LG International in Joint Venture for $2.7 Billion Petrochem Complex in Russia's Tatarstan

---

Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The tendering preparation process is now underway for equipment supplies for the Tatar-Korean Petrochemical Company's (TKNK) planned petrochemical complex at Nizhnekamsk on the ground of the Tuben Kama oil refinery in the Republic of Tatarstan in the Russian Federation.

Local companies Tatneft (over 45%), Nizhnekamskneftekhim (NZKM) (over 36%), Svazinvestneftekhim (9%), and Korea's LG International Corp (9%) (KOREA:001120) (Seoul, Korea) set up the joint venture company, TKNK, early in 2000 to build the $1.3 billion petrochemical and oil refinery that is scheduled for completion by 2010. The refinery will have a capacity of seven million tons of oil per annum and an ethylene plant with a capacity of 600,000 tons a year. There will also be downstream plants for the production and processing of polymers. Construction will start in October on the first project in the first phase, a $40-50 million foamed polystyrene plant. It is estimated when the second (details to be announced) phase of the complex is complete, the total cost will be $2.7 billion. The first phase is scheduled for completion in 2008.

Russian market analysts say that no petrochemical refinery of this size and capacity in post-Soviet Russia With an output of 600,000 tons a year it will put NZKM in control of about 50% of the Russian ethylene market.

Tatarstan produces about 25 million tons of oil/year, 6% of Russia's oil output, and the petrochemical output of its four major processing companies amounts to $1.2 billion a year. NKZM produces 97% of Russian ethers output, 64% styrene, 75% ethylene oxide and 60% of synthetic butyl rubber. About 50% of Russia's vehicle tyre output comes from Tatarstan. The oil-gas-chemical industry employs over 100,000 people.

Adjacent to the petrochem plant Tatneft will set a production plant for all-metal cord tires for SUV and utility vehicles and expand its filling station and capacity vehicles at the motor plant. Tatneft is held 31% by Tatarstan's Land and Property Ministry, group companies and employees 14% and 55% by 75,000 individuals and over 100 companies.

TKNK is arranging a $900 million line of credit from a consortium of western banks, including $150 million from Citibank, which has been granted. TKNK has provided charter capital of $220 million. Korea's export-import bank may also become a lender.

Tatarstan has a population of 3.8 million, 1.1 million living in the capital Kazan. It has a land area of 68,000 sq kilometers. The country is in the eastern European plain at the confluence of the Volga and Kama rivers.

PEC - 81000053 81000099