Worker at a petrochemical plant
Photo: ITAR-TASS
| Other Photos |
 |
|
 |
A Run on Chemicals
// Petrochemical Production on the Rise in Russia
Plans and Perspectives
Last year, Russian petrochemical producers showed positive growth for the first time in four years. Many of them announced new investment projects, amounting to $5 billion all together. The more cautious among them thought that the realization of those plans would lead to a sharp decrease in the load on the enterprises, by 40-45 percent.
Against the sun
Industry experts predict that world petrochemical market will continue to grow in the coming years faster than the oil or petroleum products markets. Soaring oil prices have made the raw materials necessary for petrochemical production and tunhe production itself more expensive as well. Polymers had risen in price 40-70 percent by September and they are expected to go up by another 10-15 percent in November.
Nonetheless, the industry is continuing its movement toward the East. Monomer production, which is directly tied to hydrocarbon sources, remains in its traditional strongholds, Europe, the United States and Russia, but is rapidly developing in the Near East. This is mainly because of the availability of its raw material natural gas while oil prices are at such high levels. The number of petrochemical plants in the Persian Gulf countries has risen from 4380 in 1999 to 9800 in 2003, with between $33-101 billion having been invested to open them. That represents 40 percent of industry investment in that region.
The making of petrochemical end products is spreading to Asia as well, and especially quickly to China, where their consumption is skyrocketing. The demand for polyester fiber in that country has been growing at an average of 26 percent per year for the last decade. Production volume for petrochemicals rose by 12 percent in China in 2003, and the profits from it by 43.6 percent. It is now one of the most profitable segments of that country's economy. World prices on a number of petrochemical products are largely determined here. The China Petroleum and Chemical Industry Association predicts that the substantial growth in the industry will continue through this year and its profitability will increase by 20 percent. In the next ten years, Chinese petrochemicals will take in about 35 percent of all the world's investment in that sector.
As a result, China today is Russia's biggest competitor on the world petrochemical market, and a major consumer of its own production at the same time. It may be to Russian makers' advantage that China does not have a broad raw materials base and the cost of electrical energy there is higher than in Europe or the United States. Russian experts say that in light of world petrochemical companies' strategies for opening deep refining complexes in China, Russia has good opportunities for providing primary petrochemicals there. However, Russian producers themselves are complaining more and more often about a shortage of raw materials.
A Second Breathe
Head of the Tatneftekhiminvestkholding Co. Rafinat Yarullin indicated at the first International Chemical Summit, which took place in Moscow, primary petroleum products are not available in sufficient quantities for further processing by petrochemical manufacturers. In order to rectify that situation, summit attendees suggested that limits be placed on hydrocarbon exports on a governmental level. They also recommended the formation of a standing state order for their output to support domestic production, as part of the reforms of the housing maintenance authority, for example. The government already partially satisfied their desires in October by raising the export duties on petroleum products, including benzol, xylene, propane, butanes, ethylene, propylene, butylene, butadiene and other flammable gasses, from $45.40 to $57 per ton.
It would be a stretch to say that Russian petrochemical manufacturers are booming. Production hit a low in 1998, at 40 percent of the output level of 1990. Its growth picked up dramatically in 1999, only to fall again and remain lethargic until 2003.
Last year, $6-8-billion worth of petrochemicals were produced in Russia, 1 percent of world output, placing the country in 19th place by production and in 11th place by volume per capita. Russian producers earned $5.6 billion on exports. The volume of investments has also begun to rise, including investments from the West. Foreign investment in Russian petrochemical manufacturing was $47 million in 2001 and, in 2002, projects were announced that topped $300 million in value. The totals for 2003 and 2004 should reach the billions.
Millions for Polymers
The biggest project in Russian petrochemical production since the early 1990s was announced in December 2003. Tatneft, Tatneftekhiminvestkholding, Nizhnekamskneftekhim, the government of Tatarstan and the South Korean LG Corp. signed a protocol to build Tatarstani oil refinery and petrochemical complex. The refinery, to be based around the Nizhnekamsk refinery opened a year ago, will have a capacity of 7 million tons of oil per year. In addition, there will be plans to produce ethylene (600,000 tons per year) and polymers (polyethylene and polypropylene). In January, the partners formed the Tataro-Korean Petrochemical Co., in which Tatneft received 46 percent of the stock and Nizhnekamskneftekhim 36 percent.
Svyazinvestneftekhim (representing the government of Tatarstan) and LG own 9 percent each. A memorandum of mutual understanding was signed in September between the government of Tatarstan and the Export-Import Bank of Korea, under which the bank opened a credit line of more than $1.3 billion to finance the first stage of the project (construction of the oil refinery, a polyester foam plant with a capacity of 40,000 tons per year and a linear polyethylene plant with a capacity of 200,000 tons per year). The total investment in the project is estimated at $3 billion.
In April, a group of German banks headed by Commerzbank negotiated with NOVATEK for the chance to finance the foundation in Novokuibyshev, Samara Region, of a petrochemical complex worth €1 billion. The contract with Linde Co. for its construction was to be signed in June, but the project was not forwarded for half a year. Finally, in September, NOVATEK began negotiations over again with Commerzbank, AKA Bank and the Hermes and Linde Export Banks on finance conditions. A preliminary agreement was reached with the banks for more than 80 percent of the officially approved sum (by the government of the Russian Federation. Financial guarantees from the state were not necessary).
They are counting on 400,000 tons of polyethylene, 200,000 tons of polypropylene, 100,000 tons of benzole and toluol, 25,000 tons of high-octane gasoline components and 100,000 tons of butadiene per year. A gas-condensate processing plant in Yamalo-Nenets Autonomous Area with a capacity of 200 million tons per year that NOVATEK will build there is to guarantee deliveries and is expected to be online by 2005.
Surgutneftegaz had announced plans to build a complex in Khanty-Mansi to produce Surgutpolimer polymer worth $600 million by the beginning of 2002. Almost two years later, the project had still not been announced, and Surgutneftegaz head Vladimir Bogdanov approached three Japanese traders, Mitsubishi, Mitsui and Itochu Corps.
The LUKOIL-Neftekhim investment program foresees the growth of ethylene production by 1-1.5 million tons by 2014. At the same time, they are planning on increasing production of polymerized plastics. The Sayanskkhimplast Co., controlled by Viktor Veksleberg, is promising to increase polyvinyl chloride production to 600,000 tons by 2005. AK Sibur wants to build a plant to produce 120,000 tons of polyethylene per year worth $135 million and start production at Tobolsk Neftekhim production of propylene (250,000 tons per year) and polypropylene (120,00 tons per year). That will require investment of $223 million.
They are beginning high refinement projects that have practically never been produced before in Russia. At the beginning of 2005, five plants are to be working to produce 100,000 biaxial polypropylene sheets (BOPP sheets) per year worth €140 million. The first such project was announced in 2003 by NOVATEK, which had decided to prepare a place for itself on the polypropylene market in advance for products of the Novokuibyshev plant. Then the Euromet Group, the GRiNN Corp., Marta Trading and Production Co. and Mosimpex Service Ltd. joined in its efforts. If all those plans came to fruition, the domestic market would be not only full, but the BOPP sheet market, by the very most optimistic predictions, would reach $100,000 per year.
AK Sibur opened the first polyethylene terephthalate (PET) plant in Russia to produce 52,000 tons of PET per year (which is used, in particular, for the production of packaging materials). Now the company is considering producing 28,000 tons of PET per year at its Tver plant and setting up new production of 200,000 tons at its Sibur-Neftekhikm plant in Dzerzhinsk. Evroplast and Polief plan to produce 300,000 tons of PET per year altogether and, in October, the Korund plant announced plans to produce 154,000 tons of PET per year, worth $80 million. Thus, in a few years, more than 730 tons of PET per year will be produced. That is more than the forecast demand.
One Big Tar Baby
It is not altogether clear that all the projects listed above will succeed. The demand for BOPP sheets from Russian companies and for PET in general could be fully met by imports. In Sibur they do not deny that it is hard to compete with foreign companies. Moreover, terephthalic acid, the raw material for PET, is not produced in Russia yet and has to be imported at prices equal to those of the finished product.
The Austrian petrochemical investment group Petrochemical Holding (a structure close to Sibur founder and ex-president Yakov Goldovsky) and the Indonesian petrochemical group Indorama Petrochem plan to open their own plants to produce 150,000 tons per year of PET in the Klaipeda free economic zone in Lithuania.
The Azerbaijani state-owned company Azerkhimia is also of interest to the Russian market. It recently announced that it is preparing to start exporting polyethylene. In 2004, Azerkhim promised to deliver 50,000 tons of polyethylene to various countries and, in 2005, it will increase its productions by 30 percent.
Many industry analysts think that the production of projects planned for the petrochemical sector, if realized, would lead to a flooding of the market. Export possibilities are limited by duties and quotas set in consumer countries that are developing their own production. AK Sibur marketing director Oleg Makarov thinks that, if all anounnced projects are realized, only 40-45 percent of the newly built capacity will be in demand.
Iran Begins a Petrochemical Five-Year Plan
In the coming years, Middle Eastern countries will attract about 30 percent of world investment in petrochemicals. In June, the leading Japanese petrochemical companies announced plans to make massive investments in Saudi Arabian projects. Sunitomo Chemical will join Saudi Aramco in building the world's biggest oil refinery worth $4.6 billion in mid-2008. It will produce oil and purified ethane, ethylene and polyethylene. The Saudi Petrochemical Development Co., together with a consortium of 58 Japanese firms, including Mitsubishi Chemical and Japan Bank for International Cooperation, is ready to invest $2.3 billion in the construction of a series of petrochemical enterprises on the Persian Gulf.
In March 2004, the German Lurgi and the Iranian Petroleum Development Co. signed an agreement on the construction of methanol plant in Iran for €160 million. The construction of a third and fourth methanol plant will bring their output to 3.4 million tons per year, and Iran's share of the world market will grow from 1.49 to 6.35 percent. The construction of the second plant will make Iran the world's largest methanol producer.
The completion in 2007 of a pipeline to deliver ethylene to the western provinces of Iran will make it one of the world's largest exporters of polyethylene. The project implies moving the ethylene from Assaluyeh and Mahshahr through a 1659 kilometer pipeline to the five western provinces of the country (Kohgiluyeh, Buyer Ahmad, Lorestan, Kermanshah and Kordestan) as well as to Azerbaijan. The total shipment will amount to 1.5 million tons per year. The construction of an ethylene pipeline will be followed by the construction of five petrochemical complexes and with a total production level of 1.65 tons per year. There will be $1.8 billion spent to outfit the complexes. At the beginning of their operation, in 2007, polyethylene export from Iran will reach 2.5 million tons annually. If the entire program is realized, export will reach 4.2 million tons of polyethylene (14 percent of the world trade) annually for 2005-2010 (the fourth five-year plan after the Islamic Revolution).
In June, the Iranian national industrial and mining committee announced that the majority of hurdles to investment in the petrochemical sector of the economy have been overcome. They predict that the petrochemical industry will bring the country $12 billion in its fourth five year plan. There has already been $11 billion invested in production for the coming five years. Under the plan, the economic development of Iran will include 31 new petrochemical enterprises. In ten years, export of petrochemical products will bring the country $20 billion in income.
Renata Yambaeva
All the Article in Russian as of Nov. 11, 2004
|
|
|
