Domestic market of gas separating equipment is gradually recreated by foreign companies` efforts, but no Russian ones.
On Friday, the July 17 Creon held the First International Conference "Industrial Gases 2011". The event supported by Praxair, was the first for Creon and was organized because of great interest to cryogenic equipment industry and industrial gases on the part of chemical complex and allied industries participants. In welcome address Sandjar Turgunov, CEO of Creon noticed that almost all key domestic and foreign players gathered in the event. He thanked participants for trust to his company.
The Conference was opened by overview report of helium market in Russia which was presented by Lola Ogrel, the Head of Chemicals Markets Department of IG Infomine. The country production capacity of this valuable gas is slightly used. About three-quarters of helium world production is the share of US. At the same time, Russia produces only 5 %. However, country has huge helium resources, more than half of which is concentrated in Siberia, primarily, on Kovykta and Chayanda fields, which aren`t developed now. The unique source of helium in Russia is a depleted Orenburg field, which capacity is 7,5 million cubic meters per year, however, produces only 5 million cubic meters. Out of this volume only 1 million cubic meters is supplied on internal market, and the other are liquefied and shipped for medical facilities and foreign customers. Internal consumption as well as production of liquid helium declined as well as its stocks which are on critically low level now. There is an export to Western Europe countries (primarily to Germany and Belgium) from these stocks. In this case export prices are about 3.5 dollar per liter but in Russia helium is about 16 dollars and is imported at 6.4 dollars. Such phenomenon is explained by market absence, helium deficit in the country, delivery, safekeeping and distribution complication of imported raw materials. Domestic gaseous helium is consumed by Moscow NII "KM" which liquefies and realizes it for medical use, for balloons manufacturers, advertising agencies and scientific organizations. Other major helium consumers are Baltic plant in St. Petersburg, VSMPO-Avisma and other high-tech enterprises. Only 3 % of helium consumption accounted for nuclear power engineering and scientific organizations share, and liquid helium is used almost exceptionally for filling scanners. 20 years ago the major helium consumers in Russia were Physics Institutes, abroad advanced technologies, associated with helium usage in energy, are developed actively. In Russia, in spite of helium demand growth at 5-8 % per year, its consumption structure is not going to be innovative and Kovykta and Chayanda fields will not be developed before 2016-2017 years. Herewith helium problem is one of that, which prevents development acceleration: it`s necessary either to give gas extraction to China or to build large specialized storages for the volatile gas. According to Mrs Ogrel the last variant needs huge investment which may be implemented only by Russian government under the auspices of innovative economic development promotion.
Vyacheslav Utkin, Innovation Director of CryoStar told about NII "KM" activity, which has a quarter of the Russian market. Company began activity on the base of Kurchatov Institute`s equipment in Moscow and produces not only helium, but nitrogen, oxygen, argon and other industrial gases. Moreover, company services tomographs (fills it with helium), repairs cryogenic equipment. According to Mr. Utkin, the service of cryogenic machines on tankers to transport liquefied natural gas can become an important helium sales market for Russia. Company with partnership of CryoStar promotes expander-pumps to operate in cryogenic liquids on the domestic market. Such types of pumps are used in energy, gas transmission systems. Company also offers compressors for auto experimental and car fueling stations by compressed and liquefied natural gas. The first gas station of the second type already works in Moscow in the area of bus depot.
The representatives of leading western companies, working in industrial gases industry, talked about conducting business in Russia and realized projects. Andrey Vinogradov, Air Products Sales Director told specifically about outsourcing scheme (on-site projects) of industrial gases supply, which the company works on. This work scheme is in creating of own production of industrial gases, which is sold to the clients according to terms of 15 years contract. In case of inadequate customer consumption company sells gases surplus independently and gets compensation on the principle of take-or-pay in case of reducing consumption below a specified level (60-70%). In this case all costs of production, installation and maintenance and repair are paid by company-outsourcer, that is extremely profitably for client who pays only for finished product. Air Products participates in projects with Alcoa (Samara region), PepsiCo (Moscow region) and Sibur (Voronezh plant SynthesisRubber). According to the reporter, Russian companies, especially globalized ones are looking closely to outsourcing scheme and the signing of new contracts is expected.
Sergey Bulavinov, Director of Business Development of Italian SIAD`s office in his presentation about company which has 220 air separation units all over the world, stressed that company offers equipment of individual projects according to customer needs. In Russia and CIS countries SIAD is working successfully in Kirishi refinery, Odessa port plant, Serov Metallurgical Plant, Vyksa, Tyumen, Shahti and other oil&gas and metallurgical plants. The promising directions of activities, according to Mr Bulavin, are injection of associated gas into the reservoir and realization of the first such project together with the oil company RITEK. However, the problem in all cases is a necessity of technological forecasting for 15-20 years, definition of plants` optimum capacity, but in local conditions it`s hard to plan the future.
Alexander Zvonov, CEO of German company Linde`s Russian affiliate told about company`s production and marketing in Russia. The company has three production sites in Balashiha, Samara and Sverdlovsk regions, realizes industrial gases to final consumers. In 2010 the sales volume was 2 billion rubles; the company occupies about 16 % of industrial gases market and forms its own distribution network. Unlike active outsourcing supporters, the company gives the service on any schemes according to partners` wishes. Today it`s realizing a new project of promoting special metallurgy local plant by argon in Kaluga. The company interests in development prospects of hydrogen energy for motor transport in Russia, although even in Germany only 20 stations work for cars with hydrogen fuel cells.
In time of open discussion the main questions were the domestic market development prospects, integration of outsourcing schemes and competition between the Russian and Western companies. According to Andrey Andreev, Sales Director of PraxAir, business prospects in Russia are optimistic, as in Sovet period Cryogenmash installed more than 600 units of air separation, which are now obsolete and need to be replaced. For three years of work in Russia PraxAir has already signed four contracts including Nizhniy Tagil Metallurgical Plant of Evraz. The company works in Russia only on outsourcing schemes. Sergey Karetnikov, Chief Specialist of Technical Analysis and Targeted Programs Department of Sibur called for domestic companies not to be afraid of outsourcing schemes and update equipment more actively. According to him, 90% of air separation sets are worn and will be substituted soon in the company. Oleg Yakupov, Chief Marketing Specialist of Cryogenmash evaluated growth rates of industrial gases domestic market in 2-3 % per year and explained that outsourcing schemes meet requirements of not all consumers, for example, NLMK preferred to buy equipment in ownership and many others clients are in solidarity with it. Nicolay Gesko, Chief Deputy of Sectoral Programs Management of Gazprom Energoset reminded the audience that in Russian conditions it`s exceptionally important to legally possess a particular resource, to have a stability of supplies guarantee and that`s why wide outsourcing expansion will not be likely. Will Russia be able to return its once leading positions in manufacturing of such important product as equipment for air separation for individual gases? This is the main problem in industry. Domestic Cryogenmash is been displaced by Western companies, which doesn`t plan to localize equipment production yet. According to Alexander Zvonov, representative of Linde, company could create its own production in Russia, but it`s economically senseless to do it in current situation of orders volume and market conditions.
According to head of Creon Fares Kilzie, nobody has doubts that volume of work on industrial gases domestic market will be very large in 10-15 years. However, market dynamics is rather weak and it is due to Western companies who haven`t yet developed a model of doing business in Russia. Such model would have to consider the local conditions and that scientific and technological potential, which the country has. For example, Russia has everything to participate in future redistribution of helium market and take if not the first, but at least second place on it.
