical Company in Nakhodka port on Russia's Pacific coast.
The funding is expected to be disbursed from 2018 on. The Eastern Petrochemical Company is controlled by Russia's oil giant Rosneft.
In August 2017, President Vladimir Putin ordered a start to construction works to build the production facilities of the Eastern Petrochemical Company before the year’s end. Subsequently, Rosneft pledged to start construction works on December 20.
In November, Russian lawmakers passed new laws to offer more profit tax breaks to far eastern projects, including the Eastern Petrochemical Company.
In March 2017, Rosneft estimated that the production facilities of the Eastern Petrochemical Company would cost Russian roubles (Rs) 658.7bn ($11.1bn) to be built, while the related utility and infrastructure facilities would cost Rs129.3bn ($2.18bn).
The plant, to be based in Nakhodka, Primorie region in the far east, is expected on stream in 2020-2021. It would have capacities to produce 2m tonnes/year of urea, 1.1m tonnes/year of ammonia and 1m tonnes/year of methanol.
Plans to build the major petrochemical plant in Nakhodka first surfaced back in 1974. Rosneft started considering this project in 2007 and formed the Eastern Petrochemical Company in 2011.
In the meantime, Russia's leading petrochemical producer Nizhnekamskneftekhim (NKNKh) also aims to build new major polymer facilities with the government’s support.
NKNKh plans to finish construction of its new units to produce 600,000 tonnes/year of ethylene (C2) in 2019, and the second-stage C2 unit, also 600,000 tonnes/year, by 2025 at an estimated cost of $7.8bn, according to the company.
In the past, NKNKh cut dividend payments to increase investment in its C2 projects.
In November 2017, NKNKh pledged to start construction works at its new olefin complex in 2018. Following a recent agreement with Linde AG, NKNKh started an environmental impact study related to the C2 projects.
In recent years, a number of Russia's new petchem projects were implemented with the officially stated goal of import substitution.
In 2013, Russia's petrochemical holding SIBUR started operation of its new 500,000 tonnes/year PP facility in Tobolsk. The launch of Tobolsk-Polymer turned Russia from a net importer into a net exporter of basic PP grades.
In 2014, Russia started operation of RusVinyl, a new 330,000 tonne/year PVC production facility at Kstovo.
In 2016, the ammonia and fertilizer plant in Mendeleyevsk started operation at full rates. The new production units have capacities to produce more than 700,000 tonnes/year of urea, 480,000 tonnes/year of ammonia and 230,000 tonnes/year of methanol.
On December 1, 2017, Russia's major petrochemical producer Gazprom Neftekhim Salavat started production at full rates at its new acrylic acid production unit. The facilities, built on the premises of Gazprom Neftekhim Salavat, have capacities to produce 80,000 tonnes/year of acrylic acid, 35,000 tonnes/year of ice class acrylic acid and 80,000 tonnes/year of butyl acrylate.
In 2011, the company, formerly known as Salavatnefteorgsintez, was renamed to become Gazprom Neftekhim Salavat.
It is based in Russia's internal republic of Bashkortostan, and is one of the country's leading fertilizer, ethylene and polymer producers.
Gazprom Neftekhim Salavat previously planned to start acrylic acid and butyl acrylate production in the fourth quarter of 2015. This project is part of the government's "import substitution" programme.