First meeting – four ideas: TAIF Group and SK Engineering & Construction preparing for cooperation

Seung Soo Lee: “We should have come much earlier’’

SK Engineering & Construction is the name known almost all over the world. The USA, Saudi Arabia, China, Thailand, Vietnam, India, Ecuador, Qatar, Algeria, Venezuela and the CIS countries have already made use of the complex services of the company on design and construction of oil refineries, petrochemical enterprises and objects of power engineering, civil and transport infrastructure. But this company has not operated yet in Russia as a whole and Tatarstan in particular.

First, President of Tatarstan Rustam Minnikhanov welcomed the delegation of SK Engineering & Construction – Senior Vice President and Managing Director of Eurasia Seung Soo Lee, Senior Marketing Director at SK Engineering & Construction Song Sayan, and Advisor to Chairman of IC Holding in Russia and CIS Ilia Kutidze. Already during this short conversation, to which Albert Shigabutdinov, Director General of TAIF PSC, was invited, it became clear to the guests: they are welcome in the republic and there are many mutual interests.

The prospects of cooperation were discussed later – during the visit of the Korean delegation to the main office of TAIF Group. The guests were welcomed by Albert Shigabutdinov, the director general of TAIF PSC, deputy director general of TAIF PSC for corporate governance and investments, Ruslan Shigabutdinov, the chairman of the board of directors of Kazanorgsintez PJSC and Nizhnekamskneftekhim PJSC, heads of divisions of the group of companies.

“I'm sorry we have come to Tatarstan only now, we should have done it much earlier. I hope it's not too late,’’ said Mr. Lee. However, after watching a presentation film about the activities of the group of companies, he made sure that the development process of TAIF is constant and the companies have a lot of mutual interests.

Four ideas at a rough estimate

At the very beginning of the meeting, Mr. Lee stressed that such meetings between the companies were the best way to understand the level of mutual interests and outline steps for further cooperation. He expressed the hope that by the end of the conversation the parties would get an understanding of the direction in which to move forward. The director general of TAIF PSC fully justified these hopes.

“I have closely read your presentation. Having studied your activities, as well as on the basis of the TAIF Group development programme until 2030, the total cost of which is estimated at $ 30 billion, I would like to note that it is primarily important for us to develop new areas. If you have noticed: our company produces almost the entire line of plastics and rubbers, except polyurethane. We do have propylene oxide and polyesters, but no isocyanates. We know that together with Mitsui Group you are working in this area and have achieved good results,’’ Albert Shigabutdinov outlined an area of possible cooperation. Then he immediately offered several options for cooperation:

— purchase of a production license through SK Group, followed by the construction and equipping of a new production facility with the active participation of SK Engineering & Construction;

— creation of a joint venture for the production of MDI (methylene diphenyl diisocyanate) and the production of polyurethane systems. It is not necessary to look for raw materials – everything that is necessary for the organization of production is already produced by the enterprises of TAIF Group.

Polyurethane is used everywhere – from household items to the construction of automotive equipment, in the shipbuilding and aircraft industry. The need for polyurethane is becoming more and more in Russia and abroad.

“Second, you are engaged in machine oils. We produce a wide range of alpha-olefins — what is the basis for synthetic oils. Besides, we have a small plant for 10,000 tonnes of production of bodies of oil. It is possible to organize a joint production. There will be no questions about the provision of mineral raw materials. If necessary, we can significantly increase the production of alpha-olefins,” the director general of TAIF PSC outlined another promising direction.

The third direction, which may be of interest to SK Group, he called TAIF's readiness to provide direct supplies of synthetic rubbers, in the production of which the group of companies is the undisputed leader in Russia, and in isoprene rubber — in the world. The automotive industry is actively developing in South Korea. In addition, SK Group can become a major trader of Tatarstan rubber not only to the South Korean market, but also further – to the states of East Asia and Europe. In addition to rubber, TAIF is ready to offer plastics and a wide range of other products.

Finally, TAIF continues to develop actively, and almost a third of the funds allocated for the implementation of the programme until 2030 is the construction works. SK Engineering & Construction's experience in the design and construction of oil refineries and petrochemical plants may be in high demand by the group of companies.

“Given that you have a very strong engineering service and you perform contracts for engineering and construction, we are ready for all projects that we build in petrochemistry, to make you proposals for participation in the construction and supply of equipment,’’ shared Albert Shigabutdinov.

“Four ideas is enough to start with. As for the proposal to participate in your programmes as a contractor – we warmly welcome it. We are interested in this. We know that TAIF is a financially sustainable company, and you probably won't need funding. But if you do, we are ready to participate in this issue. What you suggested is the idea of trading products. There are no rubbers in our production line, but we know that there is a great demand in Korea. We will consider the proposal to import rubber. Perhaps, to other countries as well. I will need to discuss with our trading department about this,’’ the head of the Korean delegation expressed interest in almost all areas.

The proposal on supply of motor oils has also fallen on fertile ground. The Korean company represents a wide line of synthetic oils in the world market under ZIC brand. Now base oils are made in Spain. But if Russia has market channels, and Tatarstan – the nearly finished plant and all necessary derivatives, then Korea is willing to consider expanding the capacities. Moreover, the management of TAIF indicated its readiness to provide the opportunity to sell finished products in the network of more than 200 filling stations of TAIF-NK.

Isocyanates is a separate issue

On the first of the questions raised: the desire to expand the range of products manufactured by TAIF with MDI and polyurethanes — Mr. Lee has not given a definite answer yet. He only noted that he needed to discuss it with the management and partners – Mitsui, the Japanese company:

“We'll discuss it. For your information – now we are implementing a polyurethane project in Thailand as an engineering contractor. It is quite a complex process, but we have experience in such construction. Since we produce propylene oxide, we do not produce polyurethanes ourselves. This is done by a company with which we cooperate. I will clarify this moment and I will report about our decision,’’ he noted.

Ruslan Shigabutdinov said that TAIF Group has been purposefully working on the issue of purchasing a license for the production of isocyanates for several years. The negotiations are underway with many companies – license holders. He also stressed that SK Group actively cooperates with the Japanese corporation Mitsui, with which Tatarstan has long and fruitful relations, taking roots since the existence of the Soviet Union and the period of formation of “major chemistry’’ in the USSR, and later – in modern Russia. The new joint production is a good reason to strengthen ties.

“We have a long good history with them. We have implemented a number of projects together with Mitsui. For example, the project for the production of polycarbonates. Advisor to the President of Mitsui, former Ambassador of Japan to the USSR Tokichiro Togo was a great friend of our first President Mintimer Shaimiev. We had a lot of good things with him that connected us. With the direct participation of Mr. Togo, Mitsui concern made advances, and we could build a plant of polycarbonates. Still the only one in Russia. By non-phosgene technology. Today the production operates successfully, and we are working to increase its capacity. The top management of Mitsui not only has heard about us, but also knows very well from our joint business. We assume that in the framework of the new project that you have successfully implemented with Mitsui, it would be possible to work together. We fully share all the organizational approaches that you apply to the project to be successful,’’ said Ruslan Shigabutdinov.

The existing opportunities, the land plot already allocated for the future construction, the availability of highly qualified personnel and proximity to raw materials will make the process of launching the new production facility in Tatarstan not only the fastest, but also the least expensive than in the same Europe, which also uses Russian oil in its production, but delivers it over long distances. The market for finished products – Russia and the whole world. The offer for future partners is really profitable.

Seung Soo Lee: I will definitely come back, maybe already this summer

In a short interview, held after the meeting, Mr. Lee admitted that this trip to Tatarstan is the second for him and it turned out to be very fruitful. The information and ideas on cooperation received in the republic and in TAIF in particular will now be discussed with the leadership of SK Group and will soon return to Tatarstan with the received answers and counter offers. Mr. Lee is looking forward to another meeting with the republic, which may take place already this summer, by his own admission.

“Next time, I hope I can stay longer. I am sure that we have a lot of points of contact with TAIF and they will be implemented. Besides, I was told that summer is the best season in Tatarstan and Kazan. Also, I was told that in summer one can enjoy a motor ship trip down the Volga River. For this reason, I will also try to visit Tatarstan and Kazan more often,’’ the senior vice president and managing director of SK Engineering & Construction for Eurasia shared the plans.

During the next visit, Mr. Lee hopes to meet again with Director General of TAIF PSC Albert Shigabutdinov to discuss the information on the interaction of the companies, as well as to hear the old legend of the winged leopard decorating the emblem of TAIF and, in turn, to share the legend of the wings of happiness that adorn the logo of SK Group.