Russian and Italian Companies Building 500,000-Ton Polypropylene Project in Tobolsk

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sibur Holdings (Moscow, Russia), development bank Vnesheconombank (VEB) (Moscow), credit insurance firm SACE SpA (Rome, Italy), and Tecnimont SpA, a subsidiary of engineering and construction firm Maire Tecnimont SpA (BIT:MT) (Rome, Italy), are developing a 500,000-ton polypropylene plant in Tobolsk, Russia.

The project is being constructed in two phases. Construction of the first phase, originally scheduled to start in August 2009, was delayed by a month. This phase includes development of a 500,000-ton-per-year polypropylene plant and a propane drying unit with a capacity to process 510,000 tons per year of propylene. Both units are scheduled for completion by June 2012 and will be commissioned by the end of the subsequent quarter. The second phase will involve construction of a 500,000-ton-per-year polyethylene plant, scheduled to start operations by 2014.

The polypropylene plant will be developed at an investment of more than $2 billion (1.36 billion euros), with VEB's participation likely to amount to $1.4 billion (950 million euros). Credit sourcing for the venture will be addressed by SACE. The first round of credit, worth $153 million (104 million euros), was released by VEB to Tobolsk-Polymer LLC, a subsidiary of Sibur, which will execute the project. The second credit source was finalized in October, with Sberbank (Moscow) committing credits totaling $400 million (271 million euros) over a four-year period.

Front-end engineering and design (FEED), construction, and equipment supply for the units will be handled by Tecnimont and Linde-KCA-Dresden (KCA Linde), a subsidiary of Linde AG (ETR:LIN) (Munich, Germany). Tecnimont will reportedly be involved in the propylene plant activities, and KCA Linde will work on the polypropylene unit. While the polypropylene unit will be based on the Innovene polypropylene process technology licensed from INEOS Group (Hampshire, England), the propylene plant will employ Oleflex technology, licensed from UOP LLC (Des Plaines, Illinois).

The Tobolsk polypropylene project is part of Russia's initiative to raise the production of petrochemicals and chemicals between 60% and 80% through 2015. Although Russia is rich in the basic raw materials for petrochemicals, the country still imports about 70% of its plastics and 65% of its synthetic fibers and resins. The new growth plan aims at setting up fresh capacity and increasing the production capacities of the existing facilities of several players in the sector, including Sibur, Lukoil (OTC:LUKOY) (Moscow), Tatneft OAO (RTC:TATN) (Al'met'evsk, Russia), Gazprom OAO (OTC:OGZPY) (Moscow), and RusVinyl LLC (Novgorod, Russia).

Domestic polyvinyl chloride and polyethylene outputs are forecast to increase 50% and 80%, respectively, while polypropylene, polystyrene and synthetic yarn production have been projected to record a growths of more than 100% by 2015. The initiative will also provide an impetus to vehicle production, community services, housing, and ecological-protection ventures, while attempting to use available natural resources in the best possible manner.

With global production of poly-fibers and plastics predicted to reach annual growth rates of 6% and 5%, respectively, by the year 2020, demand for petrochemical products is also slated to record growth.

Sibur's petrochemical derivatives will go toward producing geo-synthetic material, catering to 20% of Russia's requirement. The company has already started manufacturing flat geo-grid meshes from polypropylene that find use in supporting and firming the ground. Sibur plans to produce nonwoven geo-synthetic construction components for use in the transportation and infrastructure sectors.

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