You can find many different petrochemical products from European and CIS countries in car petrol stations in Kazakhstan. Moreover, recently oils from China have entered our market. There are many varnishes, paints, technical rubber products and others that refer to petrochemical industry coming from Russia, Turkey, Germany, etc. However, there are few products made in Kazakhstan. This situation is amazing for a country that produces oil 6 times more that it consumes, that has 3 refineries, and same number of government programs on development of petrochemistry.
Today we can write about Kazakhstan’s petrochemistry as about a set of lost opportunities.
From the Soviet Union Kazakhstan inherited a controversial situation in petrochemical industry. It existed in the country and was represented by large companies, but the final stages of petrochemical production were weekly developed, the country didn’t have a full technological cycle. According to some assessments, less than 20% of petrochemical and chemical industries in Kazakhstan supplied consumer markets. At the time of the USSR it was considered that the development level of petrochemistry is far behind the opportunities provided by oil and gas extraction. “At that time only about 20% of the industry’s potential was used, even then development of the industry had a good speed. For example: plastic producing plant in Aktau had the capacity to produce 200 thousand tons per year. To appreciate the scale of this plant consider another figure, all the rest of similar plants in the USSR combined together gave 70 thousand tons of plastic products per year.” – said Nadir Nadirov, well known Kazakhstani scientist. There were two other large plants: Atyrau chemical plant, which produced polyethylene and polypropylene, and Kustanay chemical fibre plant. The range of petrochemical and related chemical products made in Kazakhstan was quite big: polypropylene, polystyrene, chemical fibres, related rubber products, including tyres, varnishes, paints, resins, polymer composite materials and many other products. Nevertheless, this inheritance from the USSR had its problems. According to Valery Markov, well known Kazakhstani expert, the country has never produced basic petrochemical goods, such as propane, benzol, phenols, because at the time of USSR all refinery plants were fuel oriented.
The industry’s fate was sad even compared to general economic recession of that time. The following phrase from classical literature can describe the petrochemistry: “They had a bitter fate – few returned from the battle…” The second half of 1990 was especially devastating for the industry; most of the enterprises didn’t work during that time. Let’s analyse this negative experience without blaming it for the “difficult years of transition period”. After all, for example, the neighbouring Turkmenistan at the same time has achieved significant success in developing its petrochemistry and oil refinery, after having worse starting conditions than Kazakhstan. Interestingly, petrochemical products from Turkmenistan are bought even by oil producing Arab countries (“Exclusive”, #4 (61), 2007, “Turkmen terra incognito”…). In our country the recession of petrochemistry was happening not only on the background of success in neighbouring countries, but also on the background stable growth of petrochemical industry in the rest of the world. For example, production of polymer materials has been growing for the last several decades, with the growth rate higher than even traditional “engines” of international economy, such as metallurgy, have. Here is the confirmation: during the last 3 decades production of polymers has increased by more than 5 times, while production of basic metals increased by 90%. Our country could joint this world spread tendency. The country had necessary conditions for that: good source of raw materials, production capabilities, though with outdated technology, scientific centres and personnel. Even world tendencies were favourable for us: in recent years many Western companies, having reconsidered their policy of placing petrochemical production units, tried to place them closer to sources of raw materials and cheap labour. This resulted in launching new productions in Middle East and even China, which doesn’t have oil surplus.
The possibilities that Kazakhstan had regarding petrochemistry have been discussed a lot by our well known chemists and economists: Nadir Nadirov, Khalel Suleymenov, Valery Markov, Kanak Berentaev… However, it hadn’t resulted in anything special.
The big hopes for foreign investments into this sector haven’t realized. Remember that in late 1990 American “Philips Petroleum” became a member of Kashagan consortium and promised Kazakhstan a serious development of oil processing industry and petrochemistry. However, later it was forgotten…
Nevertheless, we cannot say that the government paid no attention to development of petrochemistry. The industry has traditionally been included into the list of priority industries for development, and in late 1990s they created the first government programme about it. However, as Nadirov mentioned several years ago, during the previous five years no articles on petrochemistry were published in the “Oil and gas” journal. “It shows that nobody among the practical or theoretical workers, scientists and politicians work on this problem. Why scientists don’t write on petrochemistry? Because they see that the government doesn’t include it into its priorities in oil sphere” – wrote Nadirov.
What is the situation now after admitting the failures of 1990s and early 2000s? Today Nadir Nadirov characterizes the situation as follows: “Officially there is the dynamics, but…”
Production of polyethylene has been restored in Atyrau. Of course, the capacity of the production is far from the capacity at Soviet times, but the plant produces goods that were not produced at that time, such as pipes for oil, gas and water pipelines. This year they defined the area where a large petrochemical plant will be built, which is also in Atyrau oblast. The plant is planned to produce polypropylene and polyethylene. They have chosen good location for the plant: it has the personnel and infrastructure. The raw materials will be obtained from Tengiz and in the future Kashagan deposits. The countries of Central Asia, Russia and China are considered to be the future markets.
Everything is clear and logical. But there is one serious problem. It is systematic for the development of petrochemical industry and Kazakhstan’s economy in general; the problem is “long lags” between decisions and actions.
Here it is appropriate to quote Valery Markov’s words, which were told in the interview to Kazakhstan’s mass media more than a year ago; there haven’t been any serious changes since then:
- We are falling behind in petrochemical industry development very much. The markets are gradually getting saturated: Russia started production of propylene on some of its plants, some countries of South-East Asia, even the ones without own hydrocarbon resources, take on the same route. We can stably develop this industry only hoping to enter external markets, because our domestic market cannot consume any serious volumes of petrochemical products. Although, there is understanding of this in the recent years, we are still loosing time. It is necessary to study the situation on the world and regional markets. Otherwise the country can meet serious problems after it had built and modernized petrochemical production.
What are the reasons of this “long lag”? One of the reasons is the uncertainty with respect to concrete responsibility in bureaucratic environment. One of the examples of this is the story with the sulphur extracted from oil from Tengiz deposit. A lot of sulphur has been accumulated, but the issue of its utilization has not been resolved.
Scientist Nadirov says that Kazakhstan has scientific designs that allow using sulphur in creating roads. The roads become 20 – 25% cheaper, and they become more durable.
The latter is pretty important. The scientist said that in spring this year Kazakhstan’s delegation of scientists travelled from Atyrau to Astrakhan by cars. And it appeared that the roads in Kazakhstan are much worse that roads in Russia.
“Many businessmen, local and foreign, having found out about the possibilities provided by the technology of building roads, are getting very interested in this. However, the issue doesn’t move further than considering the technical and economic aspects, because developing the technology is expensive and requires 25 million tenge. Who has to pay for the development? Hence, the issue is left unresolved. People who were assigned to arrange the payments don’t refuse, but they don’t do anything either.” – said Mr. Nadirov.
This situation is typical for many, if not all industries of Kazakhstan’s economy. But there are few of them where the potential is so great and delays with realizing it is so dangerous, due to actions by competitors, as in petrochemical industry. Continuing this way we may loose one of our strongest advantages.