High gas prices in Europe defers ethylene capacity growth in Russia

The high prices that Europe is willing to pay for Russian gas has impeded the development of gas-based ethylene crackers in Russia, the President of Siberian Ural Petrochemical Company (Sibur) told Platts. Though Russia holds the largest gas reserves in the world, it has a total ethylene capacity of 3 mln tpa, which is small when compared to 33 mln tpa ethylene capacity in North America, 34 mln tpa in Northeast Asia, 25 mln tpa in the Middle East and 24 mln tpa in Europe. In Russia, ethane along with methane is being sent through pipes to Europe. It does not make any economic sense to extract ethane as Europe pays Russia US$300/1,000 cubic meters for natural gas- probably the best price in the world. Russia has the largest natural gas transportation system in the world, and the country distributes gas into Europe through 155,000 km, or 96,100 mils, of gas pipelines and through 24 gas storage facilities. Ethane's extraction, due to low content [less than 5%], results in high capital expenditure. Therefore, new projects, in the near future, are mainly based on C3 [hydrocarbons with molecules comprising three carbon atoms. Other feedstocks such as naphtha and LPG are not being used sufficiently in Russia to produce ethylene because of alternatives that are being used. Practically, Russia has no pipelines for NGLs or olefins. And historically Russia's feedstock prices are not competitive with the Middle East.
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