Shortage of gas could upset Sibur's plans to double olefins capacity, feedstocks of naphtha and LPG

Shortage of gas could upset Sibur’s plans to double olefins capacity

31-Jan-11

It is unlikely that Russia's state owned petrochemicals manufacturer Sibur will meet its target of doubling sales by boosting olefins production capacity in the next five years on a shortage of gas. Russian gas producers like Gazprom have no immediate plans to supply additional gas to Sibur as per Platts. Other feedstocks of naphtha and LPG are also not being used sufficiently in Russia to produce ethylene because of alternative uses and in the absence of essential infrastructure. Russia continues to flare 40 billion cubic meters of ethane-rich associated gas, and though the country's government had plans to reduce this by 95% by 2011, there are hardly any signs of that happening in the next five years, said Philip Leighton, director, Petroleum, Chemicals and Energy at Jacobs Consultancy. Russia could have built up a ethylene and other polyolefins-making capacity equivalent to half of [ethylene and olefins] production capacity of Saudi Arabia had they used the gas they are flaring. But no such projects are seen as yet, not even at the inception stage. According to latest data, even though Russia holds the largest gas reserves in the world, it has a total ethylene capacity of just 3 mln tpa which is very small compared with the 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. While Russia flares most of its ethane-rich associated gas, it sells most of its low ethane non-associated gas. Russia sells gas to Europe at one of the best prices in the world, thus making it less economically attractive to extract ethane for manufacturing polyolefins. The country has the largest natural gas transportation system in the world, and the country distributes gas into Europe through 155,000 km of gas pipelines and through 24 gas storage facilities.