Investment projects worth billions to meet growing domestic demand
Russia’s chemical industry is one of the most investment-intensive sectors of the economy. The increasing demand for plastics for packaging, pipelines, construction materials, and vehicles is leading to several large investment projects. Per capita consumption of polyethylene (PE), at 13.5 kilograms per year, is only one-third of the US level (38 kilograms). For polypropylene (PP), Russians consume 8.6 kilograms per year, while citizens of the European Union consume 25 kilograms.
According to the consulting company Creon Energy, the PE and PP production capacities amount to 3.3 million tons. Ten companies produce these polyolefins; the biggest producers are Kasanorgsintes and Sibur-Tobolsk.
Russia: Producers of polypropylene (PP) and polyethylene (PE)
|Company (Region)||PP capacity (1,000 t/year)||PE capacity (1,000 t/year)||Website|
|NPP Neftechimija (Moscow)||120||–||http://www.neftekhimia.ru|
|Gazprom Neftechim Salawat (Bashkortostan)||–||166||http://salavat-neftekhim.gazprom.ru|
|Angarski sawod polimerow (Irkutsk)||–||77||http://www.rosneft.ru|
Source: Inventra (Creon Group)
Local production of polyolefins can’t cover demand
Annual production of PP has more than doubled since 2010 to 1.38 million tons in 2018 – with domestic demand amounting to 1.22 million tons. In the case of PE, annual production increased by almost one fifth to 1.78 million tons in the same period. However, domestic demand was higher with 1.92 million tons in 2018.
The deficit is particularly high for linear low-density polyethylene (LLDPE). Russia still has to import half of its consumption of that. “It is visible that the share of specialty brands is falling, while deliveries of cheaper basic brands from neighboring countries are increasing,” explains Lola Ogrel, head of the analysis department at the Creon Group.
The largest supplier of low-density PE in 2018 was Belarus with a 58% share of total imports, followed by Germany (19%). In high-density PE, Uzbekistan (56%) and Germany (9%) were the biggest suppliers.
The demand for PE has increased recently due to the growing use of foils. They are mainly used as packaging material and for coatings. PE also has excellent potential in the manufacture of tubes for gas and water pipelines as well as for sewage disposal.
PP has a wider range of applications. It is used in Russia mainly for consumer goods, tubes, nonwovens, and composite materials as well as for the production of foil threads and foils. According to Creon expert Ogrel, this diversity means that PP demand is stable even in times of crisis. “If demand falls in one segment, the decline is compensated by increases in other product groups.” The market analyst sees growth potential, especially in composite materials.
Production capacities will be multiplied
Due to numerous investment projects, Russia’s PP capacities have increased by 120% since 2010, while domestic demand has grown by 64%. But despite new production lines, many plants already are working at their limits.
Russia’s development strategy for the chemical industry is based on the assumption that the demand for plastics will triple by 2030: each Russian is expected to consume around 90 kilograms of plastic products per year. Domestic production, therefore, has to be expanded significantly.
According to Creon, five large PP projects are currently being realized. Their implementation will almost triple the country’s capacity to 3.84 million tons. The PE projects could even quintuple output – to 10 million tons per year.
Russia: Selected investment projects in polyethylene (PE) and polypropylene (PP) production
|Project (Region)||Investment (EUR billions)||Status||Capacity / Project operator|
|Vostoshnyi Neftechimicheski Complex (Eastern Petrochemical Complex), Nakhodka Port (Primorsky region)||17.3
(1st and 2nd stage)
|Financial plan to be updated; planned completion of refinery: 2020; chemical plant: 2022||850,000 t PE, 750,000 t PP / Vostochnya Neftechimicheskaya Kompaniya (Rosneft subsidiary, http://www.rosneft.ru)|
|Gas liquefaction and processing plant Baltijskij, port Ust-Luga (Leningrad region)||10.6||Feasibility study, preparation of a joint venture; completion: 2022 to 2023||In addition to LNG production, 1.5 million t PE per year planned / Gazprom SPG (http://www.gazprom.ru), RusGasDobytscha (http://rusgasdob.ru)|
|Ethylene complex at Nizhnekamskneftechim plant (Tatarstan)||10.1||Start of construction: autumn 2019; completion 2025||1st stage of production: 600,000 t ethylene, 300,000 t PE, 180,000 t PP / TAIF holding company (http://www.taif.ru)|
|Petrochemical complex Sapsibneftechim (Tobolsk, Tyumen region)||8.8||Under construction, start of operation: 2020||1.5 million t PE, 500,000 t PP / Sibur Holding (http://www.sibur.ru)|
|Amur gas chemical complex (Amur region)||7.0||No final investment decision yet, planned start of construction 2020||1st production phase: 1.2 million t PE, 2nd phase: 800,000 t PE / Sibur Holding (http://www.sibur.ru)|
|Gas chemical complex Budjonnowsk (Stavropol region)||1.5||Project planning, completion planned for 2023||255,000 t PE / Lukoil (http://www.lukoil.ru)|
|Polymer Plant Ust-Kut (Irkutsk region)||1.5||Technical design of the project in progress||650,000 t PE / Irkutskaja neftjanaja kompanija (http://www.irkutskoil.ru)|
|Gas processing plant Minnibayevsk (Republic of Bashkortostan)||1.0||Part of Tatneft development program until 2030||247,000 t PP and other chemical products / Tatneft (http://www.tatneft.ru)|
Source: author’s research
Sibur builds one of the world’s largest polymer plants in Tobolsk
The project SabSibNeftechim in Tobolsk of the leading chemical company Sibur will change the balance of power on the market. It costs almost EUR 9 billion and is expected to achieve an annual production of 1.5 million tons of PE and 500,000 tons of PP, making SabSibNeftechim one of the largest polymer plants in the world.
Gazprom, too, is planning a massive project at the Baltic Sea port of Ust-Luga. A gas liquefaction plant will be built here, with large production capacities of PE. Shell was one of the original project partners. Gazprom is now relying mainly on local supplier RusGasDobytscha.
One obstacle in the modernization of the plastics industry is the lack of local plant manufacturers. “The ruble devaluation has made imports of the corresponding production equipment considerably more expensive,” says Creon expert Lola Ogrel. Nevertheless, Russia will not be able to avoid Western plant suppliers when it comes to implementing the upcoming major projects. Also for smaller suppliers, there are going to be exciting business opportunities.