【Haichuan Project Updates】Construction of the Amur Natural Gas Chemical Complex in Russia has begun

The AGCC has designed a polymer production capacity of 2.7 million tons per year, of which 2.3 million tons are polyethylene and 400,000 tons are polypropylene. Once completed, the AGCC will have the world’s largest pyrolysis facility. With the production capacity added by AGCC, Russia’s total polymer exports will reach 1.35 times the current level (based on the total exports in 2019). According to Sibur’s estimates, by 2040, this project will contribute 4.6 trillion rubles to Russia’s exports of non-raw material products. AGCC will receive approximately 3.5 million tons of ethane and LPG per year as raw materials from the nearby Gazprom Amur Gas Processing Plant. According to Konoval, 66% of the construction work on the Amur gas processing plant has been completed, and its capacity is expected to meet the standards required by AGCC by 2024. Meanwhile, Sibyl expects AGCC to complete construction and commissioning between 2024 and 2025.

According to Xibei, the contracts related to the construction of AGCC that have been signed and are now in the implementation phase cover the design of the main technical units as well as the supply of equipment and materials. Sibyl’s technical partners include a consortium composed of Linde Group and the Russian company NIPIGAS (in the field of pyrolysis units), Univation Technologies and Chevron Phillips Chemical Company (in the field of ethylene polymerization), and LyondellBasell of the Netherlands (in the field of propylene polymerization). In the sections that do not involve the need to purchase exclusively licensed foreign-made equipment, the localization level of this project is as high as 80%.

China is the main market for AGCC, with the annual demand for polymers in this market growing at a rate of 6%. Apart from China, other Asian countries are also target markets; these countries have a high demand for polypropylene and polyethylene, and that demand continues to grow. Sibyl said that, based on the cost curves, AGCC’s costs are lower than those of its competitors; therefore, even if market growth slows down in the future, AGCC’s products will still have an advantage in key markets. It is worth noting that over the past year, Russia has provided substantial subsidies for large-scale projects for the processing of ethane and LPG, thereby improving the economic viability of these projects.

Sibur’s partner in the AGCC project will be Sinopec. On June 5, 2019, Sinopec and Xibei signed a framework agreement for the AGCC project in Moscow. Under the agreement, Sinopec will hold a 40% stake in the project. The initial estimated total investment for this project is $10–11 billion, but Seibul said that this figure could still change. It is reported that Xibei is actively trying to further reduce the total investment by increasing the localization level of the projects. For reference, another large project by Sibur, the \"Zapssibneftekhim\" project, has a designed annual production capacity of 2 million tons, of which 500,000 tons are polypropylene and 1.5 million tons are polyethylene. The total investment in this project is 9.5 billion dollars; therefore, from this perspective, an investment of 10–10 billion dollars for the AGCC project is also reasonable.

Akhsin, an expert from Vygon Consulting, said that AGCC is one of the most anticipated projects in the Far East. When Sibur makes its final investment decision depends mainly on confidence in the raw material supply capacity of the Amur gas processing plant. For Gazprom, the only way to monetize the ethane produced at the Amur Gas Processing Plant is to supply it via gas pipelines at the price of natural gas. Akisin also pointed out that the decision to impose a negative consumption tax on ethane and LPG will affect the layout of the AGCC project, which currently plans to introduce LPG pyrolysis units. Aksin said that the implementation of the AGCC project is based on the recovery of the Chinese economy and rising prices of petrochemical products. If these two prerequisites are not met, the investment risk for this project will be very high.

On May 5, Sinopec Refining & Chemical Engineering Group won the bid for Russia’s Sibur AGCC polyolefin project. Its engineering construction company and its Russian subsidiary signed the EPSS contracts for the offshore and onshore parts of this project, respectively; the total value of these contracts is approximately 230 million euros. In 2019, the Refining and Chemical Engineering Group formed a consortium with the Italian company Tecnimont to submit bids for the polyolefin envelope EPSS component of the AGCC project. Among them, the engineering construction company is responsible for submitting quotes for the design, procurement, and on-site services of the 500,000 tons per year HDPE plant.

Sibur is Russia’s largest integrated petrochemical company. On June 5, 2019, in the presence of the heads of state of China and Russia, Sinopec signed a framework agreement with Siberian Chemical Company to invest in the construction of a large-scale chemical complex (AGCC) in the Amur region of Russian Far East; Sinopec plans to hold 40% of the shares in this project. Using ethane and LPG supplied by the Amur Gas Processing Plant as raw materials, this project employs light hydrocarbon cracking technology and advanced polyolefin technologies to produce products such as polyethylene and polypropylene, with completion and operation expected by the end of 2024.

Recently, the excavation of the foundation trench for the fourth phase of the Amur gas processing plant in Russia, which was constructed by China Energy Engineering Group Gezhouba Mechanical and Electrical Company, began, about 6 months ahead of the scheduled start date in the contract. The main construction tasks for the fourth phase of the Amur Gas Processing Plant project include approximately 4,800 concrete piles, about 20,000 cubic meters of concrete pouring, around 7,000 tons of metal structure installation, as well as about 22 sets of key equipment. Completion is scheduled for March 2023. The Russian Amur gas processing plant project is the starting point of the Sino-Russian Second Large Energy Corridor – the East China Sea Gas Pipeline – and upon completion it will become one of the largest gas processing plants in the world. The construction of this factory is divided into 3 bid sections, with Gezhouba Mechanical and Electrical Company undertaking bid section P1.

Within 3 days, the first batch of 6 oversized stationary equipment units for the AGPP project were safely installed; the first liquid separation tank arrived at the site. After 3 days of continuous work, on June 7, with the last compressor liquid separation tank also being safely and smoothly installed, all 6 oversized stationary equipment units for the Russian AGPP project were successfully installed, marking the beginning of the installation of stationary equipment for this project. Inspections before lifting: The first batch of 6 compressor liquid separation tanks, each 12 meters long, 3 meters in diameter, and weighing 51 tons, were manufactured by Yijian Company. It is shipped by sea to the Zeya River terminal in Russia, and then transported by land in three shipments to the site from there. Before the equipment arrived, the project team organized the subcontractor to develop detailed plans for on-site transportation and lifting procedures. The roads required for transporting the equipment as well as the locations for lifting were prepared in advance, and strict checks were carried out on the lifting machinery, rigging, as well as the operators’ licenses and relevant work permits ； Before the equipment arrived for lifting, the project team leaders directed the operations on site, with all departments working together closely and the subcontractors carrying out their tasks in an orderly manner; as a result, all 6 lifting attempts were successful on the first try.