Russia's Sibur Secures $153 Million Line of Credit for Polypropylene Project in Tobolsk

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russian petrochemical major OJSC Sibur Holding (Moscow) has secured initial funding of $153 million (100 million euros) from state-owned bank Vnesheconombank (Moscow) for the company's latest propylene and polypropylene venture in Tobolsk, situated in the Tyumen region of Russia. The bank has opened a $153 million line of credit as the first step for funding.

The proposed petrochemical complex will house a polypropylene plant with a production capacity of 500,000 tons per year. The plant equipment is likely to be delivered to the site during the next year, and construction and other pre-commissioning tasks are expected to continue until mid-2012. The plant will employ the patented Innovene Polypropylene process technology from INEOS Group Limited (Lyndhurst, England) for the production of propylene. The Innovene polypropylene process, in addition to being cost-effective, scalable and reliable, also offers a wide product capability.

The project will be executed by Sibur's subsidiary Tobolsk-Polymer LLC, a company established in 2006 to oversee the liquefied natural gas (LNG) processing plant at Tobolsk-Neftekhim. Sibur has also signed a joint venture framework agreement with Novatek OAO (RTC:NVTK) (Tarko-Sale, Russia) on the basis of Tobolsk-Polymer, which will specialize in feedstock dehydrogenization, polypropylene production and other downstream processes. The other major participants in the venture were identified as early as 2007. Fluor Corporation (NYSE:FLR) (Irving, Texas) was brought on board as the project manager and is in charge of all project activities ranging from detailed documentation to identifying suitable technologies for the project. UOP LLC (Des Plaines, Illinois) and INEOS Group were subsequently chosen to be the project licensors, providing the required process technologies for the venture. Tecnimont SpA (Rome, Italy), a subsidiary of Maire Tecnimont SpA (BIT:MT) (Rome), and Linde-KCA-Dresden GmBH (Dresden, Germany), a subsidiary of Linde AG (ETR:LIN) (Munich, Germany), were awarded the front-end engineering and design (FEED) contract. Under the FEED contract, the companies will also supply plant equipment and manage all construction activities until the project is operational.

In addition to the polypropylene plant, the Tobolsk petrochemical complex will contain a 510,000-ton-per-year propylene production unit based on propane dehydrogenation. While Linde-KCA will be involved in the construction of the polypropylene plant, Tecnimont will carry out engineering, procurement and construction (EPC) activities for the propylene plant, for which Novatek will provide the necessary gas feedstock. The propylene plant will run on the Oleflex technology licensed from UOP.

Upon completion, the petrochemical complex at Tobolsk will be the largest modern facility in Russia to be outfitted with advanced hydrocarbon processing techniques. The first phase of the project was slated for completion by 2010, subject to successful project launch in 2007. The second phase of operations was reported to involve production of olefins, in addition to capacity expansion spanning polypropylene and polyethylene output. Capital costs for the venture were estimated to be $750 million, while the break-even period was forecast to be seven years.

Sibur, which is aiming to capture a large share in the growing plastics sector of the region, is expected to benefit from this new polypropylene venture, which to some extent will offset the volume of Russia's imports of polypropylene end products. It is estimated that about 1 million tons per year of imported finished plastic goods find their way into the Russian market.

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