Nizhnekamskneftekhim’s mega project faces remarks of Russia’s industrial safety watchdog

EP-600 in numbers

The practical implementation of the project whose importance and necessity was noted by the republic’s administration and TAIF top managers began in June 2017. A memorandum of understanding through 2025 with investments equal to up to €12 billion in total was signed between Germany’s transnational chemical company Linde AG and TAIF Group of Companies at Petersburg International Economic Forum. Precisely this project was discussed at a meeting of Russian President Vladimir Putin and Tatarstan President Rustam Minnikhanov and Minister-President of Bavaria (FRG) Horst Seehofer and obtained approval. During the same year, Nizhnekamskneftekhim PJSC and Linde AG signed contracts on the first stage of the would-be ethylene complex with a capacity of 600,000 tonnes a year.

Foreign investments of €807 million were attracted to implement the project. Money was also borrowed from a consortium of five German banks — Deutsche Bank AG, UniCredit Bank AG, Bayerische Landesbank, Landesbank Baden-Württemberg and DZ BANK AG.

VNIPIneft PJSC designed project documentation, which received a positive review of state inspection, for construction and assembly works. The construction works kicked off on the site in March 2020. After the facility is delivered, the complex is due to process around 1,8 million tonnes of naphtha a year and make 600,000 tonnes of ethylene, 273,000 tonnes of propylene, 88,000 tonnes of butadiene, 245,000 tonnes of benzene.

About 27,000 piles were drilled on the site by early April 2021, 62,000 cubic metres of bitumen was received and laid, 18,500 tonnes of metal structures, 183 pieces of equipment were supplied. 26 factories supply metal structures, of which 18 are enterprises of the Republic of Tatarstan. 2,500 people are employed in construction and assembly works on the site. It is workers of the contractor general, Turkey’s Gemont company and employees of 18 Tatarstan construction companies.

630 permanent jobs will be created in the new ethylene complex. Its launch will allow reducing exports of gas and petrochemical feedstock and increasing the production of target products, first of all, plastics and rubbers with high added value, which will also have a positive impact on import substitution.

We will go back to the meaning of these numbers and facts for the economy of Nizhnekamsk and Tatarstan considering the media coverage of these events.

Time and money

Specialists of the Volga office of the Federal Service for Environmental, Technological and Nuclear Supervision think that a divergence from the project documentation is the reason why the works in the two process units were suspended. The divergence can “create a risk of harm to citizens, animals and plants’ health”, as a corresponding article of the Russian Code of Administrative Offences reads.

It is acknowledged in explanations of the Construction Department of Nizhnekamskneftekhim PJSC the importance and necessity of a state inspection of parts of the project document that changed.

The inspection will take place in the short run. At the same time, such an approach surprises and perplexes the specialists who are involved in the construction and assembly works. The case is that a construction project isn’t a static lump that isn’t subjected to any change.

The standard world practice in constructing large production facilities indicates that the weight and dimension of analogous facilities are used as a benchmark first. Later, it isn’t ruled out that some elements are replaced with analogous ones or others enhancing indicators.

It is no surprise that the real equipment will differ from the analogue that was envisaged in the project in some parameters. In such cases, the project’s numbers are quickly corrected. It is an ordinary situation that can happen. Moreover, the main legislative document — the Urban Planning Code of the Russian Federation — permits doing this.

In fact, what “risk of harm” are we talking about? All project decisions used in the submittals and that are applied on the construction site completely comply with construction norms and rules of the Russian Federation. They meet all requirements for reliability and safety, there is no threat to life and health, and the remarks of the industrial safety watchdog made during the inspection of the ethylene complex that’s being built are too strict. This is confirmed by the fact that the federal service doesn’t have remarks about the constructors’ submittals and as-built documentation.

If the story about the industrial safety watchdog’s remarks were only technical, it perhaps would not be worthy of attention. The watchdog made remarks, the constructors eliminated them: everybody met the requirements and continued working. The suspension of construction can hurt the reputation of NKNK and lead to extremely negative consequences, since the works according to the contracts will delay. This means only one thing — additional and big financial costs for Nizhnekamskneftekhim. This is why it is no wonder that a version of some forces’ interest in harming the Nizhnekamsk petrochemists is hovering over this situation. I don’t want to believe it, but it anyway has the right to exist.

The media coverage of the situation confirms this too: “The Russian industrial safety watchdog is shocked at how TAIF is building the ethylene complex,” this is the formulation of the subheading of an article of one of the online newspapers. Moreover, no “shocking” statement of the watchdog’s representatives is cited in the text. The author of the article admits that the suspension, though partial, of such a big construction project is unprecedented for the republic. Nobody can remember this not only in Tatarstan.

“Neither I personally nor my colleagues have ever faced anything similar,” head of the project of VNIPIneft PJSC Fyodor Zolovkin shared his thoughts. “I don’t know what this strictness of Russia’s industrial safety watchdog has to do with. Before making decisions, supervisory agencies usually try to solve a problem constructively. Why fire sparrows from a cannon if there is a catapult? Not a sauna is built!”

It is surprising that when deciding to suspend the construction, the federal service didn’t even give Nizhnekamskneftekhim a chance to correct mistakes, which is supposed for, moreover, contractors of such large projects according to all written and unwritten rules. There weren’t given either oral or written warnings. For some reason, the watchdog’s workers didn’t pay attention to either economic or social aspects of the complex that’s being constructed, which are more important.

A ban is immediately imposed! Though the poetically nervous picture of the already mentioned online newspaper provided to readers that “the bitumen is weaker, the piles are thinner, fewer bolts” — this is obviously not about the EP-600.

“The weight of the equipment compared to those analogues mentioned in the submittals changed because the weight of the equipment that will be assembled reduced,” head of the project of VNIPIneft PJSC Fyodor Zolovkin explained technical aspects of the argument in detail. “For instance, if equipment weighed 8 tonnes in the project, it began to weigh 5. This is why there is no need to drill 60 piles for it when 50 piles are enough. We can’t say that the constructions became less resistant.”

The lawsuit of Russia’s industrials safety watchdog against Nizhnekamskneftekhim was examined by the Court of Arbitration on 26 April. The suspended works cost approximately 50 million rubles a month. At the same time, anticipating the possible concern of business partners, Nizhnekamskneftekhim stresses that the current stage of construction and the amount of work allowed redistributing the staff and machinery of the contractor general to other construction areas, thus avoiding a slowdown in the pace of works. Nowadays the company and VNIPIneft PJSC are working together at a high speed to prepare materials to inspect the submittals that were corrected. The company is convinced it is right.

I would like to remind you that a mechanism of “regulatory guillotine” has been applied for several years already on the country’s management’s instructions (it is an instrument of large-scale reconsideration and cancellation of regulations that have a negative impact on the general business climate). In other words, the management of the country thinks that it is time for reforms in this issue.

At the heart of the city and republic

At first sight, it is not the best time now to implement large-scale industrial projects. The coronavirus pandemic not only destabilised the life of some companies but also entire sectors of the economy. It would be more logical to slow down the pace, lie low until better days, look around and recover your breath.

In fact, many companies did so. But as a non-stop enterprise that provides economic stability of not only Tatarstan, including Nizhnekamsk, but also the Russian Federation in general, Nizhnekamskneftekhim keeps working and hasn’t stopped implementing its investments programme containing several large and truly ambitious projects even for a day.

Ethylene-600 is not the only project on their list. Besides the ethylene complex, the company is successfully building its own CCGT-TPP: the first gas turbine flaring will take place here literally in the next weeks. But the implementation of another significant project — the construction of a divinyl styrene synthetic rubber (DSSR) plant — is already on the finishing line. This January, the first DSSR briquette was produced in the new plant in test mode. Since then, Nizhnekamskneftekhim has become a manufacturer of the whole line of rubbers used in the world’s tyre industry.

Lockdowns, closed borders, incredible difficulties for freight and specialists’ travel around the world — this is the atmosphere of 2020. Objective complications are still here, however, the erection of the olefin complex is keeping to schedule. The fact that it is included in the Long-Term Development Strategy of the Chemical and Petrochemical Complex of the Russian Federation through 2030 and a list of priority investment projects of the Volga Federal District also talks about the meaning of this project. Its implementation will create new added value, raise the enterprise’s economic stability and payments made to all budget levels.

I will say a few words about the economic effect of the erection of the new Nizhnekamskneftekhim plants, including Ethylene-600, on Nizhnekamsk Municipal District and the Republic of Tatarstan. We can say without exaggeration that these projects will become a real catalyst for the region’s development and its social infrastructure, which will have an impact on a big number of Nizhnekamsk families’ personal well-being. The new Nizhnekamskneftekhim plants will create over 2,000 jobs in total with a decent salary, while income taxes paid to the urban and republican budgets will go 15% up.

More than 150 organisations of the Republic of Tatarstan are involved in construction and repair works on the operating sites of Nizhnekamskneftekhim and those that are under construction. This means that the company creates well-being not only for its workers but also for a huge amount of residents of the republic. Thanks to Nizhnekamskneftekhim these organisations lay a foundation for tax payments made to the Tatarstan budget. “Petrochemistry is the growth point of our republic!” Tatarstan President Rustam Minnikhanov has pronounced this phrase many times.

Nizhnekamskneftekhim’s slogan reads “To the city’s heart”. This is no exaggeration. Suffice it to say that payments of the company and contractors working in its facilities made to the local budget in 2020 exceeded 1,3 billion rubles, which is as much as 70% of its amount. There is a rhetorical question: is there a similar city in Russia whose two-thirds of the budget consists of payments of one backbone enterprise?

Nizhnekamskneftekhim pursues an open policy on environmental and industrial safety. The fourth environmental programme of the enterprise was completed in 2020. A number of serious and important indicators were achieved in this programme: river water consumption for production reduced by 13 million cubic metres (18,6% of previous indicators), emissions of polluting substances into the atmosphere decreased by 6,000 tonnes (26%). More than 60 environmental measures for over 828 million rubles were taken in 2020 alone. The measures included the launch of a new 15-km long sewage tank, reconstruction of cooling towers, replacement of pumps and manufacturing equipment for hermetic equipment, substitution of more than 12,000 metres of water and sewage pipelines, development of the water consumption system.

A lot of attention is paid to environmental aspects during the implementation of the Ethylene-600 project. Technological developments designed here allow saying that it is a very eco-friendly project.

The emissions of the EP-600 are much lower than those of analogous plants. The complex will use flares with progressive combustion with lower emissions of carbon dioxide. It is the use of a modern flare system suppressing smoky combustion. Less gas ends up in the flare system thanks to the union of the latest process management systems. A closed water circuit is used here, that’s to say, the EP-600 has local treatment facilities where all sewage is accumulated, treated and return to the water circuit. It is the state-of-the-art technology,” emphasised Director General of Nizhnekamskneftekhim PJSC Ayrat Safin.

“After the project is implemented, Nizhnekamskneftekhim will become one of the few companies to make such a quantity of commodities, around 3,500 million tonnes a year. It is probably one of Europe’s largest petrochemical facilities that will use high-quality feedstock made of processed oil,” noted TAIF JSC Board Chairman Albert Shigabutdinov. “We want to build faster, deliver facilities so that everything will start running, citizens of Nizhnekamsk, Tatarstan and Russia will live better. It is a big number of jobs, it is additional incomes for both the state and the workers. It is good salaries. Nizhnekamsk, Kazan will blossom, and the Russian Federation will just be better due to this. While Nizhnekamskneftekhim’s products will be refined across Russia. We would really like all this to happen faster.”

“The faster any construction project ends, the more economic it is. The work is underway, equipment is arriving, while it is not yet the peak of equipment delivery, but the key heavy structures were already erected, large freight was delivered by water. The scheduled stable work goes on, there is a big desire to reinforce and accelerate it,” Director General of TAIF JSC, Board Chairman of Nizhnekamskneftekhim PJSC Ruslan Shigabutdinov commented on the course of the construction.

There is no doubt that the EP-600 construction project will be successfully completed no matter what objective and subjective, local and global difficulties arise in the process, progress cannot be stopped.