The Russian government has grand plans for its petrochemicals sector, which in spite of the country’s huge oil and gas wealth remains underdeveloped. The Energy Ministry has set out plans to spend billions of dollars establishing a number of petrochemical hubs across the country and building the infrastructure, including pipelines and railways, to support an expanded petrochemicals base. Those plans, however, will likely be slowed over the short term as the eurozone debt crisis continues to weigh on the global economy.
Russia Petrochemicals Market Report Q1 2012
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Indeed, the crisis has scuppered hopes of an H211 recovery in private consumption in Russia and we have lowered our final household expenditure growth projections for 2011 to 3.0% from 4.1% previously. Moreover, we caution that failure to tame inflation expectations could force a more aggressive hiking cycle by the central bank in H211. This would hit the petrochemicals industry, particularly segments reliant on the production of consumer goods, exacerbating the already-adverse effects of rising inflation.
Despite revising down Russia’s 2011 private consumption growth forecast as higher inflation hurts real wage growth and consumer confidence, we have raised our overall real GDP growth forecast to 4.6% from 4.3% for this year on the back of higher oil and gas production and prices. This should help offset most of the effects of inflation on household spending.
Petrochemicals production growth in 2011 has been led by Sibur’s expansion, with the company planning a 14% y-o-y rise in output to 18.8mn tonnes. Although the strong rouble will likely start to hurt external demand for manufactures at some point, for now we remain upbeat on the outlook for the petrochemicals sector.
Lukoil-Neftekhim’s world-class petrochemical complex in Budyennovsk, southern Russia, is back on track after having been stalled by the financial crisis. In October 2011, the company started construction of the first phase of the project, which will source feedstock from Lukoil’s offshore oil and gas fields in the Caspian Sea. The first phase, scheduled for completion in 2015, will see the construction of a new 2bcm gas processing plant, a 135 MW combined-cycle gas turbine and the upgrade of an existing ethylene production unit at the site to all for the processing of all natural gas liquids. The second phase, scheduled to come online in 2017, will see the gas processing plant expanded to 4bcm and will see the construction of a 225,000 tonnes per annum (tpa) ethylene production plant and a 255,000tpa polyethelene production facility. Lukoil has said that, once completed, the facility will be Russia’s largest polymer production centre.
Russia is expected to build up to 10 complexes to produce ethylene, each with a 1m tonne capacity, by 2030. Annual per capita production of ethylene is currently three times lower in Russia than in Western Europe, despite Russia’s position as one of the world’s largest crude producers. Over the forecast period, the focus of investment will be Nizhnekamskneftekhim’s (NKNK) planned 1mn tpa ethylene complex by 2016, Sibur’s planned 1mn tpa cracker at its Tobolsk site which will also feature a new 500,000tpa PP plant, and Gazprom’s planned 80,000tpa increase in ethylene capacity at its Salavat complex to 380,000tpa by Q412 in tandem with a similar rise in its HDPE capacity at the site to 200,000tpa.
Russian PVC consumption is expected to rise by 30% in 2011 on the back of 3% growth in construction activity, which is fuelling imports and putting upward pressure on prices. Over the past two years, PVC has suffered alongside the poor performance of the construction industry. However, the lack of domestic production capacity and strengthening growth in construction over the medium term means that the country will be dependent on PVC imports over much of the forecast period; in 2010, PVC imports reached an all-time high of 486,000 tonnes. We see recovery on the back of preparations for the 2018 World Cup, especially in commercial construction.
In response to the upturn, Sibur is pressing ahead with the RusVinyl 330,000tpa PVC plant at Kstovo in Nizhny Novgorod, a JV with SolVin; capacity will be increased to 500,000tpa at a later stage.
Construction began in 2010 with completion slated for 2012 when it is envisaged the plant will remove Russia’s dependency on PVC imports. In December 2010, Lukoil said it could build a new PVC unit in southern Russia with a capacity of up to 500,000tpa, but it is not expected to begin operations before 2017. The state-owned Gazprom also has plans for a complex in the Orenburg region with capacities of 650,000tpa PE and 450,000tpa PP, expected to come onstream in 2015.
- Executive Summary
- Russia Chemicals And Petrochemicals Industry SWOT
- Russia Political SWOT
- Russia Economic SWOT
- Russia Business Environment SWOT
- Global Petrochemicals Overview
- Petrochemicals Market Overview
- Table: World Ethylene Production By Country, 2011 And 2015 (‘000 tonnes capacity)
- Financial Results
- Table: Financial Results Of Major Petrochemicals Companies, 2010
- Global Oil Products Price Outlook
- European Petrochemicals Overview
- Russia Market Overview
- Petrochemicals Trade
- Market Structure
- Table: Russia’s Cracker Capacity Data – Historical Data & Forecasts (000 tpa)
- Foreign Investment
- Business Environment
- Petrochemicals Business Environment Ratings
- Table: Central And Eastern Europe Petrochemicals Business Environment Ratings
- Russia’s Foreign Investment Policy
- Foreign Trade Regime
- Tariffs/Non-Tariff Barriers
- Tax Regime
- Industry Trends and Developments
- Olefins and Aromatics
- Industry Forecast Scenario
- Table: Russia’s Petrochemicals Sector, 2008-2016
- Macroeconomic Outlook
- Table: Russia – Economic Activity, 2011-2016
- Company Profile
- Nizhnekamskneftekhim (NKNK)
- Sibur Holding
- Glossary Of Terms
- Table: Glossary Of Petrochemicals Terms
- BMI Methodology
- How We Generate Our Industry Forecasts
- Chemicals And Petrochemicals Industry
- Cross Checks
- Business Environment Ratings
- Table: Petrochemicals Business Environment Indicators And Rationale
- Table: Weighting Of Indicators