Sinopec Agrees to Buy Stake in Russian Rubber Plant

A subsidiary of oil refining giant China Petrochemical Corp. (Sinopec) has signed an agreement with Russia's largest petrochemicals company, Sibur, to buy a stake in a rubber plant.

Sinopec International (Hong Kong) Co. will buy 25 percent plus one extra share of a synthetic rubber plant in the Siberian city of Krasnoyarsk.

No financial detail has been disclosed, but Dmitry Konov, chief executive of Sibur, said at a press conference on October 31 that the transaction would not exceed US$ 100 million.

The deal needs the approval of the Chinese and Russian governments.

A framework agreement for setting up a joint venture to produce nitrile rubber was signed in April. Nitrile rubber is a synthetic rubber used in the automotive, aeronautic and nuclear industries.

Sibur's Krasnoyarsk rubber plant has an annual production capacity of 42,500 tons, but the two companies plan to increase capacity to 56,000 tons.

With its stake, Sinopec can participate in the management of the venture, it said. Under Russian law, a stake of 25 percent plus one extra share allows Sinopec to veto management proposals, Konov said.

Oleg Makarov, Sibur's managing director, said that in the past, 70 percent of the Krasnoyarsk plant's production was exported to China. With the partnership, the amount is expected to rise.

The two companies are also discussing setting up a joint venture to produce rubber in Shanghai using Sibur's techniques and patents, Sibur said. The facility would have total capacity of 100,000 tons per year.

Sibur's annual exports to China are valued at about 385 million euros, or about 11 percent of the company's total exports. Part of this is settled in yuan, and Makarov expected this portion to rise.