Minnikhanov about Alabuga’s expansion: ‘We took this Brest Fortress’
Tatarstan persuaded the federal authorities to spend residents’ taxes to expand the borders of the special economic zone, while SIBUR promised to solve a feedstock problem of NKNK and KOS
“The country won’t change itself if we don’t change it,” Tatarstan President Rustam Minnikhanov was glad because Alabuga Special Economic Zone (SEZ) finally secured compensation for costs from the federal budget to expand the infrastructure of the zone in the next 15 years instead of agreed 5. “You wonder at times why functionaries need nothing,” he was puzzled in his closing argument at a meeting of the republic’s Ministry of Industry and Trade. Read in Realnoe Vremya’s report how SIBUR’s CEO Mikhail Karisalov promised to solve the “feedstock issue” for Nizhnekamskneftekhim and Kazanorgsintez, Director General of Promtech GC Valery Shadrin did to repay salary debts of Krasnoyarsk Synthetic Rubber Plant and what Timur Shagivaleyev doesn’t like.
Place of industrial power
The next meeting of the Tatarstan Ministry of Industry and Trade was out of the office — the industrial in-crowd gathered in Yelabuga. The Zakamye area, as Minister of Industry and Trade of the republic Albert Karimov explained to guests, becomes one of the industrial development centres of Tatarstan, and this “place of power” promises to expand its borders in the near future. At the end of the meeting, Tatarstan President Rustam Minnikhanov gave them to understand that Alabuga SEZ would get the long-awaited federal tranches to expand the infrastructure of the special economic zone within the Russian government’s decree No. 1119. It wasn’t specified how big Alabuga SEZ would get, but judging by the 15-year term, there is time to grow.
Minister of Industry and Trade of Tatarstan Albert Karimov started his report on a positive note. “The industrial production index was 108,5%, while commodities and services were shipped for 4 trillion rubles,” he reported. To compare, production in Tatarstan in 2020 fell by 3,6%, while production volumes reached 2,7 trillion rubles.
“It is great labour, a big contribution of our staff. We looked at the statistics and saw this hadn’t happened since 1992,” noted Karimov and added that a low base of 2020 provided a part of the success. Nevertheless,, compared to 2019, the growth was 104,8%, he specified.
Production output of the gas and petrochemical complex reached 63%. Products for 2,5 trillion rubles were made. 34,5 million tonnes of oil was produced, 69,300 lorries and 747 cars were manufactured, 13,5 million car tyres were made, 27 billion KW of electricity and 56,1 million Gcal of steam and hot water were produced last year. Over 323,000 people work in the industry. The total profit of Tatarstan’s enterprises in 2021 was 0,6 trillion rubles. Over 78% of companies made it. 21,3% lost 20,45 billion rubles. The total result of Tatarstan’s industrial enterprises was 0,461 trillion rubles. It is 314% above the disastrous 2020.
Albert Karimov’s four clusters
The head of the Ministry of Industry and Trade claimed that approaches changed, the focus shifted from separate companies towards territorial production complexes or clusters. There are four: the oil cluster with Tatneft at the core in the southeast of the republic, the petrochemical cluster around SIBUR Holding PJSC, the aircraft engineering in Kazan (Kazan Aircraft Engineering Association, Kazan Helicopters, electronic enterprises), automotive cluster in Naberezhnye Chelny.
“Oil production and oil refinery are the biggest territorial cluster in the republic, Tatneft is its core. 29 oil companies, oil service companies develop in the southeast of the republic, oil refining grows. It is planned to provide 34,3 million tonnes of oil production across Tatarstan and at least 22 million tonnes of crude oil refining in 2022,” he set a task for this year.
The second-biggest cluster of the republic, which is intrinsically linked with oil production and refining, according to him, is the chemical cluster.
“Nizhnekamskneftekhim and Kazanorgsintez, which recently became part of SIBUR, are the core. One of the main tasks of this cooperation is to create a research and educational campus in Nizhnekamsk, build EP-600 ethylene complex, re-equipment of the halobutyl rubber plant at Nizhnekamskneftekhim, modernisation of ethylene shops to process propane feedstock, make polyethylene at Kazanorgsintez,” the minister enumerated.
It seems that the cluster approach turned out to be useful to receive state support measures. As Albert Karimov said, last year, industrial enterprises managed to get a record sum — 57,3 billion rubles. With this indicator, Tatarstan finished fourth after Moscow, Samara Oblast and Saint Petersburg, Vice Minister of Industry and Trade of Russia Alexey Besprozvannykh clarified later. Moreover, Tatarstan actively receives preferential loans from the Fund for Industry Development. Another 10 projects for 1,9 billion rubles were approved. But Tatarstan especially outstrips other regions in the construction of industrial parks. More than 15 billion rubles were received for these purposes, the vice minister noted.
Petrochemistry to be freed from chronic feedstock shortage
Immediately after the minister’s key report, Board Member of SIBUR Holding PJSC, Director General of SIBUR LLC Mikhail Karisalov delivered a speech. He had to answer the most concerning question if the flagships of Tatarstan petrochemistry would be fully supplied with feedstock. It is no secret that Kazanorgsintez suffered from an ethane deficit. The “ethane syndrome” can disappear this year, Mikhail Karisalov assured them.
Before this, he presented the profile of SIBUR in key figures to the audience: the preliminary evaluation of the company’s enterprises was 1,3 trillion rubles. EBITDA totalled some $5,1 (instead of $2,5 billion in 2020). Moreover, the amount of annual investments amounts to around 70-80% of the second indicator, he said.
“I have been working in the company for 19 years and remember it as a feedstock holding. But a huge breakthrough has been made in the last 10 years, which allowed the company, the country to break free from the imports of polymers and plastics and become export-oriented. We turned this sand glass upside down by launching such projects as ZapSibNeftekhim. In the last seven years, we have added about 2 million tonnes of new polymer capacities, the biggest plant has been built in Nizhny Novgorod Oblast, the capacities in Tomsk, Voronezh, Omsk and other regions have been reconstructed,” said Karisalov.
According to him, a dynamic work with the assets in Tatarstan began after the landmark deal on purchasing 100% of TAIF shares.
Evaluating the results of the first familiarisation with the Tatarstan assets, he said that the feedstock issue remained one of the challenges in their strategic development. “Of course, four months are little, but I have managed to get acquainted with the assets,” he made a brief introduction. “There are challenges too. The feedstock supply problem hasn’t been fully solved. Neither Nizhnekamskneftekhim PJSC nor Kazanorgsintez PJSC is fully provided with the feedstock,” he claimed.
According to him, providing both enterprises with 100% load depends on the outcome of negotiations of three sides — SIBUR, Gazprom and the Tatarstan management. “A big job is done here, it is trilateral. It is important both for the regional management, Gazprom and us,” he emphasised. Mikhail Karisalov said that the talks “are already held,” and understanding the importance of positive results he promised “the issue will be resolved.”
“I feel your personal support, Mr Minnikhanov,” he addressed the Tatarstan president. “Even today you have made time to ask about it, though it was seen you are busy. I am convinced that we will solve this problem because the deep conviction, statesmanship unites all the members of this process.”
At the same time, he assured them that the investment projects on the construction of the ethylene complex were in force. “Indeed, feedstock doesn’t change. The construction of EP-600 will complete,” he said. At the same time, SIBUR is contemplating “an additional increase of feedstock from Western Siberia” and also ready to solve infrastructural problems (the expansion of ethane and ethylene polyethylene pipeline throughputs) and doesn’t intend to drag it. “It isn’t a five-year plan but specific, for 2022,” the head of SIBUR noted.
Then Karisalov informed them about the results of a meeting in the Russian Ministry of Industry and Trade to discuss NKNK and KOS’s investment programme. “We rebalanced the investment programme just yesterday,” he said. “We saw how to do it better, what products to focus on and investments in the products that create stability of Nizhnekamskneftekhim and Kazanorgsintez in the next 10-15 years.”
According to him, when determining the product line of enterprises, it is necessary to look from the client’s perspective, focus on eco-friendliness and work with the prime cost. “It is the key points of our work,” he concluded.
“It isn’t our job but we will repay the debts”
Director General of Promtech GC Valery Shadrin who rented the troubled Krasnoyarsk Synthetic Rubber Plant delivered a speech after him. First of all, he told the audience that the company developed in two areas, aircraft engineering and chemical. And it seems that it feels better in the first one. According to him, the company is ready to become a resident of the aviation industrial park that is created at the Gorbunov Aviation Plant and Kazan Helicopters. Going back to the problem theme of the renovation of the synthetic rubber plant, he said the plant was provided with orders for the Defence and Industry Complex and promised to repay all debts of the bankrupt enterprise, including salaries for the workers. “There was made a decision, though it is not our job to repay old debts of the bankrupt enterprise. Today we assume this responsibility. We will certainly repay them and continue investments in development,” he claimed.
Director General of Alabuga SEZ Timur Shagivaleyev said with envy how the Chinese TEDA industrial zone was growing, simultaneously reproaching the Russian industry because it couldn’t start making the simplest electric instruments, ventilators and even cat litter boxes.
“My favourite example: imports of cat litters cost $3,5 billion, imports of ventilators does $2,8 billion,” he enumerated everything that was imported from the PRC.
“Timur constantly criticises us,” Rustam Minnikhanov agreed with him. Later the president of the republic said the republic managed to lobby federal compensations to expand Alabuga. “It was tough in Decree No. 1119, to replace five years with 15, and sometimes you wonder why functionaries need nothing,” he was surprised. It seems the case was that the Russian Ministry of Economic Development approved Tatarstan’s application for compensation for costs that will be spent to build additional infrastructure. During 15 years, some federal taxes and duties paid by the residents of the zone will be spent on the construction.
“We ask to spend a part of the money we will make to create jobs. The country won’t change itself if we don’t change it,” the president is convinced.