Tatarstan: A unique republic, A unique investment opportunity
What investors say about investing in Tatarstan
Tatarstan: supporting innovative start-ups
Tatarstan in the capital markets
Tatar banks expand with help of western capital
Taking Tatarstan’s petrochemical resources into the future
Tatarstan’s new Special Economic Zone Alabuga
Tatarstan’s thousands of years of culture
Kazan: home to some of the best sports facilities in Russia
Rafinat Yarullin is general director of the state holding company Tatneftekhiminvest, and a recognized expert on petrochemicals. He says: “Let’s say you get one dollar for a certain amount of crude oil. If you take that oil and compress it, refine it, separate and sell all the different petrochemical products like benzine, bitumen, diesel, propane and other substances, then you can make 10 or 20 times that amount. That’s the government’s strategy.”
Tatarstan is well placed to develop such a strategy. It has a long history of academic excellence in chemistry, going back to 1806, when the chemistry faculty of Kazan State University was constructed, launching the beginning of organic chemistry in Russia. The faculty educated and attracted such world famous chemists as Alexander Butlerov, who developed the theory of the chemical structure of organic compounds. This rich tradition lives on today at KGU, as well as at several leading institutes in Tatarstan.
And the Republic is blessed with rich natural resources – 1 billion tonnes of proven reserves of crude oil, as well as large deposits of gas and bitumens. In September, the Republic will celebrate extracting its three-billionth tonne of oil.
Now leading petrochemical companies in Tatarstan are utilizing local know-how and foreign technology to develop some huge new petrochemical facilities. Perhaps the most exciting new project is the NNPZ oil refining and petrochemical facility built in Nizhnekamsk, the petrochemical centre in the east of Tatarstan.
Khamza Bagmanov, CEO of NNPZ, says: “The project has a regional goal, of creating a new place to work here in Tatarstan, rather than sending our oil to be refined abroad. And it has a national goal, of raising the quality of the oil Russia exports.”
The plan aims at creating facilities capable of processing 7 million tonnes per annum of high sulphur crude, as well as a petrochemical complex capable of producing polypropylene, linear alkyl benzene and PTA and PET.
The plan for the facility was developed by Foster Wheeler together with NNPZ’s specialists and participation of Tatneft. Umberto della Sala, CEO of Foster Wheeler company, says: “This is one of the biggest petrochemical refinery projects being developed in the world. We started to develop a masterplan with Tatneft in 2005. The oil in Tatarstan contains a lot of sulphur, so it needs a high level of compression conversion. That plan was approved at the end of 2005. After that, we won the contract to develop the front-end design, including the selection of the main technology partners.”
The project is working with what della Sala says is “cutting edge technology”, and involves technology and licences provided by General Electric, Axens, UOP, Chevron, Lummus, Shell and others.
And the project is really unique in its financing. First of all, it is one of very few projects so far to have attracted backing from the Russian federal investment fund, which the ministry of economic development and trade set up last year to spend the state’s petro-dollars supporting major infrastructure projects.
Having won in the investment contest, NNPZ received around $600 million from the federal investment fund to support the construction of infrastructure such as pipelines and railways connected with the project. Financing to the project is provided by Western banks.
Tatneft is also working closely with some of the many small, independent oil producers working in Tatarstan, to help them pool their resources together to raise financing for a new refinery. Shafagat Takhautdinov, general director of Tatneft, says: “The companies together extract about 6 million tonnes of oil a year which they export through us, and they want to build their own refinery. We’re helping them to structure the deal and raise financing. They’re looking to raise around $3 billion for the project.”
Kazanorgsintez also has ambitious plans for the modernization and expansion of its petrochemical complex. It created a development plan with the help of the Japan Bank for International Cooperation (JBIC) in September 2004, to create new production facilities for ethylene and polyethylene, as well as bisphenol-A and polycarbons.
This includes the construction of the first polycarbon factory in Russia. Leonid Alekhin, general director of Kazanorgsintez, says: “At the moment, all the polycarbons in Russia are imported, even though they’re very useful for the construction of laser discs, washing detergent and other things.”
Kazanorgsintez is now finishing construction of a 65 kta polycarbonate plant, using technology provided by the Japanese firm Idemitsu, as well as a 70 kta Bisphenol-A plant to provide feedstock to the new polycarbonate plant.
The company also worked with German company Linde to build a new cracking furnace to process propane-butane fraction, with a capacity of 24 tonnes per hour. And it has just finished constructing another such cracking furnace in cooperation with the Dutch company Technip.
Kazanorgsintez successfully sought western financing for the modernization plan via a $200 million Eurobond, which it issued in October 2006, working with ABN Amro, after a roadshow throughout Europe and Asia. Alekhin says: “We had ten days of meetings throughout the world, and all the hard work paid off. In fact, we had $360 million in orders for a $200 million issue.”
It also signed an $88 million ECA-backed deal with JBIC and Sberbank, and a R1.5 billion ($55 million) syndicated loan from Sberbank, Vneshtorgbank and Raiffeisenbank.
Nizhnekamskneftekhim is being just as active in the development of new petrochemical facilities, and just as successful in attracting western capital and technology into its projects.
In 2003, it started construction of a new 180 kta polypropylene production facility, which it finished in October 2006. It signed technology partnership agreements with Italian firms Tecnimont and Basell for the project, and raised $132 million in capital financing for the project, arranged by Citigroup, which included a $65 million ECA-backed loan from Italian export credit agency SACE.
It has also recently constructed a new polystyrene production facility, which cost $500 million, as well as new ABS-plastics production facilities. Khamit Gilmanov, first deputy general director-chief engineer of Nizhnekamskneftekhim, says: “Every year, we spend at least R7 billion ($259 million) on the construction of new facilities. We find it quite possible to raise finance from international capital markets. For example, we successfully raised $200 million by our debut Eurobond last year, which had a 10-year maturity, and an interest rate of 8.5%.”
