Russia’s number one privately owned petrochemical company in Siberia Sibur is constructing a giant facility. That is a real indication of its global ambitions and expectations of entering China’s market.

 

More than 2,000 kilometers east of Moscow, Tobolsk will become a home for Russia’s biggest petrochemical complex. The town is getting Sibur’s multi-billion-dollar plan to turn crude from nearby West Siberian fields into polymer granules used to make plastic products.

Russia’s oil industry strives to diversify its production and exports to get larger profit margins. The country is developing petrochemicals on national soil rather than selling its crude exports abroad.

 

“The factory is one of five biggest petrochemical projects under construction in the world,” Igor Klimov, director of the ZapSibNeftekhim project said. The $9.5 billion project will let Sibur triple its production of polymers and double its revenues.

Besides, the importance of the project has even exerted pressure on Sibur to invest in a new airport in Tobolsk, the city of fewer than 100,000 people.

The ZapSibNeftekhim plant is due to start the production in the second quarter of 2019. Currently, almost 90 percent of the work is accomplished.

Numerous European companies are also participating in the construction. German gas giant Linde and TechnipFMC, a consolidation of France’s Technip and American FMC, are among them.

 

“Technip took part and managed the engineering, and the concept of this plant,” TechnipFMC manager Jean-Mathieu Hartmann told AFP on a site visit.

IPO in the Pipeline

Nearly sixty percent of the new plant’s production will be transported to Europe and Turkey. In addition to that, to Russia’s ex-Soviet neighbors and, notably, China.

The Asian market beckons Sibur. Sibur’s other major investment idea touches upon the production of ethylene nearly 80 kilometers from the Chinese border, in the Far-Eastern Amur region. Sibur will make the final investment decision in 2020.

Sibur would cooperate with Gazprom in the Amur project. Gazprom will be transporting gas to Asia onwards 2019 by its Power of Siberia eastern pipeline. Besides, the company is building a gas processing plant which produces ethane, propane, and other gases used in the chemical industry, in the same area.

 

The new projects will make Sibur “one of the global petrochemical markets players,” said Sibur CEO Dmitry Konov.

Despite economic sanctions imposed on Russia, Sibur is desperate in raising its capital for further growth through an IPO. It could potentially offer about 15 per cent of the company to the market.

 

The company could be ready for a listing “any time when the market is ready,” a source close to Sibur told AFP. “It could probably happen next year… the placement could be worth around $2-2.5 billion.”

Konov believes launching new projects would make Sibur even more attractive to investors. Sibur is already “among the most sustainably profitable companies in the petrochemicals industry globally”. As for sanctions, Konov believes the company “is well positioned to weather any economic or geopolitical challenge.”