Petrocoincil: Some believe that polyethylene production factory in Kazakhstan will be unprofitable since similar factories have been already operating in the neighboring countries. For example in Sumgamit (Azerbaijan), Kazan (Russia). Where does the factory plan to sell then the products? How profitable may this project turn out to be?

 – Profitability of a project is an indicator, which characterizes efficiency of using all available resources (monetary, labor and material), this is not related to production facilities in neighboring countries. This is first. Secondly, polyethylene has different brands, it is produced according to different technologies, i.e. it differs from manufacturer to manufacturer. Thirdly, polyethylene may be manufactured from three sources of raw material (liquefied hydrocarbon gases, naphthas and ethane). It is planned to manufacture Kazakh polyethylene from ethane, which significantly increases spread (i.e. difference between raw material cost and finished products), this allows to be commercially more competitive. As far as polyethylene consumption is concerned it is around 120 millions of tons today. Consumption continues to grow. This is world trend. It is attributed to growth of population and to expansion of polymers application in household. 2020 crisis due to pandemics declared by the WHO will not impact consumption over a long-term like recycling (secondary application) because in case of a repeated use of polymers the quality thereof significantly deteriorates, and consequently the area of application strongly reduces. As a whole the share of polyethylene bags in total basket of polymers takes around 10%. Thus the need for polyethylene will be always on the agenda. To what extent the project will be profitable we will see with time.

Petrocoincil: What about development of that petrochemical segment, which has not been sufficiently developed in neighboring states? Maybe there are any plans as to launching of other projects?

– In order to develop petrochemical industry we have to first of all understand what in the next 15-20 years will be in demand in the world (Kazakhstan market is too small to bet on it), then we have to calculate how much of such raw material is available in Kazakhstan for production of such products. And only afterwards we can decide whether we can develop this petrochemical segment or not. See, petrochemical industry is a very wide line of products. Petrochemical companies are operating in a very narrow range since technologies of even, one might wonder, one product but of different brands require separate capital investments. Judging by web publications there are may plans as to development of petrochemical industry in Kazakhstan. For instance, methanol production factories in West-Kazakhstan region and in Mangystau region, in Turkestan region have recently announced commencement of realization of petrochemical production capacities. I can list them for a long time. We can definitely say that private business may realize projects, which can be correlated to oil refineries either as far as raw materials are concerned or as far as sale of its products is concerned. This will allow to significantly save on transportation expenses. Well, large projects require of course support from the state.

Petrocoincil: How long will take search for an investor for construction of a polyethylene production factory? Is there any deadline? If there is, what is it?

– Search for investors is a very complicated process by itself and is a subject to negotiation, does not matter, whether it is for polyethylene or for a different project. If a project is large, most likely there will be a need to hold negotiations with the government. This is a stable practice in developing countries. Any investor wants to minimize his risks or to transfer them. But the government has to watch maximum carefully. Kazakhstan joined several international organizations as well as has become a participant of different international bilateral as well as multilateral agreements and contracts. Thus some exemptions to one investor may have an adverse impact in the future since under the terms of several agreements, which have been signed by Kazakhstan any other investor may require the same exemptions for itself also. About the deadline for search of an investor for “Polyethylene” project you can possibly learn from the Republic of Kazakhstan Ministry of Energy, moreover the minister Nogayev has already given clarifications concerning the project at his last press-conference.

Petrocoincil: Are there any investors, who show interest in this project?

– Petrochemical industry is now a rapidly developing industry in the world. The Kazakhstan best advantage is availability of raw materials. How much of it we have is a different issue. The challenge is geography, whereas it can also be an advantage. More on this below. Petroleum industry of Kazakhstan as you know is not stopped by the factor of remoteness from sales markets. Tengiz is expanding, capacities of Caspian pipeline have been increased. I am sure that petrochemical companies are looking closely at Kazakhstan since production in the Republic may cover the whole region with its products. We have a very great number of regional representative offices of foreign companies, which are responsible for Central Asia and Caspian area. The same strategies may be used also by international petrochemical companies.

By Daniyar Yenikeev