In the heart of Russia's Siberia the country's number one petrochemical company Sibur is building a giant facility, a testament to its global ambitions and sights on the China market ahead of a massive IPO.

More than 2,000 kilometres (1,250 miles) east of Moscow, Tobolsk is the old Siberian capital known for the notorious jail that once held Russian literary giant Fyodor Dostoyevsky. The town's 17th-century fortress overlooks the powerful Irtysh river and its streets are lined with historic architecture.

Now the city of fewer than 100,000 people is also getting what will be one of Russia's biggest petrochemical complexes, a multi-billion-dollar plan by privately owned Sibur to turn crude from nearby West Siberian fields into polymer granules used to make plastic products.

The facility reflects a drive by Russia's oil industry to diversify its production and exports to create greater profit margins by developing petrochemicals on national soil rather than feeding foreign industries with its crude exports.

"The factory is one of five biggest petrochemical projects under construction in the world," said Igor Klimov, director of the ZapSibNeftekhim project, which is valued at $9.5 billion and will let Sibur triple its production of polymers and double its revenues.

The importance of the project has even pushed Sibur to invest in a new airport in Tobolsk after the old one closed two decades ago: construction is set to begin early next year.

Currently nearly 90 percent complete, the ZapSibNeftekhim factory is set to launch production in the second quarter of 2019: some 28,000 people from nearly 20 countries are working on site right now, including from Turkey and China.

Several European companies are also participating, including German gas giant Linde and TechnipFMC, an energy industry engineering group formed in a merger of France's Technip and FMC, an American company.

"Technip took part and managed the engineering and the concept of this plant," TechnipFMC manager Jean-Mathieu Hartmann told AFP on a site visit.

- IPO in the pipeline -

Sixty percent of the new plant's production will be exported to Europe and Turkey, but also Russia's ex-Soviet neighbours and, notably, China.

The Sibur group is controlled by Russian billionaires Leonid Mikhelson (48.5 percent) and Gennady Timchenko (17 percent), while China's oil and chemicals firm Sinopec and Silk Road Fund hold a total of 10 percent.

The Asian market beckons Sibur: its other big investment idea is a mega-plant producing ethylene only about 80 kilometres from the Chinese border, in the Far-Eastern Amur region. The final investment decision will be in 2020, Sibur says.

The Amur project would synergise with Gazprom, which will be transporting gas to Asia starting next year via its Power of Siberia eastern pipeline and is building a gas processing plant in the same area near the town Svobodny producing ethane, propane, and other gases used in the chemical industry.

The new projects will make Sibur "one of the global petrochemical markets players," said Sibur CEO Dmitry Konov.

And despite economic sanctions against Russia, the company is keen to raise capital for further growth through an IPO, potentially offering about 15 percent of the company to the market.

The company could be ready for a listing "any time when the market is ready," a source close to Sibur told AFP. "It could probably happen next year... the placement could be worth around $2-2.5 billion."

That could trump the record $2.2 billion raised by Rusal in 2010 and become the biggest Russian IPO since VTB bank's, which raised $8 billion in 2007.

Konov believes Sibur is already "among the most sustainably profitable companies in the petrochemicals industry globally," and launching new projects would make it even more attractive to investors.

As for sanctions, he said he believes the company possesses "strong fundamentals and is well positioned to weather any economic or geopolitical challenge."

apo-ma/pvh/rl

UNITED COMPANY RUSAL

FRESENIUS MEDICAL CARE

TECHNIP

LINDE

TechnipFMC

SINOPEC - CHINA PETROLEUM & CHEMICAL CORPORATION

GAZPROM

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