Hydrocarbon Processing - March 2021 - 19

Regional Focus

E. GERDEN
Contributing Writer

Russia looks to double petrochemicals
and LPG exports by 2025
Russia hopes to become one of the
world's largest producers and exporters
of petrochemicals and LPG by 2025 by
doubling its domestic output and exports. Implementation of this plan will
be part of the country's existing International Cooperation and Export initiative,
providing a roadmap for the expansion
of the petrochemicals and gas processing
sectors. Despite Russia's status of one of
the world's largest oil and gas producers,
its share of petrochemicals and LPG in
the overall structure of the Russian economy does not exceed 2%.

larly a reverse excise tax on ethane and
LPG, is expected to stimulate interest in
creating a larger export economy around
petrochemicals and LPG. Several leading
Russian energy firms have been calling for
such tax breaks for some time.
According to the Russian Ministry of
Energy, the provision of a reverse excise tax
on ethane and LPG will attract more than
RUB 3.5 T ($47.7 B) of additional investment in Russian petrochemicals and gas
chemicals over the next 6 yr-7 yr, as well as
increase the processing of ethane and LPG
by 8 metric MMtpy-10 metric MMtpy.

Promoting petrochemicals and LPG.
As part of its development plan, Russia
aims to increase the value of its petrochemical exports to $37 B by 2024 from
$22.4 B in 2019. To this end, domestic
petrochemicals production will be scaled
up rapidly over the next 4 yr-5 yr.
For example, the production of largescale polymers should reach 11.1 metric
MMtpy by 2025 from 5.3 metric MMtpy
in 2019, while exports of these polymers
will increase to nearly 4.4 metric MMtpy
from 600,000 metric tpy. Simultaneously, the share of LPG processing in the
country is planned to increase to 8.2%
from the current share of 4.6%, while
naphtha processing will rise from 5.6%
to 7.2% by 2025.
In Russia, gas has been traditionally
used as an energy source to generate electricity and heat, rather than as a valuable
feedstock. That mindset is now changing. Analysts believe that NGL production is set to gain momentum in Russia.
The opportunity is certainly abundant-
according to the Russian Ministry of Energy, only 12% of the overall volume of
gas produced in Russia in 2019 was utilized for further processing.

Companies respond. Due to infrastructure constraints, ethane processing
in Russia is severely under-developed.
According to a report in Russia's Vedomosti newspaper, Russian gas contains approximately 10 metric MMt-12
metric MMt of ethane, of which only
700,000 metric t are further processed.
The volume of LPG production in Russia is estimated at 17 metric MMtpy, of
which 40% is exported.
The announcement of the petrochemicals and LPG export development plan
may also help stimulate companies to resume work on their investment projects in
Russia. Many of these projects were suspended due to the COVID-19 pandemic
and its negative economic consequences.
A number of leading local producers
have already announced their intention
to look into new investment opportunities in Russia's petrochemicals and gas
chemicals sectors. One company is Lukoil, a privately owned oil and natural gas
producer and oil refiner (FIG. 1). Lukoil
has confirmed plans to build new capacities for the production of polypropylene
(500,000 metric tpy) and styrene (up
to 300,000 metric tpy) at its refinery in
Nizhny Novgorod in Russia's Volga region. The petrochemicals complex will
be a new project for the company.

Tax breaks for producers. The provision of tax breaks for producers, particu-

FIG. 1. Lukoil operates four oil refineries in
Russia: Perm, Volgograd, Nizhny Novgorod
and Ukhta. Photo courtesy of Lukoil.

Lukoil is also considering the construction of a large-scale petrochemical
complex at its Perm refinery. The cost of
the project is estimated at more than RUB
200 B ($2.73 B), which would make it
one of the most expensive projects in the
Russian petrochemicals sector.
Arctic gas processing developments.
As part of Russia's export plan, a development has appeared in the Arctic region.
To ensure 80 metric MMt of cargo turnover along the Northern Sea Route by
2024, the Russian Ministry of Economic
Development has approved a package of
incentives for the gas chemicals sector.
Furthermore, Lukoil intends to invest
RUB 610 B ($8.3 B) in a gas processing
complex off the coast of the Gulf of Ob
for the production of methanol, ethane
and LPG. Meanwhile, Gazprom Neft
has vowed to allocate up to RUB 1.1 T
($15 B) in the production of ethanol,
polyethylene and polypropylene production within the territory of the region.
Russian producers welcome the government's plans to financially support the
domestic petrochemicals and gas processing sectors. The present volatility of prices for finished products and raw materials poses a threat to payback periods for
many of large-scale petrochemicals and
gas processing projects, making the longterm profitability of such projects difficult
to predict.
Hydrocarbon Processing | MARCH 2021

Hydrocarbon Processing - March 2021

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