LUKOIL Chemical Group's new strategy that has enabled a turnaround

LUKOIL Chemical Group's activities include conversion of hydrocarbons produced by Russian company LUKOIL, as well as production of a wide range of petrochemicals to meet demand from domestic Russian as well as overseas markets. The company's overall development strategy until 2017 includes maximizing existing plant efficiency as well as launching new production operations in existing facilities. The company is set to invest over US$4 billion over the next 10 years. LUKOIL Chemical Group's fixed productive assets, whose performance is either submarginal or on the verge of bankruptcy in th 1990's, include: Stavrolen (Budennovsk, Stavropol Region), Karpatneftekhim (Kalush, Ivano-Frankovsk Region, Ukraine), Saratovorgsintez (Saratov), and the sea terminal VARS (Ventspils, Latvia). Since then, the company has managed to not only recover these idle enterprises, but also implement new investment projects by investing in repairs and engineering upgrades, construction of new facilities, arrangement of steady feedstock supply. Geographically, the Group exports to more than 50 countries worldwide, products such as polyethylene, vinyl acetate, acrylonitrile, and monochloroethylene. Since 1997, Stavrolen has been operating at almost 100% capacity, capturing a 40% domestic market share for high-density polyethylene in 2006, out of the total of 650,000 tons consumed by Russia. In 2005, Karpatneftekhim commissioned a plant for ?4-?5 hydrogenation, that aided in a 17% increase in ethylene output in 2006, a 15% increase in propylene output levels, and a 13% increase in benzene over 2005 levels. The company is currently constructing a chlorine and caustic soda production plant as well as a polyvinyl chloride (PVC) resin plant which will be one of the largest in Europe with a capacity of 300,000 tpa; both are scheduled for commissioning in 2008-2009. Another investment project of LUKOIL Chemical Group is POLYEF (Blagoveshchensk, Bashkortostan), the only polyester production complex in Russia, which can produce 230,000 tpa of terephthalic acid (TPA). The group is looking forward to construction of a large petrochemical complex to produce ethylene and its derivatives in the Stavropol region. LUKOIL will supply feedstock from its fields in the North Caspian basin. Annual output will be at least 600,000 tons of ethylene, 450,000 tpa of polyethylene, and provides for the expansion of current Stavrolen facilities to produce up to 300,000 tpa of polypropylene. The complex will be completed alongwith the start of operation of the North Caspian fields in 2013.