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KazMunaiGas reduced its stake in Sileno.

KazMunaiGas (the "daughter" of Samruk-Kazyna) has reduced by 20% its stake in Silleno, which is developing a project for the production of polyethylene worth $7.7 billion.

A report published by KMG notes that KazMunaiGas reduced its stake in Sileno by 20% on March 29. After this transaction, KMG owns a 29.9% stake in Sileno. The cost and other terms of the transaction were not disclosed.

According to Egov, the participants of "Sileno" at the moment are the companies KazMunayGas, KMG PetroChem, the Russian Sibur Holding and the Chinese Sinopec Overseas Investment Holding (Singapore) PTE LTD.

Akorda's press service reported following a meeting between President Kassym-Jomart Tokayev, who was on an official visit to China last October, and Chairman of the Board of Directors of Chinese Sinopec Ma Yongsheng, that construction of a polyethylene plant in Atyrau region will start in the second half of 2024. The total cost of the project will be $7.7 billion.

The Head of State highly appreciated Sinopec's contribution to the development of bilateral relations between Kazakhstan and China, as well as the oil and gas industry of the republic, calling the Chinese company a strategic partner.

In turn, Ma Yongshen informed the head of state about the company's intention to start construction of the plant in the second half of 2024. He also shared plans for the implementation of another strategic project – the construction of a complex for the production of terephthalic acid and polyethylene terephthalate on the basis of the Atyrau Oil Refinery.

"We want to contribute to the development of this project. We attach great importance and attach great importance to this project," said the head of the Sinopec Board of Directors.

The meeting also discussed issues of cooperation in the field of geological exploration and subsoil use, including the use of the latest technologies.

KazMunaiGas itself reported that on October 17, 2023 in Beijing, KMG, Sinopec and the Russian Sibur signed contracts for the purchase and sale of a stake in a polypropylene production project. KMG and Sibur sell Sinopec 20% and 10%, respectively, to Silleno (the operator of the polyethylene production project). The ownership structure of Sileno will look like this: KMG — 40%, Sinopec — 30%, Sibur - 30%. The legal procedures for the entry of the Chinese company into Silleno were planned to be completed in the first quarter of 2024.

In addition, KMG announced the conclusion of an agreement with Sinopec on the joint development of a preliminary feasibility study for the production of terephthalic acid (TFC) and polyethylene terephthalate (PET) in Atyrau. Based on the results of the development of the preliminary feasibility study, the parties will decide on the further implementation of the project.

The capacity of the future production is planned in the amount of up to 735 thousand tons of PET per year. The main raw material for the TFK project/PET is paraxylene, produced at the Atyrau refinery. PET is an important polymer material and as a final raw material is widely used in various industries. PET is used in the production of packaging for food and beverages, containers, the textile industry (textile yarns, synthetic fibers), technical fibers and others. The terephthalic acid production plant is an intermediate link in the PET production chain.

On September 8 last year, Prime Minister Alikhan Smailov and Sinopec President Yu Baocai discussed the implementation of new projects in Kazakhstan. The Head of Government stressed that with the direct participation of Sinopec, a number of significant projects have been completed in the republic, including the modernization of the Atyrau Oil Refinery. Now we are talking about the accelerated development of petrochemical industries.

"In this regard, the "anchor" Polyethylene project is an important stage in the development of the petrochemical industry, and its implementation will have a multiplier effect on the country's economy. Considering that Sinopec is one of the world leaders in the field of petrochemistry, the issue of the company's entry into the project as an equal partner is of strategic importance," Smailov said.

At the same time, it was noted that Sinopec is considering the possibility of participating in other promising projects in Kazakhstan.

Diana Arysova, Deputy Chairman of the Board of KazMunayGas, noted on August 23, 2023, that KMG, Russia's Sibur and China's Sinopec were jointly developing a feasibility study of a polyethylene production plant, and a final investment decision was expected to be made in mid-2024.

"Now the company is considering the implementation of a project to build a polyethylene production plant. This project is at the FEED stage, a feasibility study. The project will be implemented jointly with partners — the Russian Sibur and the Chinese Sinopec, which, together with KMG, are currently working on FEED. The final investment decision is planned to be made in mid—2024," she said during the issuer's day at the Kazakhstan Stock Exchange (KASE).

In November 2022, Samruk-Kazyna, KazMunayGas, Sibur Holding and the participants of the operating companies of the petrochemical projects Polypropylene and Polyethylene signed the main documents on the creation of joint ventures based on Kazakhstan Petrochemical Industries and Sileno (the Polyethylene project). The parties defined the terms of partnership in the joint venture, in particular, investing in the construction of a polyethylene plant with a capacity of 1.25 million tons per year, as well as the procedure for selling finished products of the enterprise. At the same time, Sibur's share in each joint venture was supposed to be 40%.

Later, it became known about plans to join the Chinese Sinopec polyethylene project with a 30% stake. The agreement on Principles for the Polyethylene project was signed with Sinopec on May 18. This document assumes Sinopec's entry into the project as a full partner on a par with Sibur.

The estimated cost of the project is $7.7 billion, with a capacity of 1.25 million tons of polyethylene per year. The plant is planned to be completed in 2028. The plant will be located on the territory of the special economic zone in Kabatan, Atyrau region, where a polypropylene production plant (the Polypropylene project) is already operating, in which KMG owns 49.5%.

KMG attributed the competitive advantages to the high content of ethane fractions in raw materials (up to 14% of ethane used in the production of polyethylene), the attractive cost of raw materials, cheaper infrastructure costs due to their division into several projects, advantageous location and access to major markets. It is planned to receive gas from the Tengiz field.

The capacity of the domestic polyethylene market was estimated at 180 thousand tons per year with an annual growth potential of 4%. Target markets include the CIS countries, China, Turkey and European countries.

Licensing agreements for the use of MarTech ADL and UNIPOL PE Process technologies have been signed with world leaders in this field — Chevron Phillips Chemical and Univation Technologies, which will allow us to produce a wide range of products, including premium high–density polyethylene, which is in stable high demand worldwide.

Taking into account the technical complexity, high capital intensity and a number of other factors, the project was planned to be implemented in partnership with other industry players. The financing structure of the project assumed a combination of borrowed and own funds.

About 8 thousand jobs will be created during the construction phase, and 875 permanent jobs during operation. The contribution to the country's GDP was estimated at 1.2%
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