Page 6 - FSUOGM Week 40 2019

FSUOGM COMMENTARY FSUOGM
Rosneft pins petchem hopes on India
The company is seeking a partner to join it in development a major petrochemical project in India, after struggling to get such ambitions off the drawing board at home
INDIA
WHAT:
Rosneft is reportedly in talks with a Saudi partner to upgrade the Vadinar refinery.
WHY:
The Russian major wants to make an FID on the project this year.
WHAT NEXT:
The project is set to benefit from local political, economic and logistical advantages.
RUSSIA’S state-run oil company Rosneft is looking to make a foray into India’s petrochem- icals market, after experiencing setbacks in the domestic sector.
The company began refining and fuel retail operations in India in 2017, after teaming up with global commodities trader Trafigura and Russia’s United Capital Partners, to buy the country’s 400,000 barrel per day Vadinar refinery in the western state of Gujarat for $13bn.
In January this year, Rosneft announced it would build a 450,000 tonne per year polypro- pylene plant and a 200,000 tpy methyl tert-bu- tyl ether (MTBE) plant at the site by 2022, at a cost of $850mn. Rosneft and its partners plan to cover this investment with their own funds and support from banks.
India is already the world’s third-largest poly- mer market in the world and demand is expand- ing at a rate of 10% per year. Rosneft is looking to capture a share of this market, leveraging its existing presence in Indian refining.
The Russian company has said before it intends to take a final investment decision (FID) on Vadinar’s petrochemical upgrade by the end of this year and, according to reports, it is seeking a Saudi partner to reach this stage.
Moscow-based Vedomosti reported on Septem- ber 25 that the Russian company had engaged in talks to bring on board Saudi petrochemical developer SABIC as an investor. A preliminary deal may be signed during Russian President Vladimir Putin’s upcoming visit to Saudi Arabia this month.
Trouble at home
On the domestic front, Rosneft has languished behind its competitors in expanding into petro- chemicals. Like other Russian oil and gas firms, it views polymer production as an effective means of adding value to oil and gas supplies. It even made the segment’s development a core aim in its five-year strategy outlined in 2017. How- ever, earlier this year it quietly acknowledged in an earnings call that its flagship Far Eastern Petrochemical Co. (FEPCO) project had been dropped indefinitely.
The integrated FEPCO refining and petro- chemical complex was set to process 3.4mn tpy of feedstock into petrochemicals by the early 2020s and potentially double this amount by 2028. Rosneft gave up on the venture after failing to rope in investment partners.
FEPCO struggled for the same reasons many Russian petrochemical projects have struggled
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w w w . N E W S B A S E . c o m Week 40 09•October•2019