Tobolsk plant will double Sibur revenue
Sibur, Russia’s largest producer of petrochemicals, has brought forward by six months the mechanical completion of ZapSibNeftekhim, a $9.5-billion production complex under construction at Tobolsk, Russia. The project, Russia’s first world-scale petchems manufacturing facility, will be completed in the second quarter of 2019. It will triple Sibur’s polymers capacity, said Dmitry Konov, chairman of Sibur, at a press briefing held in London on 6 March. The briefing was attended by top company executives, including CFO Alexander Petrov and executive director Sergey Komyshan.
Sibur reported 2017 revenue of 454.62 billion Russian ruble ($7.96 billion), EBITDA of 160.85 billion Russian ruble, and an EBITDA margin of 35.4%. Feedstocks and energy accounted for about 40% of revenue, with most of the rest generated by petrochemicals.
That ratio will change significantly when ZapSibNeftekhim is online, Konov said. The company currently sells about 4 million metric tons/year (MMt/y) of LPG, of which 3 MMt/y are exported. When the Tobolsk complex is online, about 2.5 MMt/y of LPG will be redirected from exports to internal use as petchem feedstock, with exports dropping to 1–1.5 MMt/y.
Konov also discussed the Amur gas-chemical project, which is likely to become Sibur’s next major investment. It will be located at Blagoveshchensk, near the Chinese border in Russia’s Far East, where Gazprom is installing infrastructure to supply natural gas to China. As part of its investment, Gazprom is building six gas-processing lines to produce mostly liquid hydrocarbons and helium. Konov says that, in accordance with Gazprom’s schedule, the earliest the Amur petchem complex could be online is 2024. A final investment decision on the Amur petchem project is expected in 2020, he said.
Sibur and Gazprom entered into a preliminary agreement earlier this year for the supply of ethane to the proposed Amur petchem project. Gazprom’s gas-processing plant will treat natural gas destined for China, to extract LPG, pentane-hexane fraction, helium, and ethane. Gazprom will supply approximately 2 MMt/y of ethane to the Amur petchem complex under a formula-pricing arrangement.
Sibur will use it to produce 1.5 MMt/y of ethylene and 1.5 MMt/y of polyethylene (PE). Sibur and Gazprom plan to finalize the ethane-supply contract by the end of this year. Konov said that products from the Amur complex will be targeted at Asian markets, because the site is located thousands of miles from Russia’s main consuming areas. The complex could be built in a joint venture (JV) with international partners, mostly to help with marketing rather than for financial reasons, he said.
Konov also said that Sibur is in discussions with Saudi Aramco to build a jointly owned synthetic rubber production complex in Saudi Arabia. “If you look at our projects today, they are mostly in Russia and they are olefins and polyolefins, driven by feedstock availability,” he said. “But Russia is not the best place as far as synthetic rubber feedstock is concerned. Aramco has refineries and the feedstock. We are discussing scope, which may lead to a broader JV.”
In answer to a CW question on why Sibur is interested in joining forces with Aramco— already a partner with Lanxess in the world’s largest synthetic rubber producer, Arlanxeo—Konov said that Arlanxeo’s portfolio has gaps, notably polyisoprene rubber. He added that isoprene could also be used to produce other derivatives, as well as polyisoprene rubber. “We are looking for companies that have the license to produce these products and a willingness to invest,” he said. “That is the potential framework for the expansion of the JV.”
Konov also said that he expects a butyl rubber JV with Reliance Industries, under construction at Jamnagar, India, to start production in late 2018. “We are the last in the chain in the Jamnagar 3 expansion and will be receiving our isobutylene feedstock when the whole complex is completed,” he said.
The JV, Reliance Sibur Elastomers, is building a 120,000-metric tons/year butyl rubber plant, including 60,000 metric tons/ year of halogenated butyl rubber, although the halobutyl rubber project is still in the engineering phase, Konov said.
He confirmed that a proposed synthetic rubber JV between Sibur and Sinopec at Shanghai has been shelved. The complex, first announced in 2011, was intended to produce 50,000 metric tons/year of nitrile butadiene rubber (NBR) and 50,000 metric tons/year of isoprene butadiene rubber. Sibur had been expected to hold 25.1% and Sinopec 74.9% in the JV. The companies took about seven years to design and obtain technologies for the project, only to discover that demand was insufficient. At about the same time, Sinopec and Sibur also formed a synthetic rubber JV in Russia incorporating an existing 42,500- metric tons/year NBR plant at Krasnoyarsk.
Sinopec is currently helping to sell some of the JV’s output in China. Synthetic rubber had a strong year in 2017, but Konov says that additional supply of butadiene is likely to put pressure on the industry this year. He adds, however, that polyisoprene, a synthetic substitute for natural rubber and directly linked to its price, will not be impacted by the butadiene surplus. “But overall, I don’t expect the margins of 2017 to be repeated this year.”
Konov also addressed the expected flood of PE exports from the United States. “The United States is adding about 15 MMt/y of ethylene capacity, mostly going into PE, but with polyolefin demand rising at about 4.5%/ year, some 9 MMt/y of new capacity will be needed globally. So, yes, there is a lot of US capacity coming, but people are more worried that there will not be enough projects rather than too many,” he said.
In an exclusive conversation with CW, Komyshan said that the ZapSibNeftekhim complex, referred to as ZapSib2, will double Sibur’s revenue at full production. “We will convert 2 MMt/y of LPG into 2 MMt/y of polymers,” he said. The contribution of upstream to Sibur’s overall business will correspondingly decrease. The company already operates propane dehydrogenation (PDH) and polypropylene (PP) plants there.
ZapSibNeftekhim will be centred on an NGL-based steam cracker designed to produce 1.5 MMt/y of ethylene and 525,000 metric tons/year of propylene. The complex will also produce hydrogenated pyrolysis gasoline (pygas), butadiene, and methyl-tert butyl ether (MTBE) from ethane, propane, and n-butane feedstock. The olefin facilities will feed downstream units with capacity for 1.5 MMt/y of PE and 500,000 metric tons/year of PP. Overall, ZapSib 2 is now 74.3% complete after 38 months of construction. The cracker is 75.3% finished, and the PP and PE units 83.1% and 75.9% ready, respectively.
ZapSib 2 will cover Russia’s demand for most polyolefins. “We will introduce two slurry lines with combined PE capacity of 700,000 metric tons/year and two gas-phase lines with combined PE capacity of 800,000 metric tons/year. This will cover the needs of high-density polyethylene and linear low-density polyethylene,” Komyshan said.
Sibur plans to export a large proportion of the complex’s output. “Our exports could reach 900,000 metric tons/year but that will also depend on how the Russian market performs,” he said. When Sibur launched its 500,000-metric tons/year PP plant at Tobolsk, the new supply gave Russia’s PP consumption a big push. “We hope the same thing will happen with ZapSib 2,” Komyshan said.
The PDH and PP plants at Tobolsk worked at above name-plate capacity last year, producing 510,000 metric tons of PP. The PP plant’s EBITDA margin was 55%. Sibur plans to market all of the production from the new complex alone. The company currently sells about 60% of its output domestically, with another 5–7% going to former members of the Soviet Union. These proportions will change significantly. The company today sells two main product lines: synthetic rubber and LPG. Roughly half of its synthetic rubber output goes to tire producers in Europe and Asia. It sold 485,000 metric tons of elastomers last year.
Komyshan says that, among the other products from Tobolsk, MTBE will be sold on the market and pygas fraction will most likely be transported for consumption at Kstovo, where the company operates a benzene unit. No decision has been taken on how the butadiene will be used.
Leonid Mikhelson, Sibur’s largest shareholder with a 48.5% stake, said that the company may consider an IPO after the commissioning of ZapSibNeftekhim. Sibur chairman Konov declined to comment on a possible IPO. When asked how the company’s new shareholder structure—which includes Sinopec and the Silk Road Fund (Beijing), each with a 10% holding—has affected strategy decisions at Sibur, Konov said that the two Chinese shareholders have a relatively small minority stake.