The rise of polyolefins in Russia and the CIS

During this period, the average annual growth rate in demand for polyolefins was 3.7% – this is higher than the global economic growth rate and much higher than the demand for even the most valuable petroleum products, such as light and middle distillates.

Another phenomenon of the past 20 years was the significant geographical shift in demand. In 1997, the largest markets were North America and Europe/Russia and the Commonwealth of Independent States (CIS): regions that consumed over 50% of polyolefins produced globally. Today, the global leaders are China and the Asia Pacific region.

Russia and the CIS have never been a leading consumer market, yet in the last few years some countries in the region have shown sustainable demand growth rates comparable to the global ones. In Russia, polyolefins consumption has been growing by 3.2% per year in the period from 2010 to 2017.

There is a plethora of drivers that foster polyolefins consumption in the region, two of which are worth particular attention: governmental support and feedstock availability.

Any discussion of governmental support should mention the action plan for import substitution in refining and petrochemical industries that the government of the Russian Federation approved in March 2015. As for polyolefins, the plan stated the following goal: to bring the 2014 share of import of polyethylene and polypropylene from 26% and 10%, respectively, to zero by 2020. Today, as half of the designated term has already passed, it is possible to draw some initial conclusions on whether the plan is on the right track.

Firstly, it is important to note that the aforementioned statistics for the share of import differ from estimates made by independent experts. Thus, in 2014 the forecast for the share of imported polyethylene and polypropylene was 36% and 15%, respectively. Three years later, Russian polyolefins consumption is seeing some changes, though only in respect to polyethylene: its import has shrunk to 26%. Meanwhile, the progress in polypropylene import substitution is marginal.

Admittedly, the idea of substituting 100% of the polyolefins import is quite utopian, bearing in mind the broad variety of grades and consumer attributes. Still, by developing polyolefins production through the construction of grassroots petrochemical facilities and expansion of existing ones, it is possible to achieve greater supply independence. Feedstock availability is of great help here: as 2017 data have it, the proven oil reserves in Russia and the CIS amount to approximately 20 billion t (8.5% of the global reserves) and the proven reserves of gas are nearly 60 trillion m³ (30.6% of the global reserves).

This article was originally published in the December issue of Hydrocarbon Engineering. To read the full version, sign in or register for a free trial subscription.

Written by Valentin Kotlomin, Euro Petroleum Consultants, Russia.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/27122018/the-rise-of-polyolefins-in-russia-and-the-cis/