Leonid Mikhelson’s Sibur Buys 25% Joint Venture Interest In New Siberian Polypropylene Plant

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“Sibgazpolimer” is the tongue-twisting name for a new joint venture between Russian oil company Gazprom Neft and petrochemicals producer Sibur. The J/V has agreed to acquire a 50% stake in a new polypropylene plant, “Polyom, ” that has recently been constructed in the Siberian city of Omsk, from the Titan Group.

Gazprom Neft is the third largest oil company in Russia by refined output, and is a subsidiary of the giant gas producer Gazprom. Sibur is a downstream petrochemicals refiner and plastics producer, and is controlled and led by billionaire Leonid Mikhelson.

Titan Group, which is headquartered in Omsk, originally invested about US$380 million (Euros 280 million) to build the new polypropylene plant, which opened in April 2013. Now, just one year later it has already ramped up beyond its nominal 180, 000 tons per year capacity. The plant is currently producing at a rate of about 210, 000 tons per year.b

Omsk is an industrial city in southern Siberia of over 2 million people, not to be confused with another Siberian city Tomsk which is just 463 miles away. The Polyom facility is part of the Omsk PARK petrochemical cluster, which is operated by Titan and specialises in plastics and synthetic resins.

Under the new partnership arrangement, Sibgazpolimer will form a 50:50 joint enterprise with Titan to run the Polyom facility. Gazprom Neft will supply the required feedstock, a propane-propylene fraction, from its local refinery. Sibur will have responsibility to market Polyom’s polypropylene products through its huge distribution network.

Dmitry Konov, Sibur’s CEO said of the new mont venture, “We are convinced that Sibur’s competencies in polypropylene production and solid understanding of the Russian polymer market will contribute to enhancing Poliom’s operational excellence and performance.”

Just in October of 2013 Sibur opened it own major polypropylene facility in Tobolsk, Siberia, one capable of producing over 500, 000 tons of polypropylene annually. Russia’s President Vladimir Putin attended the ribbon ceremony for the new plant. Tobolsk is just 297 miles from Omsk.

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Reading between the tea leaves a little therefore, one can perhaps infer that the new joint venture may assist in the orderly marketing of the products of both plants now, without each one trying simply to underbid the other in competitive markets.

Sibur’s corporate activities span the entire petrochemical process chain from gas processing, production of monomers, polymers, plastics and synthetic rubbers to the processing of plastics and a variety of other materials. Vertically integrated, Sibur’s own gas processing facilities provide feedstock for its various downstream petrochemical production lines.

Sibur operates 27 production sites located all over Russia, has over 1, 500 major customers engaged in the energy, automotive, construction, consumer goods, chemical and other industries and the company employs over 28, 000 people in 60 different countries of the world.

The name Sibur stands originally for the “Siberian and Urals” Petrochemicals company, and which was spun out of state owned gas company Gazprom in 2011 after it had briefly flirted with bankruptcy. Then it finally ended up, complete with a strong balance sheet, in private hands and controlled by Lenod Mikhelson.

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About Leonid Mikhelson

Leonid Mikhelson is today one of Russia’s most successful industrialists, working frequently in partnership with fellow billionaire Gennady Timchenko.

Mikhelson’s principal corporate interests are his 57.5% interest in the petrochemical producer Sibur, and as well he owns 25% of the energy company Novatek, which he founded and where he acts as CEO. He is also the largest shareholder of Russia’s First United Bank.

His personal fortune is over US$15 billion, according to the Forbes billionaires list as at May 2014. so far at least he does not seem to appear on President Obama’s list of sanctioned oligarchs, imposed due to the crisis in Ukraine.

Leonid Mikhelson began his career as a foreman of a construction and assembling company in the Tyumen region of Siberia, where he worked on the construction of the first section of the Urengoi-Chelyabinsk gas pipeline.

In 1985 he was appointed as Chief Engineer of Ryazantruboprovodstroy. In 1987, he became General Director of Kuibishevtruboprovodstroy, which in 1991 was one of the first companies in Russia to sell shares and become a private company, to be renamed NOVA – with a much shorter name being not the least of its advantages.

Mr. Mikhelson remained NOVA’s Managing Director from August 1987 until October 1994. Then Mr. Mikhelson became General Director of Novafininvest, a holding company, which included NOVA and other gas producers amongst its assets.

Since 2002, Mr. Mikhelson has served as a member of the Board of Directors and Chairman of the Management Board of gas company NOVATEK. He also serves on the board of several other companies.

Leonid Mikhelson graduated from the Samara Institute of Civil Engineering in 1977 with a degree in Industrial Civil Engineering. He has been awarded the Order of the Badge of Honor of the Russian Federation.