Albert Shigabutdinov: ‘The united company has enough resources to implement TAIF’s programme’
About the merger of petrochemical and energy businesses with SIBUR, the future of TAIF-NK JSC and vaccination against COVID-19: the management of TAIF Group talked about this during a media scrum after a year-end meeting of shareholders
The final meeting about the results of annual general meetings of shareholders took place with Tatarstan President Rustam Minnikhanov via teleconference on 21 May at TAIF Group. At the end, the management of Group’s head company — TAIF JSC — met with representatives of mass media to answer journalists’ questions. Read more in Realnoe Vremya’s report.
There is a 99,9% probability of the deal with SIBUR
“The work on the agreement on the creation of a joint company is at the most active stage,” Director General of TAIF JSC Ruslan Shigabutdinov stressed in an interview with the republic’s mass media.
It should be reminded that the beginning of the possible union of gas and petrochemical and energy businesses of TAIF JSC and SIBUR Holding PJSC was announced on 23 April 2021. A corresponding agreement was signed at the headquarters of NOVATEK PJSC in Moscow in the presence of Russia’s Vice Premier Alexander Novak, Tatarstan President Rustam Minnikhanov, Board Chairman of NOVATEK PJSC Leonid Mikhelson and TAIF JSC Director General Ruslan Shigabutdinov. TAIF JSC Board Chairman Albert Shigabutdinov and Board Chairman of SIBUR Holding PJSC Dmitry Konov put their signatures to the document.
“SIBUR Holding is the largest gas and chemical company. By uniting our efforts, we will create a company that will certainly be in the world’s top 5 largest gas and petrochemical companies. Our colleagues from SIBUR have great professional expertise in polymers, while we have expertise in rubbers and copolymers. We will organically complement each other,” Ruslan Shigabutdinov noted and added: “I think only success awaits us. As Mr Shaimiyev said: ‘We are doomed for success’. And the state will greatly benefit from this: lower expenses, synchronisation in new developments, smart organisation, a balanced approach to feedstock suppliers will allow the companies and the plants to ramp up production, increase the utilisation rate of existing capacities, which is production, revenue, taxes, salaries, rewards, stability and reliability.”
He also set a clear deadline for the merger:
“The staffs are working to implement this project. The deadline is the end of the year. All organisations issues will be resolved to start the new year as a united company.”
“Judging by the work done by SIBUR and TAIF, in agreement with all structures of the country, I think we can confidently say the deal will be 99,9% sealed,” Board Chairman of TAIF JSC, Senior Adviser to TAIF JSC Director General in Development Albert Shigabutdinov expressed his opinion.
SIBUR Holding is one of the initiators of the deal
Albert Shigabutdinov claimed this and specified:
“The talk about this idea of signing an agreement between TAIF JSC and SIBUR Holding PJSC, as Mr Mikhelson already told the Tatarstan president on 23 April, has been tabled since the early 1995s. In the early 2000s, TAIF received a lot of offers from different companies, including from foreign companies. Our main condition was the guarantee of implementation of all ongoing development programmes so that companies continued expanding production capacity and the amount of work, produce more sought-after products and provide the biggest possible economic effect both to the country, the republic and Group’s shareholders. We had mainly received offers to load the existing capacities to the full and get the biggest possible profit and stop, not invest in future development. This is why negotiations dragged on.”
As a result of long-term talks, discussions, agreements between the companies and the republic’s management, after learning each other very well, a multifaceted agreement appeared thanks to TAIF and SIBUR’s joint efforts, one of the conditions of the agreement was the guaranteed implementation of the programme of TAIF Group’s Strategic Development through 2030, which is assessed at over 2 trillion rubles.
“A part of the programme has already been implemented. Further expansion of funding of ongoing and scheduled projects of TAIF Group enterprises envisaged by the Strategic Development Programme with borrowings, amid the market’s volatility, could hit the ceiling at times. And this could lead to risks of attempted manipulations on behalf of dishonest financial organisations and create the risk of suspending the implementation of our programmes. The united company will have by far enough resources to implement TAIF’s programme. It became the foundation for the decision to work jointly and unite the petrochemical and energy businesses. SIBUR confirmed that an agreement with related guarantees will be signed. Both SIBUR and TAIF assume the responsibility for implementing the programme approved by TAIF, NOVATEK, the government. To compare, over 30 years of its business, TAIF Group has invested over $20 billion in the development of its companies, while here the investment in 10 years will be $20 billion,” Albert Shigabutdinov explained.
Social area will get stronger
“Production development is impossible without the construction of social facilities. Modern-day technologies require that educated people and professionals deal with industry improvement. And such specialists require a certain attitude to themselves, the creation of certain conditions, that’s to say, the development of social infrastructure. Earlier, one had to look for a compromise between production development and social facilities because social expenditures were mostly charity coming from the industry’s net profit, to the detriment of the possibility of enterprises’ own further development. So this is how legislation works. I will put just one example: throughout TAIF’s history, we have invested more than $10 billion rubles in the construction and renovation of infrastructure (it is sport, roads, housing, kindergartens, parks, lakes, historical sites and much more) almost gratis. From a perspective of value, it is even costlier than the whole ZapSibNeftekhim complex in Tobolsk.
The infrastructure created, including with TAIF’s involvement, allows both specialists of Group’s companies and their family members as well as citizens and guests of the republic to delve into history, connect with nature, enjoy beautiful urban views, go to the conservatory, watch a top water polo, football and hockey matches in their free time... The list is long. Now, thanks to the regulations approved by the country’s administration and adopted by lawmakers, there are much more possibilities of creating modern infrastructure. And it became easier to implement such projects. The construction of such sites can lead to the dependence on industrial capacity development programmes and be financed with borrowings. In the future, these borrowings can be repaid from those taxes that new, constructed and launched plants will bring,” Albert Shigabutdinov explained.
The changes in state legislation allowed including social facilities in investment projects designed to develop industrial production: bridges, roads, housing, kindergartens and schools, health establishments, leisure areas and much more — the essentials to create comfortable living conditions for the population. The socially responsible businesses actively take advantage of the opportunities that opened by creating, first of all, comfortable conditions for companies’ activity, the life and leisure of its employees and citizens of the region. So everybody is at advantage: the business itself, people, the territory enterprises are located on, the region and the country in general. It is the obvious effect. But the real benefit is much bigger:
“Any job we create in petrochemistry additionally creates as many as 40 jobs in related and social sectors. The income grows, which means the population’s well-being does too,” the board chairman of TAIF JSC shared with the journalists. And here the upcoming merger of the businesses of TAIF Group and SIBUR Holding will help get a bigger effect that every holding could separately.”
“The programme is possible to implement. I don’t doubt it. The only case is that everybody will have to work twice as hard and effective, but for a bigger reward. The staffs and management of the companies that are merging have the necessary experience, energy and knowledge,” Albert Shigabutdinov said.
TAIF-NK JSC to join TAIF MG JSC
Albert Shigabutdinov disclosed one of the intrigues too: what companies are included in the deal with SIBUR and how the other companies will develop:
“At the moment, the deal envisages that the following companies will join the united company from TAIF: TGC-16 JSC, Kazanorgsintez PJSC, Nizhnekamskneftekhim PJSC and TAIF JSC itself,” the board chairman of TAIF JSC outlined the configuration of the agreement they came to from the beginning.
Some mass media had already assumed what would happen to Group’s oil refining business after the petrochemical plants joined the new united Group. Some predicted that Tatneft PJSC would buy out TAIF-NK JSC, others supposed that the company would follow key consumers of its products and join the gas and petrochemical company created at SIBUR. Albert Shigabutdinov talked about the future of the company.
“The assets of Group are divided into two managing companies. It is two different legal entities. The company I have named will unite with SIBUR’s business, while the rest will stay with TAIF Managing Company JSC. They have their own strategic programmes, and they will develop further,” he explained. Further business relations between TAIF-NK JSC and Nizhnekamskneftekhim PJSC will be based on market pricing mechanisms and agreements that are signed.”
To turn heavy oil to project feedstock
The development of TAIF-NK was discussed at this meeting not only in the context of the deal with SIBUR. During the teleconference, Director General of TAIF JSC Ruslan Shigabutdinov raised one of the most hot-button questions for the country’s oil production and oil refining sectors, including TAIF-NK, namely, the quality of the incoming feedstock. The question was touched on at the meeting and was tabled again in the talk with the press:
“Today no oil refinery in the world uses oil with density above 860 kg/m3 for direct high oil conversion. But TAIF-NK receives oil with an extremely high density reaching 878 kg/m3 with more than 1,4% of sulphur via Transneft’s main oil pipelines. The feedstock breaks down before processing, which leads to a considerable amount of sediment in oil pipelines and reservoirs. And further processing inevitable bring to the formation of superheavy non-convertible asphaltene sediment in pipelines, uncontrolled coking in regulating and safety valves, devices and other equipment,” Ruslan Shigabutdinov described the essence of the problem.
He also stressed that when such a low-quality feedstock is used, as a consequence of the absence of modern technologies to control such processes, there is always a risk that safety valves and regulating elements may not work, and this can lead to catastrophic explosive situations, manmade catastrophes with a huge risk of destruction of the whole industrial hub in Nizhnekamsk.
Emergency plans and layouts in Group’s enterprises were created and adopted a long time ago, they are tested in drills. But in reality, the enterprise shouldn’t operate in emergency mode. But it is possible to get rid of the sediment only mechanically. For this purpose, one part first and then the other part of the equipment has to be eliminated temporarily from the processing chart and shut down the production for repairs. As a result, the business, the region, the country lose.
To increase the reliability of the operation of plants now, TAIF had to reduce feedstock processing volumes. It expectedly influenced the general financial and economic result.
“There is a solution to this problem in the world. We aren’t the first: the USA faced such a problem in the early 2000s. When the general quality of oil that was produced and sent for processing started to get worse, the United States made a decision to use units to produce the so-called ‘synthetic oil’, which can be processed both directly and diluted with oil of a lower quality obtaining the average,” the TAIF JSC director general put an example.
TAIF Group offered to use the world experience. With the support of Tatarstan President Rustam Minnikhanov, work in this area is already done.
“Oil quality is, indeed, a complicated issue. And it is impossible to resolve without serious decisions on the processing, treatment and production of synthetic oil. We have discussed this topic with Mr Shigabutdinov (Editor’s note: TAIF JCS board chairman, senior adviser to TAIF JSC director general in development), and I have discussed the topic with Mr Maganov (Editor’s note: director general and board chairman of Tatneft PJSC. I have already raised this topic with Sazanov (Editor’s note: state secretary, vice minister of finance of Russia). We are in unequal conditions: those who have light oil have a different result (Editor’s note: of light oil products). While taxation is the same for everybody. We are addressing this topic with you. We don’t have choice. We should find a solution. In any case, our oil and that of other companies will worsen: the more sulphur, the heavier oil. This problem needs to be solved,” the Tatarstan president claimed during the teleconference.
“There are synthetic oil production technologies. The implementation of such a project will allow solving this problem completely. Moreover, this will enable to increase the efficiency of operating oil refineries both in terms of capacity and money. The country can also get an additional increased from this in the form of taxes and high efficiency of existing feedstock processing,” Ruslan Shigabutdinov noted.
The better the feedstock, the bigger the production of light high-quality products with high profitability, the more effective their further processing, which means more products the country needs.
Every person is valuable to us
“Our staffs are huge, and every person is valuable. It is our core asset, the wealth of the company. Iron can be bought, cast, while it is impossible to train a specialist who has spent the best years of his life in the company, who knows the whole system. To avoid irreparable losses, vaccination is a priority,” Ruslan Shigabutdinov answered a question about the response to the pandemic’s spread in Group’s companies.
TAIF was probably one of the first to feel the cunning of the novel coronavirus infection. A considerable part of the companies’ products is exported. When countries started to close their borders one by one under the influence of the spread of COVID-19, suspend the production and declare self-isolation or quarantine, international commerce suddenly decreased, prices for commodities went down, while the stock of warehouses, in contrast, increased.
“Thanks to the team’s well-oiled work, all production plans were corrected, repairs were postponed into spring and early summer, the investment programme accelerated. The main task was to prevent the staff from getting ill, from losing neither money nor well-being. We didn’t fire, didn’t lay off a single person. Moreover, the staff even grew, and considering the collective agreement, salaries were indexed at around 6-8%,” TAIF JSC’s director general said.
Now it is still important to save Group’s workers from the deadly disease. Thanks to the management of the republic, Tatarstan doesn’t have a shortage of the vaccine. Officials of TAIF Group put their personal example:
“Our board chairman personally received a vaccine, thus giving everybody an example. Work on vaccination was set up in enterprises. We work via campaigns, explanations, including via health services in the enterprises. The number of vaccinated people is increasing weekly,” Ruslan Shigabutdinov explained.
The priority task is to cover 100% of the staff. The enterprises are actively increasing capacity, mastering new types of products and market niches. So there is simply no time to get ill: TAIF Group’s companies will have a lot of work to do.