Page 16 - FSUOGM Week 41 2019

FSUOGM PROJECTS & COMPANIES FSUOGM
Chinese firm wins $13.2bn contract at Baltic chemical project
CHINA
CHINA National Chemical Engineering (CNCEP) has won a contract to build one of the world’s integrated gas chemical complexes on Russia’s Baltic Sea shore.
The contractor said in a statement on October 12 it had been hired for front-end engineering design (FEED) and engineering, procurement and construction (EPC) of the complex by the project’s private operator RusGazDobycha. The contract is worth EUR12bn ($13.2bn), it said. According to Chinese media reports, construc- tion will take five years to complete.
RusGazDobycha presented its plans for the Baltic chemical complex back in March, while also unveiling with state-owned Gazprom a nearby joint project to create a massive gas processing and liquefaction hub. The chemical plant will pro- duce 3mn tonnes per year of polymers, using 4mn tonnes of ethane feedstock supplied from the gas processing complex, due on stream in 2023.
The processing complex will cost an esti- mated RUB700bn to build. In addition to ethane, it will also annually turn out 13mn tonnes of LNG, 2.2mn tonnes of liquefied petroleum gas (LPG) and 20bn cubic metres of treated gas. The treated gas will likely be sold to Europe via the Nord Stream and upcoming Nord Stream 2 pipelines. Russia’s top develop- ment bank VEB has pledged up to $1.7bn in support for the scheme.
Gazprom had previously been working with Anglo-Dutch oil major Shell on a pre- vious plans to construct a liquefaction-only plant on the Baltic Sea coast. Shell left the project after Gazprom opted in favour of an integrated model instead. The international oil company was also reportedly unsettled by RusGazDobycha’s involvement, as the firm has links with sanctioned Kremlin ally Ark- ady Rotenberg. ™
Rosneft could leverage tax breaks by selling 15-20% in Arctic asset
RUSSIA
RUSSIA’S largest oil producer state-controlled Rosneft and Neftegasholding of veteran oil- man Eduard Khudaynatov could sell 15-20% of their Arctic extraction joint venture Vostok Oil, Vedomosti daily reported on October 10 citing unnamed sources.
As reported by bne IntelliNews, Rosneft has been pressing the government and the Krem- lin for support for its Arctic assets, including Vostok.
It is unclear whether the stake will be sold to one or several investors, but Vedomosti’s sources say the potential investors will consider the pur- chase only after the project’s tax benefits become clear.
An unnamed government official told the daily that “without tax incentives, the develop- ment of the project’s fields is both technologically and economically pointless.” Other sources esti- mated Vostok at $15bn based on its reserves.
“As the project is not included in the current [Rosneft] valuation, we see up to 10% upside [for Rosneft] if valued at $15bn,” BCS Global Mar- kets commented on October 10. “The sale would attract strategic partners, bringing either new
tech or sales channels. But, the sale is uncertain, pending clarity on tax benefits.”
Rosneft argues that developing its Arctic cluster would help load the Northern Sea Route, that has to reach 80mn tonnes turnover by 2024. Vedomosti daily previously reported that Vostok Oil could gain RUB2.6 trillion ($39bn) in tax cuts over 30 years.
The finance ministry continues to consist- ently oppose tax benefits and other state support for Rosneft. ™
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Week 41 16•October•2019