Attractive Business

Roman EfimychevInterview with Roman Efimychev, Head of Petrochemicals and LPG Department, Gazprom Neft

“Oil Russia” magazine

Gazprom Neft strengthens its position in the Russian petrochemical market

In the coming years JSC Gazprom Neft will launch several projects in the field of petrochemistry, and in particular plans to expand the production of light olefins and aromatics in its refineries. But in order to develop this new business direction the company needs to attract experienced partners. Roman Efimychev, JSC Gazprom Neft’s Head of Petrochemicals and LPG, has shared the company’s plans with “Oil Russia” magazine.

— Mr Efimychev, would you please tell us about the company’s strategy in the field of petrochemistry? What are the company’s targets? Will you be developing this new direction on the basis of existing refineries, or are there plans to establish new petrochemical complexes?

— Gazprom Neft plans to further diversify its business portfolio and to create a vertically-integrated petrochemical business in order to deepen the processing of its own hydrocarbon feedstock. We understand that the successful implementation of large capital-intensive petrochemical projects depends on properly-selected strategic partners.

In order to implement the investment programme in the field of petrochemistry Gazprom Neft plans to attract major investments. Specific decisions will be taken based on the economic feasibility of each potential project. In some cases, the determining factor will be the synergistic effect of the integration of oil refining and petrochemistry at existing facilities. In other cases, where petrochemical production is largely dependent on proximity to the market, we will not rule out the shipping of feedstock to related assets outside of our refineries.

— On which petrochemical products will Gazprom Neft be focusing?

— We plan to expand production of light olefins and aromatics, primarily propane-propylene fraction (PPF), paraxylene and benzene. Projects for the reprocessing of PPF into polypropylene will be implemented at facilities capable of integrating the feedstock.

— Some experts believe that it is necessary to focus on the development of large petrochemical complexes in Russia. Where do you stand on this issue?

— Large facilities, comparable in scale to the world’s leading manufacturers, or even entire clusters of such facilities, should become the basis for improving the competitiveness of the Russian petrochemical industry. In any case, this will reduce the cost of production, either due to the positive effects of scale, or due to the concentration of production capacities within a geographic region.

— Now, after a considerable hiatus, Russia has renewed its interest in the petrochemical industry. How do you assess the current state of the Russian petrochemical complex?

— This is a legitimate interest; Russia has all the necessary resources for the development of the industry: accessible raw materials, an extensive infrastructure, highly-qualified personnel and a solid scientific base.

Despite all the difficulties, the petrochemical complex retains the position of the most important processing activity in the domestic economic structure. There is every reason to believe that its modernisation will enable Russia to strengthen its position in the global market and reduce the raw material orientation of exports.

— Which measures need to be taken by the state in order to facilitate the efficient operation of petrochemical plants?

— These are indicated in the “Development Plan for Gas and Petrochemicals in Russia in the period leading to 2030”, developed by the Ministry of Energy. Support for cluster formation, the introduction of special railway tariffs, loans at a reduced interest rate, the establishment of tax breaks and other measures will certainly have a positive impact on the petrochemical industry.

— How would you achieve efficient pricing on chemical products?

— I do not believe that any special intervention is necessary in the existing pricing mechanisms in the Russian petrochemical market, whose development is accompanied by ever-increasing competitive pressure from both internal and external players. Naturally, any measures designed to support competition could have a positive impact on the petrochemical sector.

— What is the current relationship between Gazprom Neft and SIBUR?

— SIBUR is a recognised leader in the Russian petrochemical industry. The relationship between SIBUR and Gazprom Neft has always been, and will always be, based on principles of long-term market co-operation.

— How do you feel about the possibility of the arrival of major foreign players to Russia? How do you evaluate the prospects of co-operation with large foreign petrochemical companies?

— It can be seen as a positive phenomenon, providing an influx of direct foreign investment, technology transfer, increased competition and higher standards of work. And, perhaps most importantly, it is a sign of the high appeal of the domestic petrochemical industry. Co-operation with major foreign companies in the production of petrochemical products would allow Gazprom Neft to increase its competitiveness, and may become an intermediate step towards entering foreign markets.

— Will you develop the petrochemical direction at the company’s overseas facilities? In connection with this, are you planning any new acquisitions or expansion into new markets?

— At this stage of their development the overseas assets of Gazprom Neft cannot act as a basis for expansion of the petrochemical business. The acquisition of overseas petrochemical assets does not yet feature in the company’s plans either. Such assets will only be purchased as a part of an integrated refinery and petrochemical complex.