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Russia’s Sibur, Gazprom agree on LPG supplies ahead of natgas exports to China

Sibur, Russia’s largest petrochemicals company, said on Thursday it has reached an agreement with Gazprom on liquefied petroleum gas (LPG) supplies to a yet-to-build Sibur plant, ahead of Russia’s natural gas pipeline launch to China.

The deal could expedite an investment decision by the petrochemicals company to build a gas and chemical complex in the Amur region near Russia’s border with China.

Under the deal, Gazprom will supply the new complex between 1.1 million tonnes and 1.5 million tonnes of LPG, and may increase potential deliveries of ethane by 400,000 tonnes annually.

“We would like to make an investment decision by the end of the year,” Sergey Komyshan, executive director of Sibur, told Reuters.

LPG, one of the by-products of gas processing, is the key feedstock for production of petrochemicals at Sibur’s latest complex.

The project was “practically not oriented toward the domestic market” and that China’s Sinopec was a potential partner in the complex, Komyshan said, adding that Russia’s far east is too scarcely populated to spur demand for the complex.

“China is experiencing and will keep having a deficit in polyethylene,” Komyshan said. “Around 2024-2025, we expect demand for polyethylene to grow by 10 million tonnes.”

According to Komyshan, the project construction may be completed as early as 2024.

Sibur said it could increase estimates for its annual production capacity of polyethylene at the facility to 2.3 million tonnes from 1.5 million tonnes, as well as produce about 400,000 tonnes of polypropylene.

Meanwhile, Russia, one of the top oil exporters to China, is set to launch a natural gas export pipeline in December. Its LPG supplies to China remain small at this stage, but Moscow is planning to expand its production.

Amid global trade issues, Sibur and Sinopec signed a number of cooperation agreements this year to join forces, particularly in processing natural gas into petrochemicals in Russia and China.

The company said in June that it could carry out a long-planned initial public offering (IPO) no earlier than next year.

Komyshan said no date had been set for a possible IPO.

“Our main task is to be ready for the IPO,” he said. “If and when this decision is made, I think we will fulfil it successfully.”
Source: Reuters (Reporting by Vladimir Soldatkin and Gabrielle Tétrault-Farber; additional reporting by Olesya Astakhova, Editing by Sherry Jacob-Phillips)

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