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Russia’s new Siberian petrochemical giant looks to China
TOBOLSK, Russia, Oct 31, 2018 (BSS/AFP) – In the heart of Russia’s Siberia
the country’s number one petrochemical company Sibur is building a giant
facility, a testament to its global ambitions and sights on the China market
ahead of a massive IPO.
More than 2,000 kilometres (1,250 miles) east of Moscow, Tobolsk is the
old Siberian capital known for the notorious jail that once held Russian
literary giant Fyodor Dostoyevsky. The town’s 17th-century fortress overlooks
the powerful Irtysh river and its streets are lined with historic
architecture.
Now the city of fewer than 100,000 people is also getting what will be one
of Russia’s biggest petrochemical complexes, a multi-billion-dollar plan by
privately owned Sibur to turn crude from nearby West Siberian fields into
polymer granules used to make plastic products.
The facility reflects a drive by Russia’s oil industry to diversify its
production and exports to create greater profit margins by developing
petrochemicals on national soil rather than feeding foreign industries with
its crude exports.
“The factory is one of five biggest petrochemical projects under
construction in the world,” said Igor Klimov, director of the ZapSibNeftekhim
project, which is valued at $9.5 billion and will let Sibur triple its
production of polymers and double its revenues.
The importance of the project has even pushed Sibur to invest in a new
airport in Tobolsk after the old one closed two decades ago: construction is
set to begin early next year.
Currently nearly 90 percent complete, the ZapSibNeftekhim factory is set
to launch production in the second quarter of 2019: some 28,000 people from
nearly 20 countries are working on site right now, including from Turkey and
China.
Several European companies are also participating, including German gas
giant Linde and TechnipFMC, an energy industry engineering group formed in a
merger of France’s Technip and FMC, an American company.
“Technip took part and managed the engineering and the concept of this
plant,” TechnipFMC manager Jean-Mathieu Hartmann told AFP on a site visit.
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– IPO in the pipeline –
Sixty percent of the new plant’s production will be exported to Europe and
Turkey, but also Russia’s ex-Soviet neighbours and, notably, China.
The Sibur group is controlled by Russian billionaires Leonid Mikhelson
(48.5 percent) and Gennady Timchenko (17 percent), while China’s oil and
chemicals firm Sinopec and Silk Road Fund hold a total of 10 percent.
The Asian market beckons Sibur: its other big investment idea is a mega-
plant producing ethylene only about 80 kilometres from the Chinese border, in
the Far-Eastern Amur region. The final investment decision will be in 2020,
Sibur says.
The Amur project would synergise with Gazprom, which will be transporting
gas to Asia starting next year via its Power of Siberia eastern pipeline and
is building a gas processing plant in the same area near the town Svobodny
producing ethane, propane, and other gases used in the chemical industry.
The new projects will make Sibur “one of the global petrochemical markets
players,” said Sibur CEO Dmitry Konov.
And despite economic sanctions against Russia, the company is keen to
raise capital for further growth through an IPO, potentially offering about
15 percent of the company to the market.
The company could be ready for a listing “any time when the market is
ready,” a source close to Sibur told AFP. “It could probably happen next
year… the placement could be worth around $2-2.5 billion.”
That could trump the record $2.2 billion raised by Rusal in 2010 and
become the biggest Russian IPO since VTB bank’s, which raised $8 billion in
2007.
Konov believes Sibur is already “among the most sustainably profitable
companies in the petrochemicals industry globally,” and launching new
projects would make it even more attractive to investors.
As for sanctions, he said he believes the company possesses “strong
fundamentals and is well positioned to weather any economic or geopolitical
challenge.”
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