PJSC Lukoil has signed an agreement with China National Chemical Engineering Corp. subsidiary China National Chemical Engineering & Construction Corp. Seven Ltd. (CC7) to cooperate on development of a new gas chemical complex (GCC) to be built in Budennovsk, Stavropol Territory, the industrial center of Southern Russia’s North Caucasus region.
As part of the Nov. 13 cooperation agreement, Lukoil and CC7 have agreed to develop project documentation in cooperation with yet-to-be-identified Russian companies for creation of the proposed GCC, Lukoil said.
If completed, the new GCC project would process natural gas produced from Lukoil’s northern Caspian Sea fields to manufacture carbamide, a high-demand chemical fertilizer globally, according to the operator.
While Lukoil did not reveal further details regarding the proposed GCC, the company did confirm it is currently examining an option to use an incentive mechanism for the project in collaboration with Stavropol regional authorities.
The potential incentive mechanism could take the form of a special investment contract for the GCC project that would create new jobs and additional tax payments for the Stavropol region, Lukoil said.
Existing regional processing
Lukoil subsidiary Stavrolen LLC currently operates the 2.2-billion cu m/year gas processing unit 1 (GPU-1) at its petrochemical complex in Budennovsk that—commissioned in February 2016—enabled the first production of petrochemicals based on Lukoil’s own feedstock of associated gas sourced from its North Caspian fields (OGJ Online, Feb. 17, 2016).
In October 2021, Lukoil broke ground on the 2.8-billion cu m/year GPU-2 at Stavrolen’s Budennovsk complex that—once completed—would boost Stavrolen’s processing capacity of associated gas delivered from Lukoil’s northern Caspian Sea fields to 5 billion cu m/year (OGJ Online, Oct. 11, 2021).
The first unit to be built under the Stavrolen integrated development program—which forms an essential part of Lukoil’s broader petrochemical strategy aimed at maximizing use of its own raw materials for production of chemicals—GPU-2 specifically would allow Stavrolen’s pyrolysis units to supply additional ethane and NGL feedstocks to expand the volume and variety of polyethylene and polypropylene produced at the site.
Alongside complementing Lukoil’s growing share of Caspian Sea natural gas development and production in line with the company’s global energy transition strategy, Lukoil said upon announcing the GPU-2 project that it expected Stavrolen’s integrated development program would increase production of:
- Ethylene to 420,000 tonnes/year (tpy) from 350,000 tpy.
- Polyethylene to 405,000 tpy from 300,000 tpy.
- Copolymer polypropylenes to 120,000 tpy from 80,000 tpy.
Since first announcing the proposed development, Lukoil has not disclosed details regarding a status of Stavrolen’s GPU-2 project.