Russia's Top Two Petchem Players Set to Merge

Russia’s top two petrochemical companies on Friday announced their intention to merge, a transaction they claim will create one of the world’s five largest polymer producers. Sibur, Russia’s largest petchems operator, will take a controlling interest in the merged entity, while the smaller Taif, based in the republic of Tatarstan, will acquire a 15% stake in the combined company. The tie-up will create a “massive synergetic effect” boosting the “resilience of the [merged company's] petrochemical business and competitiveness on global markets,” Sibur said in a statement. The merger comes during a serious push by Moscow to extract value from Russia’s oil and gas wealth, particularly by ramping up petrochemical capacity. It is also noteworthy in that large mergers are rare in Russia's oil industry, the last notable such deal being the forced takeover of formerly private Bashneft by state-controlled Rosneft in 2016 (IOD Oct.4'16). Falling Behind Russia has lagged in developing a petchems industry over the past two decades, falling far behind its peers despite enjoying advantages such as inexpensive feedstock. Sibur and Taif are the only two companies that have consistently invested billions of dollars in producing a range of products such as polyolefins and rubber, while oil majors such as Rosneft and Lukoil have shied from massive petrochemical projects. In the past three years Moscow has undertaken wide-ranging efforts to incentivize investments in growing petchems capacity, and last year approved subsidies for new steam crackers that use ethane and liquid petroleum gases (LPG) as feedstock (IOD Jul.8'20). “The pace of petrochemical growth throughout the world is 1½ times higher than the growth of the global economy,” said Deputy Prime Minster Alexander Novak, who was instrumental in the petchems drive during his tenure as energy minister. “Our country has enormous hydrocarbon reserves and should occupy leading positions on global markets,” said Novak, adding that Moscow has forecast some $70 billion in petchems investments in Russia over the next decade. Traditionally, Russia has relied more on naphtha as a feedstock, which produces less ethylene and propylene, the most prized petrochemical olefins. Naphtha does, however, yield more aromatics and butadiene used in making synthetic rubber -- a speciality of Taif’s core production unit, Nizhnekamskneftekhim. The company claims, in fact, to be the world’s leading producer of isoprene rubber. Taif, which relies heavily on crude oil for feedstock, produced 1.5 million metric tons of polymers in 2020 and posted sales of 146 billion rubles ($2 billion). By contrast, privately owned Sibur has focused on base polymers such as polyethylene and polypropylene and sources feed from West Siberia gas fields. Last year its subsidiary Zabsibneftekhim launched Russia’s largest steam cracker. Last year the company’s petchems output amounted to 5.1 million tons, while the top line amounted to $7.2 billion. Both companies are investing in multibillion-dollar projects to boost capacity. Nizhnekamskneftekhim is currently building a cracker that will produce 1.2 million tons per year of ethylene, while Sibur, together with China's Sinopec, is constructing the massive Amur gas processing plant in Siberia (IOD Feb.12'21). Gary Peach, Albany