Russia’s Sibur boosts links with Chinese partners
Russia’s largest petrochemicals company, Sibur, is ramping up its co-operation with Chinese partners as it prepares to build a huge petrochemical plant in the country’s Far East that will target the Chinese market.
“The Russian petrochemical industry is moving east and Russian energy is moving east,” Dmitry Konov, chairman of Sibur’s management board, said in an interview. “It is moving close to the Chinese border. This is where the energy goes and we follow it.” Mutual suspicion has long dogged relations between Russia and China, but a concerted pivot by Moscow towards Beijing in recent years to offset the impact of US and EU sanctions has given a new impetus to warming trade and investment ties between the two countries.
The main co-operation envisaged is with Sinopec, the Chinese petrochemical company that bought a 10% stake in Sibur in 2015 for $1.3bn. Mr Konov said demand from Sinopec was a key factor behind Sibur’s decision to build the Amur Gas Chemical Complex near the border with China’s north-eastern province of Heilongjiang. “Sinopec was looking for a Russian producer which was reasonably close to the Chinese market that can grow production of polymers [plastics] that are structurally short in China,” Mr Konov said, adding that the plastic resin produced would be sold elsewhere in east Asia as well as in China.
Building of the planned Amur complex, which is scheduled to come on stream in 2024 and produce 1.5m tonnes of polyethylene a year, would start in 2020, Mr Konov said. The planned Sibur complex and a nearby gas processing plant run by state-owned Gazprom would both be fuelled by the 3,000km long Power of Siberia gas pipeline, a $55bn project that will be the first to run from Russia to China and is the cornerstone of the Kremlin’s push to deepen energy ties between the two neighbours. Sibur has previously declined to divulge the Amur plant investment, but Mr Konov said: “The investment will be around $6bn or $7bn.”
Sibur is one of Russia’s most profitable large companies with earnings before interest, tax, depreciation and amortisation of $2.8bn in 2017 on an ebitda margin of 35%. The company is owned primarily by shareholders with close links to Vladimir Putin, the Russian president. The company’s other Chinese partner is the state-owned Silk Road Fund, which is capitalised at $40bn and is charged with lending to projects within the Belt and Road Initiative, a grand project championed by Chinese leader Xi Jinping to build infrastructure in more than 80 countries. The fund bought a 10% stake in Sibur for an undisclosed amount in 2016 in what was seen as a move with longer-term strategic significance.
“The countries under the [BRI] mandate are interesting places to grow a petrochemical industry and this may for us, in years to come, be another expansion area,” Mr Konov said, noting a possibility of using the Silk Road Fund to finance petrochemical projects in central Asia and elsewhere in the future.
Source: James Kynge and Henry Foy for the Financial Times
