Petrochemical enterprises in Kazakhstan will have to fight for sales markets.
The government has announced the implementation of a number of large and expensive petrochemical projects. A preliminary schedule for the construction and commissioning of the plants has been drawn up. At the same time, the products of all enterprises are mainly export-oriented and they will have to compete with the world's strongest manufacturers. Will domestic factories be able to find markets abroad? Will they stand up to the competition?
In 2029, a polyethylene production plant with a capacity of 1.25 million tons per year will be launched in Kazakhstan, and $7.7 billion will be spent on its construction. The project is jointly implemented by KazMunaiGas (40%), China's Sinopec (30%) and Russia's Sibur (30%).
KMG has already signed licensing agreements with Chevron Phillips Chemical for MarTech ADL technology for the production of low-pressure polyethylene and with Univation Technologies for UNIPOL technology for the production of low-pressure polyethylene and linear high-pressure polyethylene.
The company is currently at the stage of developing an expanded basic project. Its completion is expected in the third quarter of this year. After that, the pyrolysis licensor will be selected: Linde or Lummus Technology. Then a final investment decision should be made whether the project will be implemented or not.
The authorities have already announced a preliminary implementation schedule, according to which commissioning is scheduled for the III and IV quarters of 2028. Last year, Chairman of the Board of Directors of Sinopec Ma Yongsheng, during a meeting with President Kassym-Jomart Tokayev, announced his intention to start construction of the plant in the second half of 2024. If everything goes according to plan, the plant will be launched in 2029.
At the same time, it should be borne in mind that when fully loaded, the company will have to export about 90% of its products. According to Argus, in 2023, the consumption of polyethylene in Kazakhstan was at the level of 171 thousand tons, and by 2032 it will grow to 240 thousand tons per year.
"We all understand perfectly well that domestic consumption will show good steady growth. But if we compare it with the capacity of the enterprise, which will amount to about 1.2 million tons of polyethylene per year, then we understand that a very large volume of the product will need to be exported. And, of course, the issues of export strategy are very relevant for this enterprise, as far as sales will be successful in foreign markets," says Valentin Kotlomin, head of the Neftegazochemistry department at Argus Agency in the Middle East, Central Asia and the Asia-Pacific region.
The situation with the polypropylene production project of Kazakhstan Petrochemical Industries Inc. (KPI) shows that the announced plans cannot always be fulfilled.
The plant, which cost $2.6 billion to build, was commissioned at the end of 2022. In 2023, it produced 195,000 tons of polypropylene. The project sales structure assumed that 34% of KPI products would be exported to China, 18% to Turkey, 10% to Europe, 12% to Russia and Belarus, 14% to other countries and 12% to the domestic market. However, the actual statistics of last year showed that 55% of the polypropylene produced at the plant was sold to China, 8% to Turkey, 12% to Europe, 20% to Russia and Belarus, and 5% to Kazakhstan.
"Of course, we understand that the company is at the stage of formation. 2023 was the first year when the company was fully operational. And 2024 will be more indicative of how close the company will come to that project structure of product sales," the expert notes.
The company plans to significantly increase production this year. It is expected that it will produce 487.5 thousand tons of polypropylene, and supplies to the domestic market will increase from 9.5 thousand tons (in 2023) to 30 thousand tons. The company is also gradually expanding its branded range. If 6 grades of polypropylene were mastered in 2023, then in 2024 the assortment is expected to double to 12 grades.
In terms of exports, this year the company intends to make a very serious bet on the European market. There is information that Sibur, which owns 40% of the enterprise and is responsible for sales in foreign markets, plans to replace its (Russian) products in the European market with Kazakh products, that is, manufactured at the KPI plant.
In 2023, the global polypropylene market amounted to 86 million tons and is projected to reach 124 million tons by 2032, demonstrating an annual growth of 4.2%. At the same time, in 2024-2025, global production will grow by 8 million tons per year, which will reduce capacity utilization by up to 73%. But in the following years, the increase in capacity will not be so rapid, which should allow manufacturers to increase the load to 84%. However, there is a risk of maintaining a low load in case of new projects.
At the same time, Argus predicts that new projects will have greater competitiveness, which will allow them to push some of the existing manufacturers out of key sales markets. In a number of regions, there will be a rationalization of capacities, in which outdated, low-power industries that have difficulties accessing cheap raw materials and efficiently supplying products to key markets will be closed. The main impact of rationalization will fall on Northeast Asia and Western Europe.
Fight against China, conquer Russia
Two other planned petrochemical projects – a plant for the production of butadiene, as well as a complex for the production of terephthalic acid (TFC) and polyethylene terephthalate (PET) - will depend on the success of sales in foreign markets.
The Butadiene project is being implemented by a joint venture with the same name, the founders of which are the Samruk-Kazyna Fund – 25% (until August 2023 – KMG) and the Russian vertically integrated oil and gas company Tatneft – 75%.
In March last year, Lummus Technology entered into licensing agreements with Butadiene LLP for the technology of dehydrogenation of n-butane, dehydrogenation of isobutane, production of methyl tert-butyl ether (MTBE) and extraction of butadiene.
The company will annually produce 120 thousand tons of butadiene, 85 thousand tons of isobutylene and 40 thousand tons of MTBE. Raw materials – 380 thousand tons of butane fraction – will be supplied from Tengiz. It is planned to complete the construction of the plant in 2025. The cost of the project is estimated at almost $1 billion.
Initially, it was announced that the production of butadiene would be integrated with the production of styrene-butadiene styrene and divinyl-styrene synthetic rubbers in the amount of 186 thousand tons per year. However, according to the latest information, the production of rubbers will be reduced to 83 thousand tons. This means that a surplus of butadiene will be formed on the project, and it must be put somewhere: sold or processed.
Rubbers will also be supplied to the KamaTyresKZ plant located in Saran, Karaganda region. The owners of the enterprise are Tatneft (51%) and Allur LLP of Kazakhstan (49%).
Valentin Kotlomin notes that Tatneft has been active in its tire business in recent years. Initially, the company's key asset was the Nizhnekamskshina plant with a capacity of 10 million tires per year. At the end of 2022, it bought the First rubber machinery plant located in Uzbekistan with a capacity of 3.3 million tires per year. In December of the same year, the KamaTyresKZ joint venture began to produce products (3.5 million tires per year). And finally, in March last year, Tatneft acquired the tire factory of Nokian Tyres, located in the Leningrad region of Russia, with a capacity of 17 million tires per year. Thus, over the past two years, Tatneft has tripled the capacity of its tire business, turning from a regional into a major global player in this industry, the Argus analyst notes.
An equally interesting situation is developing around the complex for the production of TFC and PET. Last year, it was announced that the implementation of the project is planned as part of the development of the petrochemical industry in Kazakhstan. It is included in the portfolio of promising projects of KMG PetroChem (formerly KLPE LLP). At the same time, Sinopec also announced its plans to participate in the creation of this enterprise. Preliminary parameters of the complex: production of 300 thousand tons of terephthalic acid and 450 thousand tons of polyethylene terephthalate per year; investment volume – over $700 million. Raw materials for the plant – 400 thousand. tons of paraxylene per year – Atyrau Refinery will supply (in total, the enterprise is capable of producing 496 thousand tons of paraxylene annually).
It is assumed that paraxylene will be processed into terephthalic acid. Then part of the terephthalic acid will be processed into polyethylene terephthalate, and the remaining part in the amount of 240 thousand tons will be sold (according to Argus estimates, most likely exported).
It would be possible to send it to Russia. In 2023, it imported 250 thousand tons of acid. All products were delivered from China.
The same applies to PET. It is planned to produce about 450 thousand tons of it in Atyrau per year. Domestic consumption in 2023 was estimated at about 85 thousand tons, of which about 95% were imports from China. Russia imported about 270 thousand tons of PET last year, more than 90% of them from China.
"In principle, taking into account the domestic market of Kazakhstan and Russia's needs for PET, this capacity of 450 thousand tons per year looks more or less justified. Except for one important factor. All imported PET to Russia and Kazakhstan comes from China. The Kazakh project will have to compete with Chinese suppliers. And China is the global pillar of the polyester industry and, of course, competing with it, trying to oust China from its traditional markets will be very, very difficult," Valentin Kotlomin believes.
Tatneft also recently announced that it will hold public hearings on April 16 on the construction project of a 1 million tons per year TFK unit at the Taneco refinery. Thus, if the project is further developed, then the Kazakh TFK will have to be transported to other (distant) markets.
Source: petrocouncil.kz
The government has announced the implementation of a number of large and expensive petrochemical projects. A preliminary schedule for the construction and commissioning of the plants has been drawn up. At the same time, the products of all enterprises are mainly export-oriented and they will have to compete with the world's strongest manufacturers. Will domestic factories be able to find markets abroad? Will they stand up to the competition?
In 2029, a polyethylene production plant with a capacity of 1.25 million tons per year will be launched in Kazakhstan, and $7.7 billion will be spent on its construction. The project is jointly implemented by KazMunaiGas (40%), China's Sinopec (30%) and Russia's Sibur (30%).
KMG has already signed licensing agreements with Chevron Phillips Chemical for MarTech ADL technology for the production of low-pressure polyethylene and with Univation Technologies for UNIPOL technology for the production of low-pressure polyethylene and linear high-pressure polyethylene.
The company is currently at the stage of developing an expanded basic project. Its completion is expected in the third quarter of this year. After that, the pyrolysis licensor will be selected: Linde or Lummus Technology. Then a final investment decision should be made whether the project will be implemented or not.
The authorities have already announced a preliminary implementation schedule, according to which commissioning is scheduled for the III and IV quarters of 2028. Last year, Chairman of the Board of Directors of Sinopec Ma Yongsheng, during a meeting with President Kassym-Jomart Tokayev, announced his intention to start construction of the plant in the second half of 2024. If everything goes according to plan, the plant will be launched in 2029.
At the same time, it should be borne in mind that when fully loaded, the company will have to export about 90% of its products. According to Argus, in 2023, the consumption of polyethylene in Kazakhstan was at the level of 171 thousand tons, and by 2032 it will grow to 240 thousand tons per year.
"We all understand perfectly well that domestic consumption will show good steady growth. But if we compare it with the capacity of the enterprise, which will amount to about 1.2 million tons of polyethylene per year, then we understand that a very large volume of the product will need to be exported. And, of course, the issues of export strategy are very relevant for this enterprise, as far as sales will be successful in foreign markets," says Valentin Kotlomin, head of the Neftegazochemistry department at Argus Agency in the Middle East, Central Asia and the Asia-Pacific region.
The situation with the polypropylene production project of Kazakhstan Petrochemical Industries Inc. (KPI) shows that the announced plans cannot always be fulfilled.
The plant, which cost $2.6 billion to build, was commissioned at the end of 2022. In 2023, it produced 195,000 tons of polypropylene. The project sales structure assumed that 34% of KPI products would be exported to China, 18% to Turkey, 10% to Europe, 12% to Russia and Belarus, 14% to other countries and 12% to the domestic market. However, the actual statistics of last year showed that 55% of the polypropylene produced at the plant was sold to China, 8% to Turkey, 12% to Europe, 20% to Russia and Belarus, and 5% to Kazakhstan.
"Of course, we understand that the company is at the stage of formation. 2023 was the first year when the company was fully operational. And 2024 will be more indicative of how close the company will come to that project structure of product sales," the expert notes.
The company plans to significantly increase production this year. It is expected that it will produce 487.5 thousand tons of polypropylene, and supplies to the domestic market will increase from 9.5 thousand tons (in 2023) to 30 thousand tons. The company is also gradually expanding its branded range. If 6 grades of polypropylene were mastered in 2023, then in 2024 the assortment is expected to double to 12 grades.
In terms of exports, this year the company intends to make a very serious bet on the European market. There is information that Sibur, which owns 40% of the enterprise and is responsible for sales in foreign markets, plans to replace its (Russian) products in the European market with Kazakh products, that is, manufactured at the KPI plant.
In 2023, the global polypropylene market amounted to 86 million tons and is projected to reach 124 million tons by 2032, demonstrating an annual growth of 4.2%. At the same time, in 2024-2025, global production will grow by 8 million tons per year, which will reduce capacity utilization by up to 73%. But in the following years, the increase in capacity will not be so rapid, which should allow manufacturers to increase the load to 84%. However, there is a risk of maintaining a low load in case of new projects.
At the same time, Argus predicts that new projects will have greater competitiveness, which will allow them to push some of the existing manufacturers out of key sales markets. In a number of regions, there will be a rationalization of capacities, in which outdated, low-power industries that have difficulties accessing cheap raw materials and efficiently supplying products to key markets will be closed. The main impact of rationalization will fall on Northeast Asia and Western Europe.
Fight against China, conquer Russia
Two other planned petrochemical projects – a plant for the production of butadiene, as well as a complex for the production of terephthalic acid (TFC) and polyethylene terephthalate (PET) - will depend on the success of sales in foreign markets.
The Butadiene project is being implemented by a joint venture with the same name, the founders of which are the Samruk-Kazyna Fund – 25% (until August 2023 – KMG) and the Russian vertically integrated oil and gas company Tatneft – 75%.
In March last year, Lummus Technology entered into licensing agreements with Butadiene LLP for the technology of dehydrogenation of n-butane, dehydrogenation of isobutane, production of methyl tert-butyl ether (MTBE) and extraction of butadiene.
The company will annually produce 120 thousand tons of butadiene, 85 thousand tons of isobutylene and 40 thousand tons of MTBE. Raw materials – 380 thousand tons of butane fraction – will be supplied from Tengiz. It is planned to complete the construction of the plant in 2025. The cost of the project is estimated at almost $1 billion.
Initially, it was announced that the production of butadiene would be integrated with the production of styrene-butadiene styrene and divinyl-styrene synthetic rubbers in the amount of 186 thousand tons per year. However, according to the latest information, the production of rubbers will be reduced to 83 thousand tons. This means that a surplus of butadiene will be formed on the project, and it must be put somewhere: sold or processed.
Rubbers will also be supplied to the KamaTyresKZ plant located in Saran, Karaganda region. The owners of the enterprise are Tatneft (51%) and Allur LLP of Kazakhstan (49%).
Valentin Kotlomin notes that Tatneft has been active in its tire business in recent years. Initially, the company's key asset was the Nizhnekamskshina plant with a capacity of 10 million tires per year. At the end of 2022, it bought the First rubber machinery plant located in Uzbekistan with a capacity of 3.3 million tires per year. In December of the same year, the KamaTyresKZ joint venture began to produce products (3.5 million tires per year). And finally, in March last year, Tatneft acquired the tire factory of Nokian Tyres, located in the Leningrad region of Russia, with a capacity of 17 million tires per year. Thus, over the past two years, Tatneft has tripled the capacity of its tire business, turning from a regional into a major global player in this industry, the Argus analyst notes.
An equally interesting situation is developing around the complex for the production of TFC and PET. Last year, it was announced that the implementation of the project is planned as part of the development of the petrochemical industry in Kazakhstan. It is included in the portfolio of promising projects of KMG PetroChem (formerly KLPE LLP). At the same time, Sinopec also announced its plans to participate in the creation of this enterprise. Preliminary parameters of the complex: production of 300 thousand tons of terephthalic acid and 450 thousand tons of polyethylene terephthalate per year; investment volume – over $700 million. Raw materials for the plant – 400 thousand. tons of paraxylene per year – Atyrau Refinery will supply (in total, the enterprise is capable of producing 496 thousand tons of paraxylene annually).
It is assumed that paraxylene will be processed into terephthalic acid. Then part of the terephthalic acid will be processed into polyethylene terephthalate, and the remaining part in the amount of 240 thousand tons will be sold (according to Argus estimates, most likely exported).
It would be possible to send it to Russia. In 2023, it imported 250 thousand tons of acid. All products were delivered from China.
The same applies to PET. It is planned to produce about 450 thousand tons of it in Atyrau per year. Domestic consumption in 2023 was estimated at about 85 thousand tons, of which about 95% were imports from China. Russia imported about 270 thousand tons of PET last year, more than 90% of them from China.
"In principle, taking into account the domestic market of Kazakhstan and Russia's needs for PET, this capacity of 450 thousand tons per year looks more or less justified. Except for one important factor. All imported PET to Russia and Kazakhstan comes from China. The Kazakh project will have to compete with Chinese suppliers. And China is the global pillar of the polyester industry and, of course, competing with it, trying to oust China from its traditional markets will be very, very difficult," Valentin Kotlomin believes.
Tatneft also recently announced that it will hold public hearings on April 16 on the construction project of a 1 million tons per year TFK unit at the Taneco refinery. Thus, if the project is further developed, then the Kazakh TFK will have to be transported to other (distant) markets.
Source: petrocouncil.kz