TAIF planning to increase polypropylene production capacities
The management of TAIF JSC and Nizhnekamskneftekhim PJSC met with top managers of СМЕС and HQC applying for the contract for the construction of PP-400
Nizhnekamskneftekhim PJSC (part of TAIF Group) plans to build a new polypropylene production facility with a design capacity of 400,000 tonnes of products a year in the near future. The tender has already been issued, and the bidders from Europe, Korea, Japan and China are competing for being the best in terms of price and quality of execution. Business negotiations with the management of China Machinery Engineering Corporation (CMEC) and its business partner China Huanqiu Contracting & Engineering Corporation (HQC) has taken place recently. Read the details in the material of Realnoe Vremya.
The meeting via videoconferencing brought together Kazan, Nizhnekamsk, Beijing, and Frankfurt am Main. At the headquarters of TAIF JSC, the Group's companies were represented by Director General of the Group's parent company Ruslan Shigabutdinov, Chairman of the board of directors of TAIF JSC Albert Shigabutdinov, Director General of Nizhnekamskneftekhim PJSC Ayrat Safin, Chief Engineer of Kazanorgsintez PJSC Rafael Safarov, and others.
The Chinese side also seriously prepared for the meeting. Fang Yanshui — Executive Director — President of China Machinery Engineering Corporation (CMEC), one of the largest contracting companies in China, gathered in front of screens the specialists of the relevant departments of his company and also invited experts from China Huanqiu Contracting & Engineering Corporation (HQC) — one of the leading companies in China in the field of construction of oil refineries and petrochemical plants, SINOSURE — the only export and credit insurance corporation in China, which in the transaction, if it takes place, is assigned the role of a credit expert agent, as well as specialists of the Chinese branch of Deutsche Bank AG — the leader of the German banking industry. Andrei Freiberger, the director of Structured Trade & Export Finance, joined from Frankfurt am Main.
Already today, Nizhnekamskneftekhim PJSC, with the current polypropylene production design capacity of 180,000 tonnes and the actual production of 215,000 tonnes a year, is one of the leaders in Russia in this segment. Taking into account the current plant and the one that is planned to be built — with a design capacity of 400,000 tonnes, Nizhnekamskneftekhim PJSC will almost triple the production of polypropylene and become one of the largest and most powerful polypropylene producers in Europe.
TAIF Group’s companies are one of the active participants in the processes of import substitution of products on the Russian market. Every year, new types of polymers are created and mastered on an industrial scale, which are in demand by domestic and foreign consumers.
The decision to create in Tatarstan its own production of polypropylene used in almost all industries — from medicine to cosmonautics, was made in the early 2000s. In 2003, a license agreement was signed with the international company LyondellBasell. Initially, it was assumed that it would be built a plant with a capacity of 120,000 tonnes a year, but later it was decided to increase the volume to 180,000 tonnes. After less than 3 years since the acquisition of the technology, in September 2006, the new production gave the first products.
By 2020, the range of polypropylene produced by TAIF already numbered 51 brands, including special ones and with improved performance characteristics, and the share of the Russian market occupied by Nizhnekamskneftekhim PJSC for polypropylene was 13% (the second largest result among domestic manufacturers).
It is noted that polypropylene is the only base polymer (except LLDPE), and the production and consumption of which has been steadily growing for almost 10 years. Analysts suggest that by 2024, PP production in Russia alone will reach 4,5 million tonnes a year, with the share of imports in consumption of only 8%. TAIF Group will account for more than 600,000 tonnes with the completion of construction and the launch of the new plant.
One of the largest engineering companies in China and the world
This is how Fang Yanshui introduced his team. CMEC is a member of the state-owned group of companies China National Machinery Industry Corporation (Sinomach) and is included in the top three leading specialised companies in China and the top 225 largest global contractors.
“CMEC has offices and signed EPC contracts all over the world. We now operate in more than 60 countries. The contracts executed by our forces have received the approval of our customers. We have been awarded the highest EPC award in China three times,” said Mr. Hu Xiaonan, who was assigned to elaborate the proposal for TAIF Group at CMEC.
He also explained why colleagues from HQC (China HuanQiu Contracting and Engineering Corporation, a subsidiary of China Petroleum Engineering Corp. Ltd.) — a long-time partner of CMEC, were invited to the meeting.
“We intend to involve HQC as a technical partner in this project. The company has extensive practical experience, including in the implementation of projects for the construction of polypropylene production facilities. Among the contracts they have implemented, there is also an object that almost completely by all parameters — technology, area, capacity, equipment — coincides with what you are going to build,” said Mr. Xiaonan.
This point, according to the Chinese side, will not only reduce the time of project development and equipment selection, based on the already available data, but also will give the opportunity to reduce significantly the cost of these works for TAIF Group, which may be an important point when the TAIF management decides to choose an engineering company to provide design, interaction with the world's largest equipment manufacturers, as well as turnkey production construction under the EPC contract.
“The cooperation with HQC means that we are on the rise: we provide speed and quality first of all. Both CMEC and HQC are among the leaders in China in terms of quality and management. We think that HQC will be able to optimise the design for your project and optimise the choice of equipment. We think that the design costs can be reduced to a minimum,” Hu Xiaonan said.
We are committed to long-term cooperation
“We intend to create a long-term stable strategic cooperation with you through this project. Therefore, we immediately present you a very good price offer, in which we include only a reasonable profit for ourselves,” Fang Yanshui immediately outlined the maximum task.
Besides, Mr. Yanshui stressed that the CMEC and HQC specialists are ready to work in the shortest possible time, while ensuring high quality at all stages. We are talking not only about design and survey works, but also the construction of the entire new production complex on a turnkey basis.
He also made it clear that his company had already held preliminary negotiations with leading manufacturers of special equipment, which may be required to implement the project. It is planned to produce everything necessary in Europe, Russia and China. Preliminary negotiations were also held with Russian design institutes ready to undertake the necessary research, calculations, and preparation of the project.
There are also preliminary agreements on providing funding for the project. The Chinese branch of Deutsche Bank AG, the leader of the German banking industry, plays a key role in the extending the credit line. SINOSURE, the only export and credit insurance corporation in China, is planning to act as a credit expert agent. The representatives of both organisations also took part in the video conference. According to them, for the work on the extension of the credit line to start, it is necessary to determine the amount, sign a contract, and provide a feasibility study and an analysis of the impact of the project on environment.
It is not enough to build. It is necessary to train the staff
This was stressed by Albert Shigabutdinov, the chairman of the board of directors of TAIF.
“Part of the main equipment, if the contract is signed between us, is planned to be supplied by Chinese production. We have confidence in its high quality, but today TAIF Group has almost no experience in operating Chinese equipment, so the question of ensuring its effective use is acute — from the moment of installation and commissioning to maintenance, repair, replacement of wear-resistant elements and parts. This is one of the very serious issues.
I ask the management of Nizhnekamskneftekhim PJSC and our Chinese partners to pay serious attention to that the proposal should provide for a thorough inventory and analysis of the conformity of the supplied equipment in terms of quality, completeness, and the possibility of its effective operation. It is also necessary to consider the possibility of not only theoretical training of the group's specialists in handling this equipment, but also practical training at existing production facilities where it is already in operation,” he stressed.
Competition for the right to implement the project is high
The Polypropylene-400 project is part of the large-scale Development Strategy of TAIF Group as a whole. The programme is designed for the period up to 2030 and is estimated at more than 20 billion US dollars. Currently, the project worth approximately $8 billion have already been implemented or are under implementation.
The partners who have already proven their reliability and high quality of work execution have a high chance of continued cooperation
“There is a lot of work to be done, and we are interested in a long-term partnership,” said Albert Shigabutdinov. But he made it clear that it was under the condition of compliance with the agreements and an honest financial policy.
The final decision on who will be entrusted with the implementation of the Polypropylene-400 project has not yet been made. This was announced by Director General of Nizhnekamskneftekhim PJSC Ayrat Safin.
“Tender procedures are underway: all proposals are being finalised. There is a very serious competition between European, Chinese, Korean and Japanese companies. All the applicants are close to each other. We would not like to name companies not to upset the balance of the market. But I can say that we already have experience working with them. These are first-class companies. We will make a decision based on the results of a balanced analysis of all the proposals received, studying the proposed combination of price and quality,” he stressed.
Ayrat Safin also noted:
“We, as TAIF in general, and Nizhnekamskneftekhim PJSC in particular, do not yet have experience working with this company. Besides, we have never worked with the attraction of Chinese money. And if the agreement on cooperation with them is reached, it will be a great experience for us.”
At the end of the meeting, Director General of TAIF JSC Ruslan Shigabutdinov thanked the participants of the video conference for their fruitful work. They agreed to meet again with our Chinese partners to discuss a number of issues that need to be clarified. It is possible that the meeting will take place in a face-to-face format either in Kazan or in Beijing. The place, date, and time are to be determined routinely. But it probably won't take long. It is planned to decide on a contractor and start implementing the PP-400 project this year, 2021.
TAIF JSC is the parent company of TAIF Group. TAIF JSC was founded in August 1995 on the basis of Kazan foreign trade research and production association (founded in 1990).
TAIF Group combines the Group of TAIF JSC, including 29 subsidiaries, and the Group of TAIF Management Company JSC, including 11 subsidiaries. TAIF Group operates in many areas, the key of which are oil and gas processing, chemistry and petrochemistry, power engineering, investment, construction materials, media and other types of services. The total number of employees of TAIF Group is 39,700 people.
Nizhnekamskneftekhim PJSC is one of the largest petrochemical companies in Eastern Europe, occupies the leading positions among domestic producers of synthetic rubbers, plastics and ethylene. Part of TAIF Group. The company was founded in 1967, the main production facilities are located in Nizhnekamsk (Republic of Tatarstan). The product range includes 320 items. The company's products are exported to 50 countries in Europe, America and Southeast Asia. Exports share in overall production volume is about 50%. Nizhnekamskneftekhim PJSC is the only producer of alpha-olefins in Russia. In the near future, the company plans to build and launch the production of methylene diphenyl diisocyanates (MDI) and toluene diisocyanates (TDI) to ensure own raw materials for the production of new innovative polyurethane systems.
China Machinery Engineering Corporation (CMEC) is part of the China National Machinery Industry Corporation (Sinomach) group of companies. Its history dates back to 1978.
As a well-known international contractor, CMEC was one of the top three top 50 Chinese enterprises listed by China’a Ministry of Commerce. For several years, CMEC has also been included in the list of the world's largest 225 contractor firms by the well-known Engineering News-Record magazine in the United States. The company's field of activity covers about 120 countries on five continents.
China HuanQiu Contracting and Engineering Corporation (HQC) is a subsidiary of China Petroleum Engineering Corp. Ltd. The company specialises in the construction of oil refineries, petrochemical plants and chemical fertiliser plants associated with oil refineries and mining plants.
SINOSURE is a state-funded and policy-oriented insurance company that promotes China's foreign economic and trade development and cooperation. The only insurance company in China that specialises in export credit insurance.
Deutsche Bank AG is the leader of the German banking industry, with a strong position in Europe and significant presence in North and South America, and the Asia-Pacific region. Deutsche Bank AG provides financing for trading operations, provides investment banking services, commercial banking services, provides banking services to individuals, and offers products and services for asset and large private capital management. The bank's clients include corporations, government agencies, institutional investors, small and medium-sized businesses, and individuals.