ChemChina to buy into Rosneft SR project

BEIJING (Sept. 9, 2015) — Russian oil firm Rosneft Oil Co. has agreed to sell majority control of its Far-East Petrochemical Co (FEPCO) project in Nakhodka, Russia, to China National Chemical Corp. (ChemChina), which will become a key strategic partner in the project that includes synthetic rubber.

Rosneft Chairman Igor Sechin and ChemChina Chairman Ren Jianxin signed a memorandum of understanding (MOU) for co-operation in the Rosneft project during Russian president Vladimir Putin's recent visit to Beijing.

“By signing the memorandum, Rosneft involves a strategic partner for FEPCO project and makes a major step towards its development,” the release said. The transactions contemplated are subject to due diligence and the relevant corporate and regulatory approvals, Rosneft said.

Tire-maker Pirelli & C. S.p.A. — which ChemChina is in the process of acquiring — is a key R&D partner in the FEPCO project, which aims to produce, among others, styrene butadiene rubber for “green” tires.

Rubber produced at FEPCO, situated in Nakhodka, a Pacific port city close to the Russia-China-North Korea border, will be used by Pirelli in its tire production facilities in south Pacific region.

Pirelli agreed in May 2014 to consider cooperationg with Rosneft on the FEPCO complex's synthetic rubber production.

According to a Rosneft press release, the MoU concerns ChemChina's proposed acquisition of a majority stake in FEPCO project, as well as the key stages of such investment.

Rubber produced at FEPCO, situated in Nakhodka, Russia, will be used by Pirelli in its tire production facilities in south Pacific region.

In April, Polish emulsion rubber producer Synthos S.A. was brought on board for to conduct feasibility studies on various topics including the operation of the plant, market studies, investments and estimates of operating costs.

Rosneft and CHemChina struck a crude oil supply deal in June that could lead indirectly to Rosneft's taking an ownership stake in ChemChina of up to 30 percent.

The MOU calls for Rosneft to supply 200,000 metric tons of crude oil to ChemChina for a year, with an option to extend.

European Rubber Journal, a sister publication of Tire Business, contributed to this report.