China National Chemical Engineering gets US$13.3 billion Russia contract
Firm will build natural gas processing and chemical plant in the Gulf of Finland
23 Oct 2019 | Michael Marray

A subsidiary of China National Chemical Engineering Group Co (CNCEC) has signed an agreement to build a US$13.3 billion natural gas processing and chemical plant in Russia.

The deal was signed in Chengdu between the China National Chemical Engineering No. 7 Construction Company Limited (often known as CC-7) and Baltic Chemical Complex of Russia, CNCEC said in a statement to the Shanghai Stock Exchange.

The contract includes the construction of a natural gas processing chemical plant, which include two sets of ethylene cracking facilities with an annual capacity of 1.4 million tons and six sets of polyethylene facilities with an annual capacity of 480,000 tons. It is located in the Gulf of Finland. The project is divided into three phases: infrastructure extension, early stage engineering, and project implementation. The construction period will be five years.

Baltic Chemical Complex is a wholly owned subsidiary company of RusGazDobycha, a vertically integrated company within the Russian gas market. Its business covers the complete industry chain of natural gas, such as extraction, transportation and downstream processing.

In March, Gazprom and RusGazDobycha made a decision on the final configuration of the project for a large-scale complex that will process ethane-containing gas and produce LNG near the settlement of Ust-Luga, Leningrad Region.

The project envisages the construction of capacities for the processing of 45 billion cubic meters of gas and for the production and shipping of 13 million tons of LNG, up to 4 million tons of ethane and over 2.2 million tons of liquefied petroleum gases (LPG) per year. The complex will be processing ethane-containing gas produced by Gazprom from the Achimov and Valanginian deposits of the Nadym-Pur-Taz region. The gas remaining after the processing (about 20 billion cubic meters) will go into the company's gas transmission system.

It is expected to put the first train of the complex into operation in the second half of 2023 and the second train in late 2024. The project operator is RusKhimAlyans, a special-purpose company established on a parity basis by Gazprom and RusGazDobycha.

The ethane produced will be supplied to the gas chemical facility, whose constructionis being independently sponsored by RusGazDobycha via its special purpose entity, Baltic Chemical Complex.

The construction contract with China National Chemical Engineering Group involves the biggest ethylene integration project in the world, and according to RusGazDobycha combining LNG and ethane production within one industrial site will benefit the economics of the Baltic Chemical Complex project, allowing it to considerably mitigate resources and price risks.