Moscow, 16 September 2014. Based on completion of the FEED contracts and assessment of the design documentation, SIBUR proceeds with the ZapSibNeftekhim project. With the project moving on to the next stage, SIBUR's Board of Directors has approved increased funding for the project in 2014, with overall capex budget for 2014 increasing from RUB 53 bn to RUB 74 bn.

ZapSibNeftekhim's project is designed to operate a steam cracker (by Linde AG, Germany) with a capacity of 1.5 mtpa of ethylene, around 500 ktpa of propylene and 100 ktpa of butane-butylene fraction (BBF), along with units with a total capacity to produce 1.5 mtpa of various grades of polyethylene (by INEOS, UK) and a polypropylene unit of 500 ktpa (by LyondellBasell, Netherlands).

The cracker, polyethylene and polypropylene units’ FEED has been completed. SIBUR has signed an agreement to design infrastructure and off-site facilities with NIPIgazpererabotka, Russia's leading engineering centre in the gas processing industry.

According to preliminary estimates, total investment in the ZapSibNeftekhim project will amount to approximately USD 9.5 bn (around RUB 360[i] bn), including the expenditure already incurred and costs budgeted for commissioning. Production site infrastructure construction and other works for the project are to be completed within 5 to 5 and a half years, which is the international standard timeframe for building capacities of this scale.

Dmitry Konov, CEO of SIBUR, said:

“SIBUR has a strong financial position. Over recent years, the Company has delivered on ambitious projects to expand its gas processing and fractionation capacity, improve transport infrastructure reliability, and build its first large polymer production capacities, providing the basis for a smooth transition into the next stage of the project.”

SIBUR's projects in the Tyumen Region are part of the investment agreement with the Tobolsk regional Government and the Tobolsk City Administration aimed at comprehensive development of the Tobolsk production site. This agreement covered, among other projects, the construction of the Tobolsk-Polymer polypropylene production facility, put into operation in 2013, gas fractionation capacity expansion and railway infrastructure development, commissioned in 2014, along with the construction of the main pipeline between Purovsky Gas Condensate Processing Plant and Tobolsk-Neftekhim. The parties provide support for the project under applicable law and the current agreement to ensure comprehensive development of the Tobolsk production site. It has now been agreed to extend the current investment agreements for 10 years – until 2024.

The use of cutting-edge processes utilised by leading global companies ensures safety and reliability of production. Prior to the implementation of the project, the Company commissioned the Russian team of Environmental Resources Management (ERM), a global leader in HSE advisory services, to estimate ZapSibNeftekhim's environmental footprint. Comprehensive analysis showed that the prospective operations comply with the applicable Russian laws and environmental requirements. ZapSibNeftekhim's construction and operations will neither exceed environmental standards nor have a material adverse effect on the environment.

The facility will create new jobs, provide more tax and other payments to the budget, and contribute to the social development and quality of life in Tobolsk.

[i] At the exchange rate of the Central Bank of Russia as at 13 September 2014