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President of Russia Vladimir Putin: Good afternoon, colleagues,

It is no accident that we have gathered in Tobolsk, one of the leading centres of Russia’s petrochemical industry. On top of everything else, today we opened a very large, beautiful, modern enterprise.

Today we shall discuss in detail the situation in the entire sector and talk about what needs to be done to facilitate its confident, successful growth and operation.

I will note at once that a solid resource base for the petrochemical industry has been established in Russia, and good technological developments have been amassed. A long-term plan to develop the industry through to 2030 is in vigour.

According to this plan, we will create six powerful petrochemical clusters from the Far East to the Baltic. By the way, I just looked at your company’s geography: you do not yet have anything in the Far East. In any case, we have talked about this many times: there is a good base there, and every reason to implement these plans. 

”A solid resource base for the petrochemical industry has been established in Russia, and good technological developments have been amassed. A long-term plan to develop the industry through to 2030 is in vigour. We will create six powerful petrochemical clusters from the Far East to the Baltic.“

Today I would suggest we discuss the details of work that is still outstanding, look at what difficulties and problems remain, and what their possible solutions are. I also want to mention that such a cluster approach produces tangible results: in the past two years polymer production facilities with a capacity of 560,000 tonnes per year have been launched in Omsk, Perm, Nizhnekamsk and Kaliningrad. Another complex where we are today, with a capacity of 500,000 tonnes, has been launched here in Tobolsk.

Of course, such large-scale investment projects and the process of creating powerful industrial clusters should receive full state support at both federal and regional levels. I want to thank Tyumen Region Governor Vladimir Yakushev for supporting projects of this kind. I just spoke with the plant’s managers, and they are grateful to you for your support, which was felt during the entire time they established the Tobolsk Polymer plant, and generally during their work here in Tyumen Region. I also want to thank Vnesheconombank, which attracted considerable resources, collected them from the market, and disbursed these funds together with SIBUR in a very competent, professional fashion.

Despite the above, I want to draw your attention to a number of problems which hinder the sector’s development. In terms of petrochemical products consumption, which has grown in recent years, we still lag behind developed countries several times over. Of course, we cannot sit still and wait for something to happen by itself, to automatically change for the better. We have to build up and expand our national market, and create incentives for using modern materials from polymers in a range of ways. We saw the various ways they can be used at the plant just now. In fact, the sectors where they can be used are well-known to experts: they include housing and utilities, construction, road building and many others.

We must also establish a system to support and increase exports. However, as you know, we still have to close the current deficit of a number of products by boosting our own production. This represents a direct loss of revenue. Yesterday I also discussed this topic with Energy Minister Alexander Novak. As I already said, purchasing abroad products that we could easily produce ourselves represents a loss of revenue, a loss of taxes, and a loss of jobs that could have been created. Of course import substitution is not a panacea and not something we should always strive for. But naturally we should strive for this wherever possible, especially in view of our unique resource base.

Let me repeat that we must become masters in our own market. In 2012, 3.5 million tonnes of polymers were produced in Russia, while 5 million were consumed. That’s a deficit of 1.5 million tonnes; it’s clear that we still have work to do. It is essential to accelerate the industry’s innovative development, to help Russian companies to catch-up to global leaders in terms of technology, the magnitude of costs incurred and personnel training, and to introduce the best practices at all levels of the production chain. We need to make greater use of promising types of resources with great potential, which are still being poorly implemented, such as reusing waste and more actively processing associated gas deposits.

”It is essential to accelerate the industry’s innovative development, to help Russian companies to catch-up to global leaders in terms of technology, the magnitude of costs incurred and personnel training. We need to make greater use of promising types of resources with great potential, which are still being poorly implemented, such as reusing waste and more actively processing associated gas deposits.“

Just now, when we officially launched the operations at the plant, I cited the following figures: in 2012 Russia produced 71.8 billion cubic metres of associated gas and 17.1 of those were flared. The Tobolsk Polymer plant, which was launched today, will process more than 5 billion. You do the math: it means that we will still flare more than 12 billion cubic metres of associated gas.

It is clear that it is impossible to extend a separate pipeline to each plant for supplying it with raw materials. For that reason it is important to establish effective logistics and transport schemes that are convenient for all market participants. Although as I heard today, SIBUR is also moving in this direction. How long is your pipeline, Mr Michelson?

Sibur Holding chairman of the Board of Directors Leonid Mikhelson: 1,100 kilometres.

Vladimir Putin: 1,100 kilometres. Naturally, this represents significant investments, comparable to what building the plant itself cost. It came to a little more than $2 billion, more than 60 billion rubles, but it will pay for itself. Of course it will be profitable, that is clear.

We must create incentives to prevent raw materials from fleeing abroad, and to process them here in Russia. It is also vital to produce the finished, in-demand products ourselves for our domestic market, and to export them with a high degree of processing and added value. I would ask the heads of infrastructure companies, as well as manufacturers and suppliers, to express their views on this matter during our meeting.

”Expanding the capacities of petrochemical companies and supporting Russian manufacturers is a key objective of our entire industrial policy. A separate issue concerns sensible customs tariff regulation, the proper configuration of export and import duties on products, raw materials and equipment, which would allow us to fully and effectively use all existing competitive advantages.“

Furthermore, expanding the capacities of petrochemical companies and supporting Russian manufacturers is a key objective of our entire industrial policy. In this regard, a separate issue concerns sensible customs tariff regulation, the proper configuration of export and import duties on products, raw materials and equipment, which would allow us to fully and effectively use all existing competitive advantages and develop our own petrochemical production. Naturally, our actions in this regard must be consistent with World Trade Organisation requirements. And of course, a number of issues, including duties, must be discussed at the level of the Eurasian Economic Commission, together with our partners in the Customs Union and Common Economic Space we formed together with Belarus and Kazakhstan. Nevertheless, colleagues, today I would like to hear your proposals on this topic.

Finally, the last point. As I already said, our domestic market is very promising for the petrochemical industry, and has great potential for growth in a number of fields. Along with this we have to establish and develop new market niches and expand the range of products we produce. For this reason I would like to hear your suggestions in this regard. Naturally, I am ready to formulate relevant instructions to the Government of the Russian Federation so that decisions to expand our range of products can be taken.

First and foremost I am referring to creating new and modifying existing state standards, construction standards, technical regulations, and inserting in them clear requirements and obligations to use good quality, modern petrochemical products, in road construction for example. As experts said today, the [cost] increase will be only 1% per kilometre of road built. But the gain can be simply enormous in the medium-term, and all the more so in the long-term.

I would suggest that we discuss all these topics today.

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