The total volume of investments of Sibur and Kazakhstan’s Kazmunaygas in the construction of an integrated gas chemical complex for the production of polyethylene within the framework of the joint venture (JV) Sileno in Kazakhstan is estimated at $7.6 billion. This is stated in the draft resolution of the Government of Kazakhstan on the comprehensive plan for the development of major oil and gas and petrochemical projects for 2023-2027.
According to the document, the implementation of the joint venture project is scheduled for 2023-2028. It will be financed by private and borrowed funds. The capacity of the enterprise will be 1.25 million tons of polyethylene per year.
In early October 2021, the National Welfare Fund of Kazakhstan “Samruk-Kazyna”, “Kazmunaygas”, “Sibur” and the participants of the operating companies signed basic documents on the establishment of joint ventures on the basis of Kazakhstan Petrochemical Industries Inc (KPI) LLP and Sileno LLP on the territory of the special economic zone “National Industrial Petrochemical Technopark” in the city of Atyrau.
At the beginning of November 2022, the terms of partnership in the joint venture were determined, in particular, the scheme of investment in a polyethylene production plant and the procedure for selling finished products of a polypropylene plant with a capacity of 500,000 tons per year were agreed. Sibur’s share in each joint venture will be 40%, Kazmunaygas – 49.9%, Samruk-Kazyna Fund – 10.1%.
The KPI polypropylene production plant was launched in early November 2022. On November 18, the first batch of polypropylene in 1500 tons was shipped from the plant .
At the beginning of January 2023, Interfax, with reference to the executive director of Marketing and Sales of Sibur, Sergey Komyshan, reported that Sileno would “soon” begin designing a plant for the production of polyethylene.
Now the total capacity of Sibur for the production of polyethylene is 2.7 million tons per year, polypropylene – 1.7 million tons per year. The company mainly produces these products at the Zapsibneftekhim plants in Tobolsk (Tyumen Region), as well as Kazanorgsintez and Nizhnekamskneftekhim plants in Tatarstan.
Launched in May 2019 Zapsibneftekhim has capacities for the production of polyethylene at 1.5 million tons per year, polypropylene – 1 million tons per year. In 2020 (the latest public data), Sibur increased sales of polyethylene by 5 times to the level of 2021 to 1.3 million tons, polypropylene – by 51.7% to 1.1 million tons. In 2021, the company consolidated the assets of the Tatarstan holding TAIF – Kazanorgsintez and Nizhnekamskneftekhim, which also have large capacities for the production of polyethylene (870,000 tons per year and 230,000 tons per year, respectively) and polypropylene (190,000 tons and 180,000 tons).
In addition, Sibur, together with China’s Sinopec, is implementing a project to build the Amur Gas Chemical Complex (GCC) 15 km from the city of Svobodny in the Amur region. Its construction began in August 2020, the launch of the enterprise is scheduled for 2025-2026. The complex will produce 2.3 million tons of polyethylene and 400,000 tons of polypropylene per year.
In the annual report for 2021, Sibur noted that the launch of new capacities in Kazakhstan “will have a positive effect on the growth of domestic consumption of polymer products in Kazakhstan and other EAEU countries and will strengthen [the company’s] export positions in high-value-added products.”
A representative of Sibur explained to Vedomosti that the amount of the company’s participation in the financing of the project “is proportional to the participation of partners in the joint venture, in accordance with the shares.” According to him, by the time the new production is commissioned in Kazakhstan, the markets of Russia and the CIS will be in surplus for polyethylene. The growth of domestic demand will accelerate, while a significant part of the products will be exported.
Traditionally, about 60-65% of all products remain in the domestic market, which remains a priority for the company, the interlocutor stressed. Deliveries to the European market previously accounted for about 25% of exports of all products (about 10% of the volumes produced). After the restrictions were imposed, all volumes were successfully redirected to other markets.
The representative of Sibur added that when entering new markets, the company always considers the possibility of partnerships with local players, which “allows us to use their expertise and marketing channels for more effective sales.”
Dmitry Akishin, Managing Director of the Implementation Company, believes that the main goal of Sibur’s participation in gas chemical projects in Kazakhstan is business diversification. He notes that “strategically, Sibur is unlikely to focus on maintaining export restrictions in the long term.” At the same time, the expert notes that any new project is always access to new markets, which is also part of diversification.
Ekaterina Mozharova, Managing Director and Head of the ACRA Corporate Ratings Group, notes that for Sibur, the production of polyethylene in Kazakhstan is a “rather interesting” project, given the availability of local raw materials and the opportunities opening up for new sales markets. She explains that now, because of the sanctions, Sibur has restrictions on sales markets. In April — October 2022, the EU banned the supply to the countries of the community of a wide range of Russian chemical products, including polyethylene and polypropylene.
“The company has already redirected European exports to Asia, primarily to China and Turkey. The joint venture in Kazakhstan will also help with the development of distribution in other Asia–Pacific countries,” the analyst notes.