ASTANA – In the context of developing Kazakhstan’s national petrochemical industry, the former Soviet republic is pinning its hopes on putting into operation of the integrated oil and gas chemical complex in Atyrau.
The complex is designed to make polyethylene that is in high demand in the world market. Polyethylene is used in a wide range of areas: construction, medicine, mechanic engineering, packing materials, and household goods.
Originally, it was expected that the capacity of the complex would be 1,250,000 tonnes of polyethylene and propylene per year. The project was broken into two phases. The first, a $2-million phase should have been completed in 2014 with the commissioning of a 500,000 tonnes per year propylene unit.
Kazakhstan’s President Nursultan Nazarbayev has talked on more than one occasion about the necessity to develop the national petrochemical industry to help the country to avoid the dependence on oil prices and produce value-added goods that can fetch a higher price in the world markets.
Discussions about the necessity to finish the construction of the Atyrau complex have been going on for over ten years. However, the project never got off the ground and is still remaining just in plans.
There have been three main stumbling blocks in the implementation of this project.
Firstly, there is no raw material, namely, ethane gas from Tengiz. The Tengiz field developer, TengizChevrOil (TCO), had reportedly its own plans for the associated gas. So there were lengthy negotiations between TCO and the government of Kazakhstan about the supplies of ethane to the Atyrau complex.
Clearly, without guaranteed supplies of the raw material, without a firm agreement, construction of such an expensive project was out of the question, hence the investors’ reluctance to take the risk.
Secondly, in order for the complex infrastructure around the future complex to operate properly, it will need roads, heating, electricity, water, and other utilities. It will also need industrial gas facilities, water conditioning and water treatment facilities, and, finally, a fire station.
Thirdly, the Atyrau complex is an expensive project that needs financing. Its initial cost was estimated at $6.3 billion. Earlier, it was reported that the complex would be financed by a Chinese loan under a Credit Agreement signed by the Samruk-Kazyna Fund and the Export and Import Bank of China, and that the Bank of Development of Kazakhstan would administer the financing.
Last week, there was new hope that the Atyrau gas chemical complex can still become a reality.
On May 23, in the building of the Ministry of Foreign Affairs, a limited liability partnership United Chemical Company and a UAE-based company Mubadala executed a memorandum on cooperation in the field of petrochemicals.
United Chemical Company General Director Zhenis Oserbai and by Mubadala’s Chief Operating Officer for petrochemicals Khlifa Al Suwaidi signed the document. The signing of the memorandum concluded an official visit of the United Arab Emirates Foreign Minister Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, who, in his turn, was fulfilling an instruction of his country’s leadership.
Nazarbaev paid an official visit to the United Arab Emirates earlier this year, on January 14-16. As a result of the agreements reached by the leaders of the two states, the parties have started talks on cooperation in petrochemicals.
After the memorandum-signing ceremony at the Ministry of Foreign Affairs, Kazakhstan’s Deputy Energy Minister Mazgum Mirzagaliev noted that the Arab company is going to explore the possibilities of joint production of polyethylene. “I am referring to the construction of the Atyrau gas chemical complex,” Mirzagaliev said with cautious optimism. According to him, the two companies had begun discussions on possible cooperation long before the day of the memorandum. “We have been conducting negotiations over several months, and it is a conscious decision by the Arab company to join a project in Kazakhstan, the Atyrau gas chemical complex. We are to build a financial model for the project in the next two to three months. Only after that can we do feasibility study of the project. Both companies will begin their calculations as early as tomorrow,” Mirzagaliev said.
According to Mirzagaliev, the cost of the project is estimated at $5 billion to $6 billion. The construction of the plant may take three to four years. “The future capacity of the plant is expected to be around 800 thousand tons of polyethylene a year,” the deputy energy minister said.
In answer a question from New Europe about the feedstock for the plant, Mirzagaliev said that issue had already been resolved. “TengizChevrOil is giving us the gas. We have a signed contract with TCO for supply of 1,100 thousand tonnes of ethane,” he said. “Most importantly, there is a top-level political decision to cooperate. And we will hope that, after all the calculations are done, the Arab company will make a decision to join this project. We hope to start executing specific contracts in a few months,” he added.
Mubadala is an investment and development company of the United Arab Emirates. The company is active in the energy sector, particularly, in petrochemicals.