Sibur CEO: Costs stall US shale gas boom

London – The anticipated wave of new petrochemicals investments on the back of the US shale gas has, so far, failed to materialise, according to Dmitry Konov chief executive officer of Sibur.

While the shale gas boom had made the US an attractive location for investment it had also raised problems for companies building, or planning to build, new petrochemicals plants there, Konov explained at a press conference in London.

“If you talk to US companies and more importantly engineering companies you will see that the US is facing this huge increase in costs firstly in relation to labour, secondly with an escalation in [construction] materials prices," he said.

Konov, therefore, doubts that all the cracker projects that were initially announced will in fact go ahead. Some projects are moving ahead, but only slowly, he said, while others have stalled at the point of making the final investment decision.

“If you spoke to people in 2012, they expected something like 20 million tonnes [of ethylene capacity] coming on stream by 2020. If you talk to them today, [they say] there will probably be 5 million tonnes by 2020,” the CEO commented.

“Let’s see how it develops, but probably one [cracker] project at most can fit in 2017: I personally believe there will be none. So by 2020, there will be three or four crackers completed. Previous forecasts were for five new capacities.”

Konov went on to say that the shale gas ‘revolution’ had not affected Sibur directly.

“US shale gas production has dramatically reduced the cost base of US petrochemicals industry, which has made them extremely competitive with the rest of the world, though surprisingly it didn’t affect the product prices.

"So it didn’t affect us, [though] the margins for them increased.