Lack of gas may hurt Russian Sibur plans to boost olefins capacity
Dubai (Platts)--28Jan2011/645 am EST/1145 GMT
Russia's state owned petrochemicals manufacturer Sibur may not be able to
meet its target of doubling its sales by boosting olefins production capacity
in the next five years as gas producers like Russian major Gazprom have no
immediate plans to supply additional gas to it, industry sources said this
week at the Russia and CIS executive summit in Dubai.
Russia continues to flare 40 billion cubic meters of ethane-rich
associated gas, and though the country's government had plans to reduce this
by 95% by 2011, there are hardly any signs of that happening in the next five
years, said Philip Leighton, director, Petroleum, Chemicals and Energy at
Jacobs Consultancy, a London-based industry advisory group that provides
advisory services to companies in Russia.
"Russia could have built up a ethylene and other polyolefins-making
capacity equivalent to half of [ethylene and olefins] production capacity of
Saudi Arabia had they used the gas they are flaring. But we don't see that
happening. There are no such projects, even at the inception stage," Leighton
"We supply naphtha from our refineries to Sibur, but we have no plans
raise this supply," said Igor N. Barsukov, the head of the refining and
petrochemicals manufacturing division at Gazprom Neft, the oil production and
refining arm of the gas major Gazprom. Barsukov declined to comment on how
much naphtha his company is now supplying Sibur.
At the fifth annual forum of the Gulf Petrochemicals and Chemicals
Association held in December the last year, Dmitry Konov, the president of
Sibur, had said his company planned to double its sales to $12.6 billion over
the next five years. Konov said that much of the increase would come from
olefins, but did not give details. The company's website says that Sibur
produces 15 million mt/year of petrochemicals, but does not provide details on
capacities of various products.
However, others with knowledge of the country's petrochemicals industry
do not see that happening. "We don't really see new petrochemical capacities
coming up in near future in Russia," said a senior official from Gazprombank,
one of the largest banks in Russia in which gas producer Gazprom has a
majority stake. Gazprombank is known to finance petrochemicals projects in
According to latest available data, even though Russia holds the largest
gas reserves in the world, it has a total ethylene capacity of just 3 million
mt/year which is very small compared with the 33 million mt/year ethylene
capacity in North America, 34 million mt/year in Northeast Asia, 25 million
mt/year in the Middle East and 24 million mt/year in Europe.
While Russia flares most of its ethane-rich associated gas, it sells most
of its low ethane non-associated gas.
"In Russia, ethane along with methane is being sent through pipes to
Europe," Konov earlier told Platts.
Russia sells gas to Europe at one of the best prices in the world, thus
making it less economically attractive to extract ethane for manufacturing
polyolefins. The country has the largest natural gas transportation system in
the world, and the country distributes gas into Europe through 155,000 km of
gas pipelines and through 24 gas storage facilities.
Besides, even the other feedstocks -- naphtha and LPG -- are not being
used sufficiently in Russia to produce ethylene because of alternative uses
and in the absence of essential infrastructure.
--Shashank Shekhar, firstname.lastname@example.org
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