‘It’s necessary to join federal initiatives’: petrochemical investors are offered protection
The Tatarstan government offers investors to use traditional instruments protecting investments to cover risks during the local “revamp” of the petrochemical complex. “One can receive support by signing Special Investment Contracts at federal and regional level, which provides stability of taxes and preferences,” urged the audience Director General of Tatneftekhiminvest-holding Rafinat Yarullin at a meeting of the board of directors on 28 April. Tatneft with investments of 1,2 trillion rubles, TAIF and SIBUR with a trillion rubles and Roman Trotsenko’s Ammonia were among the possible candidates to receive the support. Meanwhile, enterprises of the gas and petrochemical complex are in good shape with a record high revenue of 500 billion rubles even without preferences.
Petrochemical report was delivered without Minnikhanov
The Tatarstan president started his day on 28 April with a board meeting of Tatneftekhiminvest-holding, which supervises the more important and profitable sphere of the economy. At the end of the first quarter, Director General of the holding Rafinat Yarullin as usual makes the performance of the gas and petrochemical complex public, but this time the report was received calmly and without intrigues. Just two weeks ago, head of the Tatarstan office of Russia’s Federal Tax Service Marat Safiullin said that the gas and petrochemical complex rescued the treasury by replenishing it by half. In percentage terms, enterprises of the sector paid around 57% of the taxes to the consolidated budget, or around 33-34 billion rubles.
The only unusual thing was that the report of the holding’s director general was at the end of the meeting, while guests from Moscow were given the floor first. So Director General of Willis Towers Watson Pyotr Sudoplatov, Managing Director of WGT Alexander Tikhonov whose digital solutions are endorsed by Gazprombank. But from a perspective of the message for the business community, the speech of Rafinat Yarullin became, of course, the key moment. However, by this moment, Rustam Minnikhanov who had already heard the three guests out had to leave the meeting. He went to meet with Belarusian Prime Minister Roman Golovchenko (both visited Alabuga Special Economic Zone). So the “history” in petrochemistry wasn’t commented on by the republican president.
On the swing of demand: oil refining is at advantage, oil production is at a loss
Director General of Tatneftekhiminvest-holding Rafinat Yarullin said that the sector didn’t manage to recover in the first quarter from the “coronavirus climate” in the world softened. According to him, the total amount of production in all enterprises of the sector reduced by 3%, but the fall in core companies was 6%. “Negative dynamics are observed in oil production, polyethylene and pharmacopoeia production,” he outlined the problems of the sector.
So TAIF-NK (12%), Tatneft (11%), TANECO (4%), the Karpov Chemical Plant ended the quarter with a decline. Kazanorgsintez has the smallest fall — by 3% year on year. Oil refining decreased by 10%, to 4,7 million tonnes. TAIF-NK cut oil purchases and reduced diesel fuel output, however, it mastered Euro 6 diesel fuel production, the production of petrol and hydrocarbon fractions rose.
On the other hand, amid the favourable foreign prices, there is a rise in oil processing and other sectors of petrochemistry. “Record volumes of diesel fuel, mineral fertilisers, detergents, polycarbonates, carbon black were manufactured,” Yarullin enumerated. Six large enterprises ended the first quarter with production growth, slides showed.
Nizhnekamskneftekhim increased production by 9%, Ammonia did by 3%, Tatneft’s tyre complex — by 3,5%, Nizhnekamsktekhuglerod — by 17%. In oil refining, after the launch of a hydrotreatment unit last December, TANECO expanded diesel fuel production. According to Rafinat Yarullin, it is planned to almost double the output by the end of the first half of the year. However, the speaker didn’t name specific numbers playing it safe. Moreover, motor fuel production reduced significantly.
In good shape
Despite the general fall in production, the sector’s enterprises got a record revenue of 500 billion rubles, Yarullin said. According to him, the amount of taxes paid to the consolidated budget will grow 1,7 times. He didn’t name the exact sum.
A recovery of world prices became the main factor of an inflow of income. “World prices for most exported goods were above 2020, since a recovery after the coronacrisis and force majeure began in the world,” Yarullin explained the glittering picture. So average exchange prices for carbamide soared by 44%, which had a positive impact on Ammonia’s financial results. “The factory increased the production after modernisation, increases supplies to Tatarstan, it is holding talks with the Tatarstan Ministry of Agriculture and Food,” Yarullin said.
Optimistic forecasts for the dynamics of polyethylene production around the world were made: there will be growth at least 1,9 times by 2030 amid the recovery. “The transition to heavier feedstock can become a competitive edge because the production of new fractions will help small-tonnage chemistry develop,” Yarullin noted.
Under feedstock blockade
Then the head of Tatneftekhiminvest-holding explained why leading polyethylene manufacturers in Tatarstan, in contrast, slowed down the pace. He says that a shortage of feedstock is the main reason why polyethylene production in TAIF’s enterprises went down.
Due to the shortage of feedstock, KOS and NKNK reduced polyethylene production: the first company cut it by 8%, the second one did by 5%, reported the head of Tatneftekhiminvest-holding. He says that two factors impacted it. Firstly, since oil production reduced, associated gas and ethane production by Tatneft went down. Secondly, after the accident at Ufaorgsintez, ethylene supply temporarily stopped. “Monomer supply from Nizhnekamsk to Kazan increased in these conditions,” Yarullin said and probably meant the load of KOS in these tough conditions.
TAIF and SIBUR can hope for SPIC
Large investment projects in Tatarstan’s gas and petrochemical complex can receive state support by signing agreements on investment protection (Special Investment Contracts, SPIC), Yarullin said. “It’s necessary to actively join federal initiatives,” he said.
“TAIF in synergy with SIBUR is planning to implement over 30 projects, their value will be determined, around a trillion rubles too,” Yarullin explained. “The investments of Tatneft group in the strategy programme through 2030 will total 1,2 trillion rubles. A lot of money will be invested in product diversification of Ammonia to provide carbon neutrality and environmental sustainability. One can receive support for these projects by signing agreements on protection and encouragement of capital investments and get the opportunity to refund costs on infrastructure, tax preferences and concessions for land use.”
Rafinat Yarullin notes that regulations have been adopted nowadays, the Ministry of Economic Development is receiving applications.