General Director of Tatneftekhiminvest holding – Rafinat Yarullin – has listed the problems the petrochemical industry is facing in Russia.
Despite the generally positive trend in 2018, the pace of growth of chemical products production in the petrochemical complex of Tatarstan is slowing down. This was stated in the report on the board of directors of OAO Tatneftekhiminvest-holding by the general director of the holding Rafinat Yarullin.
WE HAVE REACHED THE LIMITS
For most types of plastics and rubbers, the production facilities are loaded to the maximum, the production volumes in recent years have remained virtually unchanged. There are no projects for the release of new products, the speaker said.
There are a number of problems that limit the development. No decision was made on the further fate of the Kazan’s plant of synthetic rubber. Implementation of projects for the production of silicones, washing powders has also been frozen. At the TAIF-NK oil refinery, the issues with equipment that prevent the start-up of a deep processing complex also remain unresolved.
The supply of ethylene to Kazanorgsintez from Nizhnekamskneftekhim has reached the bare minimum. This did not allow the company to increase production in the past year. Ethylene supply is not sufficient for both companies.
The limit of production growth at Ammoni OJSC (Mendeleevsk) has also been reached.
In the meantime, logistical opportunities are being actively used in competition. PhosAgro plans to open a distribution and logistics centre in Tatarstan. KuibyshevAzot participates in a joint venture with a Tatarstan company to develop fertilizer sales in Tatarstan. SIBUR is creating a network of warehouses and logistics centres to sell products from the new complex.
THERE WILL BE A SURPLUS OF PLASTIC
Projections for the future are also negative. To a large extent, they are associated with external factors. Thus, across all Russia, in 2019, the economy is expected to stagnate, a slowdown in investment activity, and an increase in loan rates, Rafinat Yarullin predicts.
This year ZapSibNeftekhim will be launched, which will lead to an excess of polyethylene and polypropylene in the Russian market.
Eastern Petrochemical Company, Amur Gas Chemical Complex, Ust-Kut GPP are all due to be launched in the near future. Almost all complexes are focused on the production of large-capacity polymers, mainly polyethylene.
There are more and more plastics produced in Russia, however the entirely new products are not being developed that often.
The construction of a new production of propylene oxide has also turned out to be problematic. There is a very limited number of licensors of this process in the world thus the prices for this technology is are too high for Russian companies. At the same time, the demand for polyesters and laprols in Russia may grow by 3-4 times with the availability of raw materials.
Plants for the production of polyolefins and other chemical products are being actively made in the countries of the Persian Gulf. A second wave of shale-based projects is expected in the United States. China seeks self-sufficiency in basic chemistry and polymers.
Meanwhile, one of the main global trends is limiting the use of disposable plastic products. Therefore, polymer producers need to be ready for the decrease in demand in the consumer goods and packaging sector, the general director of Tatneftehiminvest-Holding warns.
GOVERNMENT SHOULD BE INVOLVED
World petrochemical companies allocate about 10-15% of the R&D budget to the development of new industries and cutting-edge technologies. The results of research and development are increasingly focused on the needs of specific regions and consumers.
There is a tendency of turning down the long-term projects in favour of short-term investments and start-ups. Many companies do not put long-term projects in their core business plans. DowDuPont, for example, prioritizes projects worth up to $30 million.
Investments in research and development in the Asia-Pacific region are increasing too. Companies expand existing research laboratories, build new research centres. Companies in China have particularly active plans. BASF, DowDuPont, Arkema, PPG and a number of other companies are developing according to this strategy.
In Russia, in general, there are few mechanisms to support petrochemical plants, Yarullin said. The SEZ (special economic zone) Alabuga, TASEDs (territory of advanced social and economic development), have been created in Tatarstan, however government funding has not been funding the large projects for a long time. The last time substantial funds from the federal budget were raised in 2006, when the Government allocated 16.5 billion roubles from the Investment Fund to TANECO’s external infrastructure.
At the same time, SIBUR actively uses the opportunities of the Russian Direct Investment Fund (construction of ZapSibNeftekhim), special investment contracts (production of a general-purpose plasticizer – dioctyl terephthalate in the Perm region) and others.
In order to finance the investment projects, not only benefits and subsidies from the state are needed, but also the long-term provision. Certain measures are needed to support large-scale projects, the general director of Tatneftekhiminvest-Holding believes.
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