Russia will turn “useless” gas into polymers that everyone needs

Donald Trump's rise to power could significantly increase instability in international energy markets. The new head of the White House has repeatedly stated that he intends to use low prices for raw materials as a tool to stimulate national economics and putting pressure on the largest oil and gas producers, including Russia.

Trump has two main ways to influence prices: actively stimulating hydrocarbon production in the US and changing the sanctions policy. A possible partial lifting of sanctions on countries such as Iran or Venezuela could lead to an increase in oil and gas volumes on the world market, which would put pressure on prices. However, the question of whether these volumes will be able to overcome the limits set by OPEC+ remains open. Despite the cartel members’ commitment to production cuts, fatigue from maintaining production at minimum levels for a long time is noticeable in some countries.

Plans will face limitations

The strategy of increasing US production is also a powerful tool for influencing the market. “America has more liquid gold than any other country in the world!” Trump proclaimed after his election victory. Indeed, thanks to the shale revolution, the US has transformed itself in a few years from a major importer to a leading exporter of hydrocarbons, temporarily overtaking Russia and Saudi Arabia in terms of production.

However, this strategy has its limitations: the peculiarities of shale geology and high production costs. Many of the largest fields in the US are already depleted and are operating on a “second wind”, which is accompanied by an increase in the share of gas in the production structure with a decrease in the volume of heavy oil fractions. At the same time, the economic profitability of drilling new wells becomes questionable, especially with low oil prices – about $40 per barrel, production becomes unprofitable.

Trump's influence on the global energy market may be limited, despite his ambitious rhetoric. The overall dynamics of the global economy, which are reducing demand for raw materials, play a major role. Slowing growth in China, the threat of a new trade war between Washington and Beijing, and a recession in the European Union are creating a global downward trend in prices.

According to World Bank forecasts, oil prices may reach a five-year low by 2025. If the average price in 2024 is expected to be $80 per barrel, then in 2025 it may fall to $73. Taking into account the discounts of the Russian Urals brand to Brent, this may lead to a drop in the cost of Russian oil to $60 per barrel, which will be lower than the budgeted figures. If high government spending is maintained, the Russian Federation will be forced to spend the National Welfare Fund, which is safe in the short term, but risky for long-term stability.

Russia: Strategies Amid Challenges

Against the backdrop of these challenges, the Russian Federation is preparing to adapt to new conditions by developing an Energy Strategy until 2050. This document not only takes into account current tactical tasks, but also sets long-term guidelines for the energy sector. The strategy includes several scenarios, from optimistic to stressful, in which oil exports cease completely by 2050, and all extracted raw materials are processed domestically.

Even in the optimistic scenario, oil production remains practically at the current level, increasing by only 1,5% by 2050. However, the inertial and stress scenarios assume a significant reduction in production, which raises the question of diversifying the economy and developing the processing industry.

The situation with gas looks more positive. Forecasts suggest production growth from 638 billion cubic meters in 2023 to 1,1 trillion cubic meters by 2050. The main increase in export supplies will be associated with the development of liquefied natural gas (LNG) production, which is gradually replacing pipeline supplies.

The domestic market remains a priority for the Russian Federation. The strategy emphasizes the development of the oil and gas chemical industry. The production of polymers such as polyethylene and polypropylene is considered one of the most promising areas. The leading role in this area should be played by the Amur Gas Chemical Complex, which is being built with the participation of Sibur and Sinopec and should be commissioned by 2027.

The polymer industry may become a key area that allows Russia to take a leading position in technological competition. The emphasis on innovation and the use of natural advantages create the basis for a breakthrough in new industries, ensuring long-term sustainability of the economy against the backdrop of changes in the global energy architecture.

Polymers, polymers and more polymers

Polymer materials are becoming an integral part of the modern economy. Demand for engineering plastics and polymer compounds in the Russian Federation is growing annually, on average by 3-4%, due to their versatility and wide range of applications in key industries.

The construction sector continues to demonstrate stable growth, being one of the largest consumers of plastics. According to Rosstat, in the first half of the year, housing construction in Russia increased by 3,4% and reached 62,1 million square meters. The production of plastic products needed for construction is also increasing. For example, the production of plastic pipes, hoses and fittings increased by 2,3%, and the production of materials for finishing walls, floors and ceilings - by 5,3%.

Plastic pipes are actively used not only in residential construction, but also in infrastructure projects, such as the modernization of urban communications. Meanwhile, the introduction of individual housing (IZHS) has grown by an impressive 23%, increasing demand for finishing materials and engineering systems.

The automotive industry, traditionally one of the main consumers of plastics, is going through a period of transformation. After the departure of international automakers, Russian manufacturers are increasing their volumes. In the first six months of 2024, 391 thousand passenger cars were produced - 50% more than in the same period of 2023.

The importance of this sector for the polymer industry is difficult to overestimate. The automotive industry requires materials such as polypropylene, polycarbonates, engineering plastics and ABS. Despite high localization, about a quarter of raw materials are still imported.

Household goods production equipment in the Russian Federation demonstrates confident growth rates, stimulating demand for materials such as polystyrene, polyurethane, ABS plastic and compounds. In the first six months of 2024, 1,9 million refrigerators and freezers (+14,5%) and 1,6 million washing machines (+10%) were produced in Russia. This growth supports domestic polymer manufacturers and motivates developers to create new materials with improved characteristics.

Packaging remains the largest segment of the polymer market in the Russian Federation. Annual consumption reaches 3,3 million tons with an expected growth of 3-4% in 2024. Plastic packaging ensures the safety and presentability of products, maintaining its status as a key consumer of polymer materials. Even in the context of tightening regulation and the introduction of extended producer responsibility mechanisms, packaging continues to play a leading role in the development of the raw materials market, stimulating the introduction of new technologies and equipment.