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  “Kommersant”, U. Garaeva  

«Nizhnekamskneftekhim» against the crisis // The Company is going to build the ethylene production for RUB 84 bln

  The project of OJSC «Nizhnekamskneftekhim» for construction of ethylene complex with 1 mln tons capacity was yesterday included in the list of the projects having a priority for Tatarstan. These projects will be the first to receive the financing and support from the government. The cost of production is RUB 84 bln; it will be paid back in three years, but the date of start of construction and the sources of financing are not determined yet. The experts consider that under conditions when the price for ethylene fell by 75%, the project may turn out to be unprofitable.
Yesterday, the OJSC «Tatneftekhiminvest-holding» (this company supervises the petrochemical complex of the Republic on behalf of the Republican government) Board of Directors Meeting took place chaired by Prime Minister Rustam Minnikhanov. The Board approved and placed the ethylene production complex of OJSC “Nizhnekamskneftekhim” with 1 mln tons pa capacity on the list of the projects having a high priority for the Republic (along with such projects as the refining complex of OJSC “Tatneft” in Nizhnekamsk, the ammonia production plant of OJSC “Ammonia” in Mendeleevsk, and the Refinery project for small oil production companies). With the start-up of the complex Nizhnekamskneftekhim will show a more than twofold increase of ethylene production (nowadays, the Company produces 600 thousand tons of ethylene per year). It is supposed that the subsidiary company of Kellog Brown & Root (KBR) — Granherne – will become the project’s general developer. This company has developed the prefeasibility study already. OJSC “Nizhnekamskneftekhim” General Director Vladimir Busygin said on the meeting, «During the first quarter of 2009 we are going to sign an agreement with Kellog Brown (for the development of advanced base project)». According to Mr. Busygin the cost of production is RUB 84 billion. He said that the plant would produce RUB 68.5 billion of revenues, RUB 22 billion of sales income, RUB 13.7 billion of net income». The company’s general said: «All calculations were made based on the 2008 prices».
The construction of the ethylene complex is a part of the strategic development program of “Nizhnekamskneftekhim” till 2023 that was approved by the Board of Directors on the 28th of November. According to the program, the Company will produce 1.6 mln tons of ethylene with 1.2 mln tons to be used for production of 600 th tons of polyethylene, 370 th tons of polypropylene, 243 th tons of benzene. The remaining 400 thousand tons of ethylene will be sold.
Vladimir Busygin underlined that the project is secured by the raw materials in full, «The existing Republican raw materials base covers our demand in full. The potential supplies of raw materials from the Russian market are the another support in the liquefied raw materials base (the main suppliers of OJSC “Nizhnekamskneftekhim” in the third quarter are CJSC “TAIF-NK” (37.03%) and OJSC „Gazenergoset’“ (10.42%)». Nowadays, as Mr. Busygin says, the Company is «on the stage of formalization the relations with potential suppliers, the specification of quality and volumes». Mr. Busygin assured that the suppliers had provided the confirmation of their readiness to increase the volume of supplies. Mr. Busygin added, «The CMI analysis of sales market indicates that the project has the enough capacity for marketing on the Russian and world markets till 2020, including the currently being launched projects and the projects to be launched. Nevertheless, more precise assessment of the project’s perspectives will be given only in the second half of 2009 as soon as «Nizhnekamskneftekhim» would receive the detailed information from the licensors, would reach the preliminary agreement with the raw materials suppliers, and would develop the structure of financing with help of the invited financial adviser.
Besides, some experts consider that the realization of this project will be not an easy task under present conditions. The analyst of “Finam” investment company says that «There can be the problems with financing. The state resources are mainly used for support of the already operating companies while the Company’s own funds are not enough. At the same time, the expert leaves open the possibility that «the Company can receive a part of the fund from the regional government support, as well as from the shareholders (“TAIF” that controls 79.3% of the voting shares is the main shareholder of “Nizhnekamskneftekhim”)». Mr. Frolov says, «Crisis is a favorable situation for the start-up of the large-scale projects. From one side, there is a possibility to save money on the investments taking into account the reduction of the labor cost, the cost of building materials and equipment. From the other side, the Company is likely to start its operation during the stage of economic recovery that will boost the demand for the Company’s production.
At the same time, analyst of «Brokercreditservice» investment company Mikhail Sayno considers that taking into account the sharp fall of the price for crude oil and petrochemicals that is not the best moment to realize the projects of such kind. The analyst says, «If the price for ethylene will remain on the present level (it has fallen by 75% since June— from 70.5 to 17.5 cents per pound) the project may turn to be unprofitable. He is sure that “Nizhnekamskneftekhim” will not start the construction untill the recovery of ethylene prices. «This could happen with stabilization of crude oil prices that will take place not earlier that the end of 2009—beginning of 2010 following our expectations». At the same time, Vladimir Busygin is sure that by the time of start-up of new production, “the situation with prices will be stabilized”».


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