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. Last Updated: 07/27/2016

Gazprom to Form Petrochemical Firm

Russian gas giant Gazprom, whose interests cover everything from power stations to construction, is finalizing the creation of a petrochemical holding company with an estimated annual turnover of $1 billion.

The new holding company will control two-thirds of the country's production of propane and butane, now 750,000 tons per year, and a third of Russia's rubber production of 680,000 tons per year.

"Gazprom will coordinate the development of the new company, which will be set up on the base of the gas and petrochemical company Sibur and the Tobolsk petrochemical plant," Alexander Shurymov, head of Gazprom's marketing department, said in an interview.

"Gazprom and the new owner of Sibur and the Tobolsk plant have a common view on developing the petrochemical industry in western Siberia," Anatoly Vertiy, vice president of Sibur, said in a separate interview.

The controlling stake of Sibur was sold last December in a privatization tender for just $20 million to a previously unknown group called Gaspetrochemical Co.

Sibur's new owners chose to stay in the shadows until Gazprom boss Rem Vyakhirev let slip casually some weeks ago that the gas giant was very close to creating a company designed along the same lines as Germany's BASF.

Now Gazprom bosses are no longer concealing the fact that Gaspetrochemical Co., which also controls Tobolsk, is a "structure friendly toward us."

Sibur's main assets are nine gas processing plants in the Siberian cities of Surgut, Gubkinskiy, Nizhnevartovsk and Krasnoleninsk, 13 gas compressor stations and 5,000 kilometers of oil and gas pipelines.

Tobolsk is Russia's largest petrochemical plant. The new holding company will also own the gas-condensate stabilization plant in Surgut.

"Our aim is not to let the petrochemical industry die. It has been so fragmented in recent years that all petrochemical plants have suffered gas shortages, have not been paid for their production, and have been completely unprofitable," Gazprom's Shurymov said.

He stressed that the new owners of the holding company plan to control the whole production process "from the wellhead to the sales counter."

"Now, when we control the majority of gas-processing plants, we'll try to abolish the system of intermediaries, and supply raw materials only if we are guaranteed to be the owner of the finished products," Vertiy said.

The company has already arranged to receive deliveries of some associated gas, mainly from Gazprom's giant Urengoi gas field and from Russian oil companies Surgutneftegaz, LUKoil and Rosneft. This gas is now flared.

It hopes to process 1.5 billion cubic meters of associated gas this year at its nine processing plants, which produce propane and butane, and a further 1.5 bcm at Tobolsk of high-grade petrochemical products.