PKN Orlen-paraxylene and related investments
PKN Orlen expects to start its new paraxylene plant at Plock in the third quarter this year, to be followed by start-up of the PTA plant at Wloclawek in the fourth quarter. These projects represent a key undertaking for PKN Orlen and the petrochemical industry in Poland. The launch of the paraxylene and PTA projects will result in an increase in crude processing by 1.2 million tpa, the production of diesel oil by 200,000 tpa, the production of benzene by 80,000 tpa and the production of orthoxylene by 40,000 tpa. Paraxylene has been produced before at Plock, where there is a small plant of 48,000 tpa based on Amoco technology, but this has only operated sporadically in recent years and did not run at all in 2009. The new paraxylene plant will have a capacity of 400,000 tpa, which will be used captively in full by the PTA unit at Wloclawek which will be capable of producing 600,000 tpa. Offtake agreements for PTA have already been agreed by PKN Orlen with Mitsubishi and SK Eurochem. A loan of €300 million was granted by the European Investment Bank in 2007 to finance the construction of the paraxylene and PTA projects.
The increases in the aromatics division of PKN Orlen are expected to impact significantly on revenues in petrochemicals which were badly affected last year. As a result of poor returns, the group has started to look beyond its core refining and petrochemical divisions. PKN Orlen plans to start building a 460 megawatt gas-fired power plant in central Poland this year and has already spoken with several potential partners.
PKN Orlen sold part of its mandatory crude oil reserves for $280 million at the end of March, aimed at improving the company s cash flow and reducing the cost of financing its debt. PKN Orlen s reserves, valued at around zl 6 billion ($2.09 billion) at the end of last year, distort the profit and loss account of the refiner and tie up cash. Thus, PKN Orlen has outsourced the management over reserves to Deutsche Bank s Polish unit, Lambourn. The agreement for gathering and management of inventories was concluded for one year, with the possibility of an extension. PKN Orlen will pay a monthly ticket fee to Lambourn and as it will continue to store the crude oil, it will receive revenue for storage. Both items will be reflected in operating costs and revenue.
PKN’s future supply options at Plock could be enhanced by the potential completion of the Odessa-Brody pipeline project and extension to Plock and Gdansk. In principle, it would allow the transit of oil from Azerbaijan. For its other group refineries, PKN Orlen signed a spot agreements in March with Gunvor International for crude oil deliveries to Orlen Lietuva in Lithuania and Glencore Energy for crude oil deliveries to Unipetrol to its refineries at Litvinov and Kralupy.
Estimates have been made that Oltchim needs to make an investment of around €15 million for essential repairs needed to restart the Arpechim petrochemical complex at Pitesti. After reviving production in the first phase, the costs to modernise and increase production capacity to the intended levels of 300,000 tpa for ethylene and 150,000 tpa for propylene have been estimated to require in the range of €154 million. Construction and modernisation could take around three years to complete, and the funds would have to be made available from bank loans and supplier credits. Oltchim recently acquired the petrochemical complex at Arpechim for €12.9 million against the advice of its minority shareholder PCC, which favoured investments into niche product areas.
LUKoil-Emerson agreement
Emerson Process Management and LUKoil have signed an agreement to modernise 13 refining and petrochemical facilities in Russia and East Europe. Under the agreement, which extends through to 2014, Emerson will provide equipment, software and services as part of LUKoil’s enterprise-wide strategy to modernise process automation at its oil-and-gas refineries, petrochemical plants and related facilities. LUKoil’s main operations to be upgraded include Neftochim Bourgas in Bulgaria, Stavrolen and Saratovorgsintez in Russia, Lukor in Ukraine, and the Vars terminal in Latvia.
There is no detail available when the petrochemical complex at Bourgas, which stopped production in the autumn, will restart activity. LUKoil Neftochim is the only operational refinery in Bulgaria and shut its polymer and petrochemical plants in September last year due to low demand. LUKoil completed planned maintenance at the refinery in March, after closing in January. The plant had enough stock of gasoline and thus the routine operation did not affect sales. LUKoil recently started the operation of a new unit for sulphuric acid alkylation at Bourgas, with a capacity of 300,000 tpa based on the Stratco license. Start-up of the new installation will enable the company to stop the old 215,000 tpa unit which is considered to be out-of-date.
Polish privatisation and sell-offs
Negotiations for the sale of Zaklady Azotowe Kedzierzyn (ZAK)and Zaklady Azotowe Tarnow (ZAT) continue between the prospective buyers PCC and Nafta Polska. If the German group PCC and Nafta Polska could agree on the price for ZAK and ZAT, privatisation could be completed quite smoothly according to reports. Both sides are in a difficult negotiating position, however, with PCC looking to buy assets in a downturn and Nafta Polska attempting to secure the highest price possible.
Zaklady Azotowe Pulawy (ZAP) is competing with Achema for control of Anwil, and PKN Orlen has respnded to the competition by raising the price. Both companies have bid more than zl 1 billion, but this is not viewed as sufficient by PKN Orlen. In order to finance the purchase of PKN Orlen’s 84.79% stake in Anwil, ZAP would need credit and a capital increase. For ZAP, Anwil would be a good complement because of its product range whilst there are also logistical synergies.
Demand for oxo alcohols has been good for Zaklady Azotowe Kedzierzyn (ZAK) this year and the company has been struggling to meet all orders. Oxo alcohols is the second most important sector for ZAK after fertilisers. Demand for butanols and 2-EH has rebounded after the collapse of the market in early 2009.
ZAK has completed the construction of a building control room for its new nitric acid installation, which according to the schedule is to be ready in mid-December. However, it does require additional funds from the banks to complete the project. The new installation is to replace the old unit, which does not meet environmental standards and also produces acid using outdated and expensive technology. The new plant will produce 900 tons of acid per day.
Zaklady Azotowe Tarnow (ZAT) has signed a further annex to its contracts with PKN Orlen for raw material supplies. Products include phenol and benzene at an estimated value of around zl 140 million. Phenol costs amounted to 23% of total raw material and energy costs in the fourth quarter last year. The company has recently signed an agreement with PKP Cargo to transport about one million tons of cargo, including fertilisers, coal and chemicals.
PKP CARGO has also reached agreement with ZAK over product shipments. The totalvolume of products to be transported in the period from March 2010 to February 2011 will amount to 411,500 tons, including 220,000 tons of coal, 111,500 tons of chemical products and 80,000 tons of fertilisers. Part of the coal logistics have been taken over by PKP Cargo from CTL Logistics.
Zaklady Azotowe Tarnow (ZAT) is undertaking a number of key projects which may be assisted by finding a new owner and new forms of finance. Future projects depend on financing and the attitude of the new owners towards investment. ZAT used previous share issue funds to start modernisation of the caprolactam plant, the installation of a new hydrogen generation system and the expansion of the modified plastics plant. The modernisation of the caprolactam plant will take the capacity up to 101,300 tpa from 95,000 tpa, and also includes the installation of a new hydrogen generation system. The engineering design has been completed for the project and construction is in progress.
Design for the construction of a new hydrogen generation system has been completed, including a feasibility study for a new hydrogen generation system of the 8000 cubic metres per hour capacity. At present, the company is in the process of selecting the technology supplier.
Other projects include improved a selective phenol hydrogenation system due to increased demand for cyclohexanone. In terms of commodity products, ZAT is expanding production at its modified plastics plant whilst aiming to modernise the polyamide facilities and increase capacity from 45,000 tpa to 55,000 tpa. The company in recent months has acquired Unylon in Germany, which has five lines for polyamide-6 production with a total capacity of 47,000 tpa. This will increase the total capacity for polyamide-6 to 102,000 tpa after ZAT has completed its expansion at Tarnow. The two plants will be capable of accounting for all of ZAT’s caprolactam consumption thus eliminating the dependence on export activity.
The first half of 2010 will see Air Liquide start-up a new air separation unit (ASU) at Pulawy. The new ASU at Zaklady Azotowe Pulawy (ZAP) will manufacture liquid oxygen, liquid nitrogen and liquid argon and will become one of the biggest bulk gas sources in Central and East Poland. ZAP is investing in the production of solid and liquid urea and ammonium sulphate-based fertilisers. Investment costs of these projects will amount to zl 96.5 million for solid fertilisers, and zl 69.5 million for liquid fertilisers. The solid fertiliser project comprises a production unit for solid urea and ammonium sulphate-based fertilisers (PULGRAN S), with a production capacity of 160,000 tpa, and an integrated logistics and distribution complex. The liquid fertiliser project involves the production unit for liquid fertilisers based on urea and ammonium sulphate solution (PULASKA), as well as tanks for storing and manufacturing derivative products. ZAP will seek to localise the construction of the new fertiliser units within the Pulawy Special Economic Zone which is a subzone of the Starachowice Special Economic Zone.
The short term problem for ZAP is that it could be dragged back into the red territory in the next few months due to lower prices for fertilisers set against very high gas prices. ZAP pays higher than average gas prices and such a difference leads to the company having high urea producer costs. On a positive note, ZAP has been able to take good advantage of the rebound in the caprolactam market due to fully switchable caprolactam capacities from liquid caprolactam to caprolactam flakes. The company thus gained a competitive advantage over other producers and was able to meet strong demand from Asian markets.
Central European Plastics
Markets have started to appear more buoyant in recent weeks, with orders at plastics converters beginning to grow. Plastics processors in Central Europe supplying the auto industry report fully utilised capacities and therefore growing raw material stocks. However, those supplying the construction industry report much lower capacity utilisation, with lower demand for plastic foils and insulation foams. Meanwhile, pipe manufacturers are reporting good demand. A temporary disruption was caused by reduced access to polypropylene for a brief period, due to a one-week shutdown at TVK and the difficult availability of Borealis products.
From 1 January 2010, Greiner Packaging (Austria) entered into a jv with Jovanovic Plast in Serbia. The jv, named Greiner Packaging JP, will focus on plastic systems for the storage of food, ice cream and cheese, in addition to flower pots and garden furniture. The Polish plastics converter Ergis-Eurofilms has ordered LLDPE from SABIC Europe valued at zl 18.5 million in 2010. At the turn of 2010 and 2011 Ergis-Eurofilms intends to invest zl 24 million to boost stretch film manufacturing at the Olawa Plant. Already in the first year the new line will increase capacity from 27,000 tpa to 44,000 tpa.
The ERG Capital Group is planning to expand its operations through a series of acquisitions over the next four years. The company, based at Dabrowa Górnicza near Katowice, is reported already to be in negotiations with two other chemical companies. ERG manufactures a range of shrink and stretch packaging films, plastic bags and adhesive tapes, as well as injection moulded crates, buckets, bins and battery cases. The group also operates Bioerg, a biodegradable packaging business that produces compostable plastics material and bags which was set up in 2007.
In terms of market trends, the Serbian plastics sector started to stabilise from the beginning of March, as fluctuations in the dinar exchange rate mitigated the effect of price changes. At present, there is sufficient availability of polymers in the domestic market. The fluctuations of the Serbian dinar have not caused problems for Petrohemija as 80% of its output is exported for which shipments are settled in euros.
The chemical industry in Serbia reduced both exports and imports in 2009, with imports amounting to $2.97 billion against exports of $1.02 billion. The main challenge to the chemical industry in Serbia is the lack of working capital and loans that could support production. The technologies are relatively old and there has been very little investment in several decades, particularly since the Nato bombing of the Petrohemija at Pancevo in 1998.
Russian chemical production Jan-Feb 2010
Russian chemical production in the first two months of 2010 was higher than in the same period last year. Methanol and synthetic rubber have shown the biggest jumps, after both product groups were decimated in January and February last year by the economic crisis. Increases were recorded for bulk polymers in the first part of the year, although markets still remain under some pressure from the economy. The IMF has forecast a recovery of 5.5% for Russia in 2010, which may help to erode some of the lost ground in 2009. However, it may be 2011 or even 2012 before 2008 chemical industry consumption levels are matched again. Partly due to the uncertainty over the speed of the recovery and growth rates beyond, SIBUR has decided to put aside some of its more ambitious polyethylene projects for the time being. The group nonetheless continues to press ahead with the Tobolsk and Kstovo investments. At a meeting of the VEB Bank, which is supporting the Tobolsk project, Putin stressed the importance of the new polypropylene plant not only in providing an outlet for gas at Tobolsk-Neftekhim but also acting as a test-case for other projects in the chemical industry.
In 2010, the main new production capacities to be added in Russia include the HDPE plant at Salavatnefteorgsintez (120,000 tpa), the polypropylene plant at Omsk Kaucuk (180,000 tpa), the methanol plant at Shchekinoazot (450,000 tpa) and the PET plant at Kaliningrad (240,000 tpa). In terms of major investments, consideration is underway in the Yugra region in West Siberia for the conversion of associated gas into paraxylene and eventually PET. This type of project is aimed at tackling the environmental impact of gas flaring and extracting and monetising value from the associated gas. It is feasible that other project ideas based on this principle will start to come under review.
Losses from the burning of associated gas in 2009 in Russia amounted to an estimated value $1.3 billion. A total of seven major oil companies in Russia burned 19,960 billion cubic metres, or 64.3% of the total production of this resource. The loss of $1.3 billion is derived from the calculation of domestic gas prices, equating to around $65 per thousand cubic metres. However, if Gazprom’s prices to Europe are used as the pricing basis, the losses escalate to $5.7 billion.
In 2008, the government responded to pressure from oil companies and liberalised prices for associated gas. Until then, prices had averaged between 73 to 442 roubles per ton of associated gas, depending on content of propane, pentane, butane, isopentane and hexane. Prices have since reflected more market based principles, but the petrochemical companies argue that they should receive much lower prices as associated gas is a by-product. Oil companies believe that associated gas should be priced the same as natural gas in order to justify expenditure in processing. To raise processing levels from the present level of 64.3% to 95% by 2012 it will require a huge amount of short term investment, which becomes more difficult to justify when associated gas prices are low. This is one of the negative factors, aside the lack of infrastructure and gas processing facilities that might prevent at least one or two producers failing to meet the 2012 government deadline.
Associated gas news
SIBUR increased processing of associated gas in 2009 by 10% to 16.8 billion cubic metres. SIBUR has applied for financial support for projects aimed at reducing greenhouse gas emissions. The Russian bank Sberbank held a design competition in February and March, in accordance with the Kyoto Protocol, through which Russian companies can receive investments in exchange for reduced greenhouse gas emissions.
By undertaking proposed projects, SIBUR aims to increase processing of associated gas by around 2 billion cubic metres per annum and reduce greenhouse gas emissions over 2010-2011 by around 9 million tons of CO2. The proceeds from the sale of carbon units of funds will be used to finance investment projects for processing of associated gas. From 2007 until 2009, SIBUR’s annual processing of associated gas increased from 13 to 16.8 billion cubic metres and is expected to reach in 20 billion cubic in the next few years.
Surgutneftegaz achieved 95% utilisation of associated gas processing at 50 of its developed fields in 2009, helping not only to meet government targets early but also to provide the company with its own energy resources. Rational use of associated gas, has allowed Surgutneftegaz to provide an estimated 29% of its total demand for electricity from recycling its own raw materials. The company operates 17 gas turbine and 7 gas turbine power generators.
Rosneft has launched a first gas turbine power station at Priobsky in Khanty-Mansiisk, as part of its programme to increase utilisation of associated gas. The commissioning of the station simultaneously solves the problem of associated gas utilisation and the generation of electricity. Financing of the project amounted to 18.7 billion roubles.
Agreements were concluded in March to utilise associated gas from Rosneft and to convert them into petrochemicals, specifically paraxylene and PET. Rosneft has agreed with a company called New Gas Technology Management for the supply of 600 million cubic metres of associated gas, to be delivered to the Yugra Gas Chemical Company which aims to construct a gas processing plant by 2012-2013. The processing plant will produce propane-butane; stable gasoline and dry stripped gas in the range of 300 to 450 million cubic metres per annum. The aim is for the gas chemical complex to use dry stripped gas to produce methanol before conversion into BTX. This is then intended to produce 108,000 tpa of paraxylene and 180,000 tpa of PET. These represent first phase investments to be followed by second and third stages where paraxylene capacity will be increased sharply. The key factor is securing the associated gas to produce dry stripped gas and agreements have been reached for at least ten years.
The Russian Ministry of Natural Resources and Ecology estimates that the annual volume of associated gas output is roughly 55 billion cubic metres, of which only 26% is sent to processing and 47% goes to the needs of industries or debited to the technological losses. Often associated gas from oil pumped back into oil-bearing minerals, to increase the pressure and to facilitate the exit of oil. The remaining 27% of gas is aimlessly flared, causing enormous damage to the environment in oil and gas producing regions. As a result, the Yugra project is receiving strong support from the government as it promotes cost-effective usage of a valuable resource.
TNK-BP is in discussions to sell its Kovytka gas field in the Irkutsk region of East Siberia to Rosneftegaz by the end of the year. Development of the field has been in stagnation for several years, bringing threats that TNK-BP s license would be revoked for failing to start full-scale production. TNK-BP had agreed to sell the field to Gazprom in 2007 for between $700-$900 million, but the deal stalled over price. Since then, Gazprom has stated that it is not interested in the field, which is thought to have potential gas reserves of 1,300 billion cubic metres and is strategically located to supply China. TNK-BP says it has been unable to launch full production because it has been unable to reach supply agreements with Gazprom.
Gazenergoset, which is part of Gazprom, has demanded that Nizhnekamskneftekhim pays a fine of 32.5 million roubles as a penalty for non-payment for butane supplies. Nizhnekamskneftekhim is prepared to file a counterclaim for 30 million roubles for prepayment of supply at an inflated price. Gazprom supplies around 77% of butane requirements for Nizhnekamskneftekhim.
Nizhnekamskneftekhim is to reconsider the feedstock configuration of its proposed one million tpa ethylene cracker, and aims to decide upon on the construction schedule before the end of 2010. The main questions focus on feedstock costs. Ethylene is currently produced at Nizhnekamsk based on naphtha and LPG, which the company acknowledges is too expensive as a raw material source for a new complex. As a result, efforts are underway to study alternatives involving mainly ethane and its supply possibilities.
Nizhnekamskneftekhim has previously explored seven different combinations of options for processing raw materials for the proposed cracker, the first of which appeared in 2006. By 2009, the company had developed a plan for processing of liquid and gas raw materials using KBR technology. This essentially consisted of eight furnaces, each producing 55 tons of ethylene per hour. The eight furnaces were to be broken down into two gas furnaces for the processing of their own secondary resources, two gas furnaces for the processing of propane and butane, the four furnaces for processing naphtha.
The feedstock calculations at that stage were estimated at 1.382 million tpa of naphtha, 390,000 tpa of pentane and hexane, 115,000 tpa of liquefied natural gas and 650,000.tpa of propane and butane. In addition to producing 1 million tpa of ethylene, other products included 559,000 tpa of propylene, 243,000 tpa of benzene, 123,000 tpa of butadiene, 68,000 tpa of isobutylene and 62,000 tpa of C9.
Whilst securing naphtha is relatively straightforward, Nizhnekamskneftekhim recognises the cost-effectiveness of ethane. The cost of producing ethylene from propane-butane fractions is almost twice higher compared to the use of ethane and any losses on other monomer yields are minimised by the gains on ethylene.
Kazanorgsintez was until recently the only ethylene producer in Russia to use ethane, but Salavatnefteorgsintez started a new ethane furnace in December 2009 capable of consuming 100,000 tpa of ethane. Nizhnekamskneftekhim has already introduced two furnaces that can use ethane, but are currently using propane-butane. The availability of new ethane furnaces thus does not that ethane consumption will increase in 2010, as the ethane market in Russia is short in supply. Currently ethane is produced in Russia at five gas processing plants, but only two of them (Orenburg GPP and Minnibayevo GPP) supply the product for further processing. Nearly all trade ethane is supplied to Kazanorgsintez, but 350-400,000 tpa is not enough to meet full demand at Kazan and there is currently a deficit in the range of 240-270,000 tpa.
Kazanorgsintez has tried to secure ethane from TNK-BP from its Zaykinsky GPP in the Orenburg region. However, it would be necessary to build a pipeline connection which would be too expensive. In late 2010, the Minnibayevo GPP in Tatarstan plans to finish reconstruction, which will increase production of ethane from 85,000 tpa to 140,000 tpa. This will help provide Kazanorgsintez with more ethane but not enough to meet full demand. Investments are projected for associated gas processing in Russia in the next few years that will increase ethane supply, and this represents one of the hopes for Nizhnekamskneftekhim in its examination of securing ethane supply.
Russia produced 213,400 tons of propylene in the first two months of 2010, 17% more than in the same period last year. Production in February totalled 100,900 tons, which was 10% lower than in January. Stavrolen has significantly increased its captive usage of propylene this year, with the polypropylene plant at Budyennovsk running more than in 2009, and this has impacted on the availability in the merchant market. It has allowed other producers such as SIBUR-Neftekhim and Omsk Kaucuk to build up production volumes of propylene for sale on the domestic market. With domestic demand for propylene recovering this year exports have subsequently fallen two-fold to 3,500 tons. SIBUR-Neftekhim has been the sole Russian exporter to date this year, with all shipments being delivered to Poland.
In February, a total of 22,400 tons of propylene were sold on the domestic market which is 6% more than in January. For the first two months of 2010, 43,600 tons were sold on the domestic market which was 9% higher than in 2009. Saratovorgsintez has increased purchases this year by 23% whilst Salavatnefteorgsintez has been forced into the merchant market. This has been due to lower production at Salavat, and the need for more propylene to maintain oxo alcohol production.
Ethylene production totalled 195,800 tons in February, 13% less in January. For the first two months of 2010, Russia produced 418,100 tons of ethylene against 359,800 tons in the same period last year. Only Ufaorgsintez has recorded a decline, producing 4% less than in January-February 2009. By contrast, Salavatnefteorgsintez increased production by 52%, SIBUR-Khimprom by 30%, Angarsk Polymer Plant by 33% and SIBUR-Neftekhim by 27%.
Russia increased styrene production 18% in the first two months of this year, totalling 86,900 tons. Plastik at Uzlovaya doubled production to 4,682 tons, whilst SIBUR-Khimprom increased volumes by 22% to 14,200 tons. A fire occurred at the ethylbenzene plant at Perm on 9 March, affecting styrene production temporarily. Plastik at Uzlovaya will increase its styrene capacity to 60,000 tpa in the second half of 2010. The company, which is part of the SIBUR group, sources ethylbenzene from SIBUR-Khimprom. SIBUR-Khimprom itself is in the process of expanding ethylbenzene production from 100,000 tpa to 135,000 tpa. Nizhnekamskneftekhim closed its styrene plant on 26 March for a planned shutdown, which will be completed on 10 April.
Russian polypropylene market
Since 2009 demand for domestically produced polypropylene has increased due to the devaluation of the rouble combined with increases in the capability of Russian producers to meet market requirements. In the first two months of 2010, Russia increased polypropylene imports by 32% against 2009 and totalled 8,320 tons. To date in 2010, no shipments of polypropylene from Turkmenistan have been seen whilst Ukrainian imports have declined due to redirection to the Turkish market.
Consumer activity in the domestic market has been relatively high in the first quarter, whilst export shipments continue to China and this a factor helping to push prices upwards. Prices have risen sharply for polypropylene since the start of the year, with SIBUR increasing prices for output from the Tomsk and Moscow plants in recent weeks followed by Stavrolen and Ufaorgsintez. Polypropylene prices in March ranged from 50-53,000 roubles per ton in the domestic market, which was 2,000 roubles higher than in February. In the first quarter of 2010 the cost of Russian polypropylene increased by 24%. Imports are still more expensive, but the gap is narrowing. All of the Russian plants have been running at full capacity, except Stavrolen where polypropylene production was suspended for five days in March due to the delay in delivery of the catalyst. Losses are estimated at 1,700 tons of polypropylene. A similar short suspension occurred in early February. Planned outages are scheduled from late April which might put more pressure on prices.
SIBUR has decided to try and buy 50% of the Moscow polypropylene plant from the shareholder SPE Petrochemicals. SIBUR has been renting and managing the Moscow polypropylene plant since 2009. The company has already filed an application to the FAS, but the service has extended its review until mid-May for further information. However, there are doubts that this step has been necessary as Gazprom-Neft is the other main shareholder which is friendly towards SIBUR. The Moscow polypropylene plant is based at Kapotnya and has a capacity of 100,000 tpa. The Moscow refinery belongs to a jv between Gazprom-Neft and Sibir Energy.
Tanks and warehouses have been installed for the new polypropylene plant under construction at Omsk. Start-up of the 180,000 tpa plant is scheduled for the last quarter in 2010. Titan has signed a contract with German company WHL for the supply of equipment worth about €4 million for the construction of a polypropylene processing line. The line will be established on the Omsk Technopark, together with a few other lines. The concept of cluster development involves the development of several sectors of the economy by actively enlisting the cooperation of small and medium-sized businesses. Based on the polypropylene plant, it is planned to create a pool of small companies producing packaging, building materials, etc. Despite the efforts to consume as much polypropylene as possible locally, Titan still expects to need to export at least 40% of its production when the plant comes onstream.
RusVinyl has had its application approved to lease two plots of land, with a total area of 130,000 square metres for 49 years for the construction of transport infrastructure for the PVC project. The structure of the transport infrastructure will host the railway station, facilitating easy access to the complex. The cost of investment into the infrastructure has been estimated at around 900 million roubles. Construction of the PVC plant is scheduled to start in 2010, with total investments estimated in the range of 30 billion roubles or $2.8 billion. Plant construction will involve 300,000 tpa of PVC suspension grade and 30,000 tpa of PVC emulsion grade. RusVinyl was registered in Nizhny Novgorod on 11 October 2007, with 50% each belonging to SIBUR and SolVin. In addition to production, RusVinyl will deal with marketing, sales of PVC and caustic soda in the CIS countries.
The Russian Federal Agency for Subsoil Use (Rosnedra) will hold an auction on 6 April for the right to develop rock salt at the Belbazh field in the Nizhny Novgorod region. RusVinyl plans to take part in the development of the Belbazh deposits, and expects to produce salt for the Kstovo chlorine and PVC plants. The demand for salt at RusVinyl could be in the range of 360-400,000 tpa, and as a result Solvay could invest €50-60 million in the development of the Belbazh field. In terms of logistics, either a 100 km pipeline could be constructed to transport the salt or alternatively it could be supplied by truck.
Kaustik and Salavatnefteorgsintez have been in dispute over ethylene prices in recent months charged, following past disagreements with Nizhnekamskneftekhim. Earlier this year, Salavatnefteorgsintez raised the price of ethylene for Kaustik at Sterlitamak from 16,700 to 22,000 roubles per ton and as a result, Kaustik is struggling to break even on PVC sales. The March contract was concluded at 20,500 roubles per ton. In November 2009, the government instructed Nizhnekamskneftekhim and Salavatnefteorgsintez to resolve the question of long-term contracts for the supply of ethylene. The Ministry of Energy has developed a pricing formula based on the price of polyethylene. However, the cost of ethylene, which is one of the elements of this formula, the parties thought differently, with the result that there are disputes. Salavatnefteorgsintez supplies Kaustik with around 7,500 tons of ethylene per month.
The first 200 tons of HDPE brand SNOLEN was produced by Salavatnefteorgsintez in March. The capacity of the new plant has been designed to produce 120,000 tpa. Output will be focused on outlets for pressure pipes used for gas and water supply products and produced through injection and extrusion blow moulding. Salavatnefteorgsintez expects to produce more than 30 brands of high density polyethylene. Current tests are only the first phase of ensuring that the product meets required standards. Full production is not likely to be seen until the middle of the year.
Orthoxylene
Orthoxylene deliveries to the Russian domestic market comprised 9,800 tons in February, 18% down on January due to reduced demand from the phthalic producers. Salavatnefteorgsintez did not purchase in February, whilst Kamteks-Khimprom reduced purchases by 15% against January. In 2009, the production and consumption of xylenes declined by 2% and 3% respectively. The decline in production was due to repairs by Kirishinefteorgsintez and the Omsk refinery, in conjunction to market forces. Demand is expected to grow for orthoxylene in the second half of 2010, with consumption in the production of organo-xylene coatings predicted to be 15-20% up on 2009. However, overall producers have been focused on building up paraxylene supplies due to higher demand.
Paraxylene consumption in Russia totalled 147,100 tons in 2009, showing a 9% increase over 2008. Consumption is expected to be similar in 2010 to 2009 levels. Total capacity to produce paraxylene in Russia comprises 435,000 tpa, with capacity utilisation roughly 75%. Over the past seven years paraxylene production in Russia has doubled, but still the three refineries are not running the plants at full capacity. Ufaneftekhim and Gazprom-Neft at Omsk increased production by 5% and 4% respectively in 2009, whilst Kirishinefteorgsintez reduced production by 14% due to a two month outage. In 2009, 56% of Russian paraxylene production was exported, with Gazprom-Neft and Kirishinefteorgsintez acting as the main exporters. Ufaneftekhim sells paraxylene exclusively on the domestic market to Polief. Having witnessed consumption rises in the past few years domestic sales of paraxylene are not expected to change much until the completion of the Polief expansion.
Russia produced 41,800 tons of toluene in the first two months of 2010 (38,600 tons from oil and 3,200 tons from coal), which was 28% less than the same period in 2009. Although refinery toluene dominates production, coal based toluene is increasing its share in total output. Oil based toluene is gradually declining due to lower consumption at refineries. In February, toluene sales on the domestic market totalled 6,900 tons which was 7% less than in January. The fall in sales was attributable to reduced purchases of toluene by manufacturers of explosives. In the first two months of this year, explosive manufacturers bought 14,400 tons of toluene which was 20% lower than in the same period in 2009.
An agreement was concluded in March by the Yugra Gas Chemical Company (YUGHK) and a Russian company New Gas Technology Management to develop the production chain from gas through to petrochemicals in the Khanty-Mansiisk region of West Siberia. This agreement of intent will serve as a basis for undertaking projects in the Khanty-Mansiisk region for the production of paraxylene, and PET for the production of fabrics. The aim is to create a gas-chemical cluster, in which derivative companies may utilise this raw material base.
The initial stage of the project process involve negotiations for buying associated gas from Rosneft, which will be converted eventually into paraxylene. China is interested in constructing a gas processing plant with a capacity of 700 million cubic metres per annum in the Yugra area, and is willing to invest €600 million in the first phase. The Chinese Association of Synthetic Fibres has stated that Chinese producers continue to experience shortages of raw materials and are extremely interested in supplies from Russia. Consequently there is strong interest in transforming the associated gas wastage in West Siberia into products of value.
Yugra Gas Chemical Company was founded in the summer of 2009 to develop textile-gas chemical cluster and to process associated gas through to synthetic fibres. The Yugra gas processing plant complex is expected to be capable of providing liquid propane-butane and stable gasoline and dry stripped gas in the range of 300 to 450 million cubic metres per annum. New Gas Technology Management has agreed to arrange the gas supply contracts, whilst Yugra Gas Chemical Company has agreed to construct and put into operation the gas chemical complex, gas pipeline and as well as receive and pay for dry gas at fair market conditions. According to Yugra Gas Chemical Company, the signed agreement in March will provide raw materials calculated to produce 108,000 tpa of paraxylene and 180,000 tpa of PET.
The technological process as devised by Metaprocess involves the conversion of dry stripped gas to methanol before conversion to paraxylene. Metaprocess has already constructed two small methanol plants for Novatek in West Siberia. After the initial investment, preliminary plans are being considered for a second and third stage of investment which could lead to much higher quantities of paraxylene and PET. According to Metaprocess, the cost of paraxylene production based on associated gas can be reduced by around 25-30% compared against the traditional processing of oil into BTX.
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Key targets and phases proposed for the Yugra PX-PET production chain
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1. Key stage of integrated technology provided by Metaprocess is processing of associated gas into methanol and into BTX fraction. If associated gas is rich in light hydrocarbons there is an option of additional formation of BTX from C3+ hydrocarbons.
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2. The BTX fraction would be utilised into paraxylene, based on technology supplied by UOP.
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3. The first phase involves processing of associated gas up to 700 million cubic metres per annum. The first phase includes the production of BTX at 260,000 tpa (108,000 tpa of paraxylene), with output sales to Russia and China. Investments in the first phase have been estimated at $330 million.
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4. The second stage envisages the construction of 8-9 low-tonnage installations (40-300,000 tpa) for associated gas utilisation of 2 billion tpa. This would aim to develop a paraxylene facility with a capacity of up to 1.2 million tpa, with related PTA and PET facilities of 200,000 tpa. Investments in the second phase have been estimated at $2.6 billion.
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5. The third stage envisaged is the so-called Full Development. This aims to produce around 5.5 billion cubic metres of dry stripped gas with the aim of producing up to 3 million tpa of paraxylene. It will also include processing of 200,000 tpa of PET for the Ivanovo region.
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The targets for the second and third phases of the programme may seem unrealistic at this stage, and will probably require substantial support from not only Chinese investors but also the Russian government which will be keen to help convert associated gas into profitable products. The main factors that might be argued against the construction of petrochemical facilities include the lack of infrastructure such as pipelines, road and rail links. The first priority is the construction of gas processing facility by 2012-2013, and this will provide the basis for the first phase of the Yugra project. China has agreed already to support the construction of the gas processing plant and will clearly be a key player for developing the paraxylene and PET projects.
New methanol plant starts up in Russia
Novatek-Yurkharovneftgaz has started production at its new methanol plant, with a capacity of 40,000 tpa, intended for supplying the local gas industry in West Siberia. The plant has been designed and constructed by the Russian company Metaprocess. The installation has been built to produce methanol for liquefaction of gas hydrate which is formed in the extraction and transportation of natural gas. The contract for construction of a methanol unit was signed between Metaprocess and Novatek-Yurkharovneftgaz on 14 December 2007. Currently, the new unit is running at 70% utilisation and adds to a smaller unit of 12,500 tpa which has been running since 2007 and was also designed by Metaprocess. The two plants together will meet the demands of methanol usage for the Yurkharovskoye deposits, with the capability to supply methanol to the other gas fields belonging to Novatek.
Pre-commissioning work for the new 450,000 tpa methanol plant at Shchekinoazot is expected to begin in the autumn this year. Contractors have already begun installation of the main equipment at Shchekino, and in May the company hopes to connect to the new plant to the related feedstock and raw material pipelines. This will take place during a shutdown and represents a major investment for the company. Another new priority for Shchekinoazot is installing a hydrogen plant, using technology provided by Linde or Haldor Topsoe. Construction of a new hydrogen unit is essential for reducing the costs in the production of caprolactam, together with ammonia. The new hydrogen plant is aimed for start up within two years.
Partly due to rising gas prices in Russia and rising logistical costs, questions have started to surface over the economic viability of the methanol plant being constructed at Nizhniy Tagil by jv UralMetanolGroup. Export activity is unlikely to be profitable against other sources of methanol from regions such as the Middle East, Caribbean, etc, whilst the combined captive needs of Uralkhimplast and the proposed chemical cluster can only consume a certain share of the 600,000 tpa plant’s output. The methanol plant, being constructed on the Uralkhimplast site with Itera as the main investor, is expected to come onstream in 2013 or possibly 2014. The jv entitled UralMetanolGroup expects to attract foreign funds to support investment, but this is proving difficult.
Captive consumption at Uralkhimplast and the creation of a chemical cluster is recognised as the best way of justifying the project. A site of 146 hectares has been identified for the chemical cluster which hopes to attract domestic and foreign investments. Uralkhimplast is keen to create jvs with companies such as Kronospan, Cavenaghi SPA, Amdor, etc, which specialise in the production of resins for foundry, chemicals for road construction, and anticorrosive inhibitors used in the oil industry.
Investments in the first phase of the chemical cluster are expected to total around 13 billion roubles from a combination of private and institutional funds. In the second phase of the project s chemical cluster, an additional 1.5 billion roubles is to be attracted in the form of state support. Part of the funds will be spent on infrastructure development, including the road network, the construction of additional storage facilities, the reconstruction of biological treatment facilities, etc. Notwithstanding the investments at Uralkhimplast in formaldehyde derivatives and in the chemical cluster, UralMetanolGroup is still expected to incur a large surplus which it could export or sell on the domestic market in order to run the 600,000 tpa plant at full capacity.
MTBE market 2010
Russia exported 65,500 tons of MTBE in the first two months of 2010, 2% less than in the same period in 2009. The main reason for lower exports is increases in domestic demand. The main exporters of MTBE included Uralorgsintez, Tobolsk-Neftekhim and Omsk Kaucuk, which accounted for 78% of exports in January and February. In total, 86% of exports were shipped to Europe via Finland, with most of the remainder going to Ukraine, where the main consumers of MTBE include the Kremenchug and Odessa refineries.
MTBE sales on the domestic market comprised 51,700 tons in the first two months in 2010, which is 5% more than the same period last year. Increased sales by Omsk Kaucuk of 71% to 18,000 tons were the main reason for the rise in domestic sales whilst SIBUR shipped 7% less equivalent to 29,300 tons. The main consumers of MTBE in Russia include the Ryazan refinery (owned by TNK-BP), Gazprom Processing at Omsk, Nizhnegorodnefteorgsintez at Kstovo and Kirishinefteorgsintez and Kirishi. The share of these refineries have accounted for 72% of the supply of MTBE in the first two months of 2010.
LUKoil has emphasised that it will continue to purchase gasoline additive from Titan and is interested in the project of ethanol production. Since 1997, LUKoil has delivered hydrocarbons to Titan, and in return receives MTBE from Titan and other products. More than 800,000 tons of MTBE has been shipped to the LUKoil over the years. The Omsk Power Company reduced consumption to Titan subsidiaries Omsk Kaucuk and Ekooil due to outstanding debts. At the start of the March the two subsidiaries owed a total of 153.4 million roubles
SIBUR approved energy plans for Togliattikaucuk
SIBUR has approved a plan of energy conservation measures at Togliattikaucuk for 2010-2012, aimed at saving energy resources and raw materials. In 2010, funding for the energy-saving programme amount to more than 230 million roubles. Most of the funds will be directed to the production of isoprene monomer, as well as the production of copolymer and isoprene rubber.
In 2009, SIBUR introduced energy saving measures, the largest of which included a saving of formaldehyde in the production of isoprene. Together with savings of formaldehyde and the introduction of the technology for one-step synthesis, steam consumption is to be reduced by around 4% at the isoprene monomer plant according to the technical programme. The economic effects of energy saving measures overall at Togliattikaucuk have been estimated in the range of $121 million.
SIBUR-Russian Tyres In 2009 sold 8.1 million tyres in 2009, including 5.4 million passenger and light truck tyres, 2.4 million tyres for commercial vehicles and 0.3 million other tyres. The group expects an increase of around 14% in 2010 which is still lower than in 2008. Last year SIBUR invested 1.5 billion roubles in tyre development, aimed principally at producing DNC tyres with a capacity of 650,000 pieces per annum.
Tatneft is investing in solid steel cord tyres (SSC) at Nizhnekamsk, with a capacity of 1.2 million pieces per annum which should be onstream by 2011. The aim is to supply around 70% of the Russian market for SSC. Tatneft opened a new plant at Nizhnekamsk in December 2009, with investments amounting to $500 million. The products of this new plant focus mainly on truck and bus tyres. The rubber compounding technology used provides for usage of a large proportion of natural rubber and silica ensuring high quality.
Kazan Synthetic Rubber Plant plans to develop a unit for methylchlorosilane with a capacity of 12,000 tpa at a value of 1.5 billion roubles. Production will comprise the hydroxylation of dimethylchlorosilane and is aimed at reducing the cost of production through the replacement of imported products. Production will be sold to the space, aviation, and machine-building industries.
Polief increased captive consumption of PTA four fold in the first two months of 2010 against the same period in 2009, as one of the PET lines was idle last year. PTA production in the first two months has been similar to January-February 2009, and increases in captive requirements has meant resulted in reduced exports from 8,900 tons to 1,100 tons.
The only external consumer of Russian PTA this year has been Mogilevkhimvolokno in Belarus and the volumes have been insufficient to meet its full demand. Moreover, due to balanced production of PTA at Polief, the Senezh PET plant near Moscow has been forced to purchase from abroad. The company imported 2,000 tons in January and February, all of which was supplied from South Korea.
Consumption of commodity acetic acid in the domestic market dropped in the first two months of the year due to reduced purchases from Stavrolen at Budyennovsk for VAM production and Polief at Blagoveschensk for PTA production. Stavrolen did not buy acetic acid in January and February, whilst Polief purchased 2,300 tons which was 14% down on the same period in 2009. Polief’s consumption of acetic acid was reduced due to technical issues on the PTA plant. To offset these reductions, solvent producers consumed 4,800 tons of acetic acid in the first two months of 2010, which was twice the volume last year.
Russia exported 4.400 tons of acetone in February, 9% more than in January. Samaraorgsintez was the main exporter in the first two months of 2009, accounting for 54% of the 8,400 tons. The main destinations for Russian acetone exports in the first two months of 2010 were China (38%), Belarus (37%) and Turkey (13%).
Butanols production totalled 25,400 tons in February 2010, 2% more than in January and 19% more than in February 2009. Production has been boosted by export activity. Roughly two thirds of Russian butanol production is directed towards normal butanol and the other third for isobutanol. The emphasis on export markets is helping to put pressure on domestic prices.
Russia produced 1,600 tons of ethyl acetate in February 2010, 26% more than in February 2009 and 28% more than January. This increase was attributable to stronger demand from paint companies and increased purchases in the domestic market. In addition, export activity for ethyl acetate increased.
Butyl acetate exports totalled 2,500 tons in January and February this year, 39% down on 2009. The main Russian exporter of butyl acetate Dmitrievsky, Chemical Plant was idle for part of the first two months. The largest end-user of Russian butyl acetate is Finland, accounting for 59% of exports in 2010.
Exports of MEG rose 19% in the first two months of 2010 against the same period last year, totalling 17,700 tons. The increase in exports was due to increased
consumption of MEG in Belarus, where shipments have increased fivefold. The main Russian exporters of MEG are SIBUR-Neftekhim and Nizhnekamskneftekhim, accounting for more than 80% of exports.
Bisphenol A exports totalled 12,400 tons in the first two months of 2010, 5% higher than last year. Most of the increase has come from the Ufa plant which accounted for 11,541 tons of exports in January and February, showing a 31% rise over 2009. Simultaneously, Kazanorgsintez has reduced export activity to 859 tons against 3,000 tons last year due to increases in polycarbonate production.
Kazanorgsintez increased domestic sales of polycarbonate by 18% in the first quarter of 2010 to 6,700 tons, whilst exporting 8,740 tons in the same period. Imports of polycarbonate into Russia totalled 5,330 tons in the first two months of 2010, twice more than in 2009. Consumption of polycarbonate is expected to continue to rise this year.
Despite the weakness of the economy, Kazanorgsintez was able to develop its polycarbonate sales in 2009. The company started production of polycarbonate in 2008 and last year managed to replace some imports by selling 29,247 tons or around half of the market. Exports totalled 25,582 tons in 2009. Imports into Russia came from a variety of sources in 2009, with Germany and Belgium being the largest suppliers. Product from Asia declined due to a lack of cost-competitiveness and Europe thus currently provides most of the imports. Imports overall though are likely to decline in the next year or two due to the expansion of domestic sales by Kazanorgsintez. With a capacity of 65,000 tpa, Kazanorgsintez could be capable of meeting all of the demand in Russia at current volumes, although some domestic consumers still prefer to buy imported polycarbonate.
Biaksplen, 50% of the share capital belonging to SIBUR, has started the production of a new 12-micron BOPP film. The new film is easier and cheaper by more than 30% against the traditional 20-micron film. The film is primarily intended for packaging of confectionery products.
Russia imported 3,200 tons of polypropylene films in the first two months of 2010, 17% less than in the same period last year. This is due primarily to increased domestic sales which rose 45% in the first two months. The main importers of polypropylene films into Russia include Innovia Films, Treofan and ExxonMobil. Polyethylene film imports totalled 12,000 tons in January and February this year, 62% up on the same period in 2008. Such a high increase is attributed to the scale of the economic downturn last year The main suppliers of polyethylene films include Ukraine (18%), Malaysia (15%), Germany (14%), China (12%), Finland (8%) and Poland (8%).
Metafrax started a new unit for production of polyamide at the end of March, with a capacity of 1,550 tpa which is double the previous capacity at Gubakha. The equipment for the plant was supplied by Persico in Italy, with the technology based on anionic polymerisation. Sales of the new product will focus on Russia s market, aimed at sectors such as machine building, shipbuilding, and the chemical industry.
The authorities in the Nizhniy Novgorod region have approved a number of investments worth around aimed at creating a plastics cluster, mainly for processing PVC at Dzerzhinsk. The regional administration is ready to invest around 2 billion roubles to develop a cluster, using the RusVinyl PVC plant at Kstovo as the main source of raw materials when it comes onstream. Application areas to be developed are likely to include processing of PVC windows, vinyl wallpaper, linoleum, etc.
A site of 94.5 hectares has already been selected at the Kaprolaktam division at Dzerzhinsk for the chemical cluster, where there is already the necessary infrastructure including gas, electricity, process steam, nitrogen, and roads. For processing 300,000 tpa of PVC an estimated 200 hectares of land would be required to produce 115,000 tpa of window profiles, 80,000 tpa of pipes, 22,000 tpa of linoleum and 54,000 tpa of vinyl wallpaper. Not only Kaprolaktam, but other plants in the industrial area of Dzerzhinsk are interested in providing free sites for the project.
Ukrainian transport discounts
The Ukrainian Ministry of Transport and Communications intends to extend the discounts given for the transhipment of transit cargo via sea trade ports before the end of 2010. This will create favourable conditions for preservation of existing trade and attract new transit cargo at the ports. In the first half of 2009 when there was no discount policy, there was a loss of transit cargo traffic of around 7 million tons costing revenues of around $25 million.
Karpatneftekhim plans to launch its new units for chlorine and caustic soda at Kalush in June 2010. Plant construction has been undertaken by Uhde, with capacities of 200,000 tpa of caustic soda and 180,000 tpa of chlorine. LUKoil, which owns Karpatneftekhim, has invested $155 million in the project.
Karpatneftekhim is hoping to develop the Verkhnestrutinsk deposit of rock salt in the Rozhnyativsk area in Ukraine, to provide the company with local raw materials for production of chlorine and caustic soda. LUKoil has already appealed to the Regional Council and after receiving permission the company will hold a final geological development of the field. The Verkhnestrutinsk field is located around 32 km from Kalush. Until these deposits are developed, however, Karpatneftekhim plans to import salt.
Following the start-up of the chlorine and caustic plants, Karpatneftekhim intends to start PVC production at Kalush in November 2010. The plant has been constructed by Uhde and has a capacity of 300,000 tpa based on Vinnolit technology. Around 20,000 tpa will be consumed for the production of profiles and other products onsite. About 60% of the remainder will be sold on the domestic market and 40% shipped to Russia, Europe and Asia. Total investments into the PVC plant comprise $234 million, with a pay-back period estimated of nine years. Currently, Ukraine depends solely on PVC imports which are sourced mostly from Europe.
Olefin production was suspended at Karpatneftekhim in June 2008 due to feedstock difficulties and low profits, and has been idle since then. There is yet an announcement to be made when the olefin plant will restart, but it is believed to be under review.
The Kalush Pipe Plant, owned by the Russian company Polyplastik, plans to launch the second stage of its pipe plant in May which will produce 1500 tons per month and be aimed mainly at the domestic market. Output from the plant will compete against imported products delivered from Poland and Romania. PVC will be purchased abroad in the first few months until the Karpatneftekhim plant starts up towards the end of 2010. In May 2009, the Kalush Pipe Plant commissioned three production extrusion lines with a combined capacity of 10,000 tpa for the production of polyethylene pipes.
The original idea for creating the Kalush Pipe Plant appeared in 2008 due to demand from several sectors. Another factor was the availability of polyethylene from nearby Karpatneftekhim, and PVC which is expected to become available in late 2010. However, the recession that engulfed Ukraine last year led to delays in start-up of pipe production at Kalush by about six months. The Kalush Pipe Plant is part of Polyplastik, which unites several plants in Russia, Belarus and Ukraine. Despite adverse economic conditions in Ukraine, there is still good demand for pipes in the range of 110-160 mm for the construction industry.
In the first two months of 2010, Linik at Lisichansk produced 16,290 tons of polypropylene which was 3% up on last year. Linik produced 8,470 tons of polypropylene In February 2010, 8% higher than in January this year and 6% higher than in February 2009. In February, nearly 80% of polypropylene production was shipped abroad, while domestic demand was met largely through imported Russian polypropylene. The main export destination for Ukrainian polymer is the Turkish market, accounting for 74% of exports in February.
Linik plans to increase polypropylene capacity from 100,000 tpa to 150,000 tpa this year, but it is not yet confirmed when this expansion will take place. The Ukrainian market is estimated in the range of 100,000 tpa at present, and thus the increase to 150,000 tpa would allow Linik to export large volumes and simultaneously to occupy an important part in the domestic market.
Petrochemical production in Belarus was affected in the first two months of the year as the result of lower feedstock deliveries from Russia. Benzene was down 17% in February against January to 6,900 tons, whilst ethylene production fell 11% to 9,400 tons. Phthalic anhydride production rose 3% against January to 1,860 tons, whilst caprolactam did not change at 10,100 tons.
Russia has been slow to honour the commitments regarding imports into Belarus of paraxylene, orthoxylene and benzene. Belarusian authorities have now appealed to the CIS Economic Court with a lawsuit on the legality of levying customs duties on Russia supplied Belarus refined products and petrochemical raw materials. This had led to increased costs, with Polymir at Novopolotsk being forced to reduce polyethylene production. The company recorded an 18% fall in polyethylene production in the first two months of 2010 against 2009.
PET production for Mogilevkhimvolokno amounted to 16,110 tons in February which was 4% higher than in January, but 2% less than in February last year. In the first two months of 2010, Mogilevkhimvolokno produced 31,540 tons of PET, a 5% increase over the same period last year. This year, the company will be able to exceed 2009 volumes following modernisation. The company is planning a maintenance shutdown in June and expects to be able to meet normal customer demand through inventory build-up.
The start-up of the Kaliningrad PET plant in the middle of the year is expected to provide another source of competition for Mogilevkhimvolokno for sales to the EU, Russia and Ukraine. In March, Mogilevkhimvolokno became a full member of the European Association of Manufacturers of Chemical Fibres. The company hopes that membership will allow the restoration of the supply of polyester fibres to the EU. Becoming a full member enables Mogilevkhimvolokno to influence the policies of the Association and create contacts with European manufacturers of chemical fibres and threads.
Azerkhimya transferred to SOCAR
Under a government resolution, Azerkhimya has been transferred to the control of the Azeri state oil group SOCAR as from April 2010. The government decided that Azerkhimya as a standalone company was finding it difficult to attract investors, whilst at the same time recognising the direct relationship between the chemical industry and the oil and gas industry. It is considered that SOCAR is well placed to develop the petrochemical industry in Azerbaijan where production and investment levels have been minimal since country became independent in 1991.
Proposed petrochemical investments in Azerbaijan based on gas feedstocks are under examination both from financial and technical criteria. Around $2 billion has been assessed as necessary to undertake investments in the first phase. Societe Generale has launched organisation of financing for the proposed Azerkimya fertiliser and petrochemical project. Foreign credit agencies such as the UK Export Credits Guarantee Department are also considering the issue of financing. The environmental group ERM has been shortlisted to make an environmental impact assessment report. To start construction, it is initially necessary to obtain an environmental report to enable the acquisition of new technology licences.
In September 2008, Azerkimya signed technology and licence agreements with companies Exxon Mobil, Basell, KBR, Technip, Ineos Thyssen Krupp and Uhde. The new complex was mapped out originally to include 700,000 tpa of HDPE and LDPE, 130,000 tpa of polypropylene, 40,000 tpa of benzene, 110,000 tpa of styrene and other petrochemicals. It will also include a one million ton fertiliser plant as a separate facility. To meet the needs of plants, raw materials will need to be supplied to Sumgait via a 60 km pipeline from the SOCAR gas processing plant at Garadag where the EBRD backed methanol plant is to be constructed.
Similar project outlines and targets for petrochemical investments have drawn up before for Azerbaijan, but have failed to progress. This time the situation may be helped by the transfer of Azerkhimya into the oil group SOCAR, as from April 2010. The reasoning behind this move is that SOCAR is able to draw international companies to Azerbaijan with more credibility than Azerkhimya to invest and introduce technologies in chemical sector. A period of around four years has been indicated as necessary for construction for the new Azerkhimya petrochemical complex, but it probably remains too early in the investment process to signal when such projects would come onstream.
Oman and Uzbekistan signed a series of MOU documents concerning the chemical sector, including the development of jvs for polyethylene and polypropylene pipes at the Navoi special economic zone. The Oman Oil Company and GAK Uzkimyosanoat (Uzkhimprom) have also signed documents on cooperation for companies from Oman for four strategic investment projects in the chemical industry, worth around $720 million in total.
Omani companies intend to participate in the construction of the second stage of the Dehkanabadsky potash fertiliser plant in the Kashkadarya region and to participate in building a complex for nitrogen-phosphorus-potassium fertilisers in the Navoi region. Other projects include the production of dimethyl ether (DME) at Ferganaazot, in addition to creating a jv for the production of PVC in Kashkadarya. The PVC project is planned for start-up in 2013 and will be based on ethylene supplied from the Shurtan gas-chemical complex. The capacity is being designed to produce 50,000 tpa, which will be combined with a caustic soda plant with a capacity of 32,000 tpa. The project is being financed through direct investment, foreign loans and credits for Reconstruction and Development Fund of Uzbekistan, in addition to private funds from Uzbek companies.
Uzbekistan has awarded Technip a contract for a detailed feasibility study for a gas-to-liquids (GTL) plant. The plant, located 40 km south of Qarshi, Kashkadarya region, will be based on Sasol’s GTL technology. Uzbekistan GTL LLC is a jv incorporated in Uzbekistan by Uzbekneftegaz, Sasol Synfuels International, Sasol Group South Africa, and Petronas. The plant follows agreements in November 2009 between the jv partners, involving project investments in the range of $2.5 billion. According to a preliminary feasibility study, the gas refinery will process 3.5 billion cubic metres per annum of gas and produce 672,000 tpa of diesel oil, 278,000 tpa of jet fuel, 361,000 tpa of naphtha and 63,000 tpa of liquefied gas. Construction is intended for completion by 2014, and will be financed through a consortium of banks and financial institutions.
An agreement on the construction of the GTL plant, based on the Shurtan Gas Chemical Complex, was signed originally by Uzbekneftegaz and Petronas in May 2008. In April 2009, Sasol joined the project and will provide the technology for the production of GTL. The Shurtan Gas Chemical Complex was put into operation in late 2001, with the design capacity including 3.9 billion cubic metres per annum of gas, 125,000 tpa of polyethylene, 137,000 tpa of liquefied gas and 130,000 tpa of unstable condensate. At present, Uzbekneftegaz is considering ways of increasing the capacity of the polyethylene plant at Shurtan to 225,000 tpa. The feedstock is based on ethane extracted by ShurtanNefteGaz, which is shipped to Shurtan Gas Chemical Complex by pipeline.
Agreements have been signed that will lead to Japan providing loans for the construction of ammonia and urea plants in Turkmenistan to the value of $501.2 million. Design and construction of plants at Mary will be carried out by the Japanese companies Kawasaki Plant Systems and Sojitz Corporation. The main purpose of the construction of new plants is to ensure that domestic requirements in mineral fertilisers, as well supplying fertilizer exports. The capacities of the new plants include 400,000 tpa of ammonia and 640,000 tpa of urea.
The State concern Turkmenkhimiya has also reached agreement with Sojitz Corporation for the design and equipment supply for a plant to produce caustic soda and other chemical products at Jebel in Turkmenistan. Turkmenistan has been in further negotiations regarding the project at Tejen for producing urea, methanol and ammonia with a consortium of Japanese companies including Mitsubishi Heavy Industries and Mitsubishi Corporation.
A unit of Sinopec has been awarded a contract to build a $1.26 billion polypropylene production plant at Atyrau in Kazakhstan. The facility will be part of a $6.3 billion gas processing complex that Kazakhstan plans to build in its western Atyrau region. The Kazakh government has said South Korean banks and companies are also looking at investing in the project. China s Eximbank is to act as an investor providing loans, whilst Sinopec Engineering will act as the contractor. Sinopec also intends to export the plant s products. Last year Sinopec Engineering won another contract in Kazakhstan to build the aromatics facility at the Atyrau oil refinery.
This is the first time for Sinopec to build a propane-polypropylene project outside of China. The project includes a 0.5 million tpa refining complex for dehydrogenation from propane and polypropylene, as well as utilities such as power station, water treatment system and railways. Kazakhstan started the construction of a petrochemical complex to produce ethylene, propylene and benzene at Atyrau in 2009.