Salavatnefteorgsintez JSC

View the Brochure

Economic Recession Opens New Opportunitie

The global financial and economic recession has been time of new opportunities for Salavatnefteorgsintez JSC—one of Russia’s biggest refining and petrochemical complexes. The company can now lay the foundation for its long-term success.

Development against all odds

Process facilities renovation, new market outlets, and profit boosts, as a means of reaching the stra­tegic goal of increasing capitalization and annual net income have been, and still are, the primary lines of Salavatnefteorgsintez JSC’s development. That means they are above all perturbations.

There is only one difference in present condi­tions from pre-recession times. Before the reces­sion, the company concentrated on development only, but now it also has to take active steps to deal with temporary difficulties. However, Salavat­nefteorgsintez JSC is on the move.   

The crisis has, in no way, prevented the com­pletion of the company’s viscosity breaking plant construction. The plant, which was put in com­mission in March, made it possible to produce commercial fuel oils from heavy residues without involving light products, as well as increase die­sel fuel production by 10 to 15 thousand MT a month.  Moreover, oil processing depth has in­creased by 5 per cent with oil refining processes getting more speedy and flexible.

In December 2009, a new facility—a 120,000 MT/year polyethylene (PE) plant—is scheduled to be in operation. Beyond doubt, the recession has affected the construction period—construction completion was originally planned for the end of 2008. This is a unique suspension PE plant project for this country. The volume of investments amounts to RUB 6.3 billion. The construction area occupies 5.4ha and has an expansion zone which makes it possible to simul­taneously produce PE of two different grades in the future. The new plant’s end products em­brace 29 grades of HDPE (high density polyethyl­ene), the range of application of which includes top-quality gas and water pipes (PE 100), large containers, super-thin packing film, and a num­ber of other uses.

The company’s strategic development program up to 2020 is being implemented, and includes big budget projects to design and construct a new primary crude oil processing unit as well as imple­ment technologies to increase processing depth.  

Social peace is a top priority

It would be far-fetched to say that Salavatneft­eorgsintez JSC is the only refuge in the stormy ocean of financial and economic cataclysms. The crisis has had its turn with the company. The loss­es of Salavatnefteorgsintez JSC as per the first two quarters of the year have accounted for RUB 2.8 billion—which is primarily due to the negative oil and petrochemicals market and Ruble devalu­ation. Among the negative factors is also the decline of purchasing power—the company sells its products on 100 per cent advance payment basis only, thanks to which it has no overdue accounts receivable. Also affecting the company is the price collapse, so urea prices have plum­meted four times, and diesel fuel prices have hit their 10-year low, whereas borrowed funds are now more expensive.

Needless to say, the company cannot pro­duce petrochemicals for the pure sake of produc­ing, and that is why it has cut production by up to 20 per cent for some of the products. This is how the company can avoid greater losses and, in spite of the recession, prevent staff reduction as well as raise wages and salaries. Regarding the region’s social peace as a top priority, despite the hard times, Salavatnefteorgsintez JSC has again demonstrated that its victory in the All-Russia competition “Russia’s Top Social Efficiency Com­pany” was well-deserved.

Anticipating the first strike

In response to worsening economic conditions, the company’s management has assumed ap­propriate countermeasures, namely energy con­sumption reduction (its own power generation has allowed a savings of RUB 210 million), sales increase through its petrol stations network, the new viscosity-breaking plant start-up, and the reduction of travel expenses reduction—to name but a few.

These actions have proved to have positive effects. In Q1 of 2009, Salavatnefteorgsintez JSC incurred losses of RUB 2.4 billion, followed by RUB 400 million in Q2 of 2009, though, in August, the company started to get operational profits. Going through hard times, the company’s management not only does not sit on their hands waiting for better days and looking for ways to cut down costs, but it carries on its investment program. The present situation is most advan­tageous for investment projects, as it is widely believed by the company. Thanks to the crisis, the costs of investment projects implementation were reduced by up to 30 per cent.

In 2009, attention has been focused on two major projects to be accomplished—viscosity-breaking and polyethylene plants. Facilities reno­vation at the Monomer plant meets the schedule; the GO-2 hydrofining unit start-up at the refinery is near at hand. As of today, half of the RUB 4.6 billion in the company’s investment program for this year is already disbursed.

According to Salavatnefteorgsintez’s 2009 investment program, RUB 13 billion worth of new facilities were put into operation (taking into ac­count earlier investments).

The best warranty for the company is its im­peccable financial reputation—thanks to which the company retains access to borrowed funds and can keep the cost of its credit resources unchanged. This testifies to the great degree of trust for Salavatnefteorgsintez JSC and its ven­tures on the part of both Russian and interna­tional credit institutions.

In addition, the company’s Board of Direc­tors gave positive evaluation on the 1H2009 records, the investment program, and the man­agement team’s actions within the anti-reces­sion program.

The Board of Directors’ meeting decisions were highlighted at a large-scale press confer­ence taking place at the Interfax Information Agency headquarters on August 7. It was attend­ed by Board of Directors members: namely Damir A. Shavaleev, Salavatnefteorgsintez JSC CEO, Yury I. Vazhenin, Gazprom Pererabotka, LLC CEO and Dmitry V. Konov, SIBUR LLC President.

Innovations to cushion the blow

The innovations being introduced over the re­cent years have acted as a defense mechanism during the recession. Those innovations are not limited only to production facilities, but also in­clude the marketing of the chemicals produced. Over the last three years, Salavatnefteorgsintez JSC has successfully introduced a number of bitumen and Euro-4 motor fuels to the market. Among other marketing developments, the com­pany is taking part in petrochemical trades on the Exchange of Saint-Petersburg and the Mos­cow Stock Exchange.

When it comes to the company’s remarkable organizational innovations, the creation of a design office and a research and development centre cannot be missed.

Introducing innovative technologies always requires expert guidance. At Salavatnefteorgsin­tez JSC, that process goes through all stages, starting with theoretic assumptions, and ending with consumption. At present, the Research & Development Centre (R&D Centre) of Salavatneft­eorgsintez JSC serves as a link between science and actual production. Many of the developments that used to be the company’s employees’ ideas just a couple of years ago are now successfully implemented at pilot plants.

Annually, the company spends about US $1 million on R&D. Outside agencies, such as the country’s leading research institutes, can also be engaged in some activities. However, in 2008 half of the R&D projects were implemented using the company’s own R&D centre resources. The personnel are highly qualified: one Doctor of Sci­ence and ten Candidates of Science work for the centre. Most employees are under 35.

Experts of the R&D centre conduct research in various spheres. There is a park of pilot plants including semi-industrial ones. Within the devel­opment, program new up-to-date plants are being bought. The pre-production stage presupposes full informational, technical and organizational preparation to products’ manufacture. Organiza­tional and regulation support is carried out to­gether with Operations Department.

For instance, PREMIUM EURO-95 and REGU­LAR EURO-92 automotive unleaded gasolines have been certified in accordance with the state standard GOST R 51866-2002 “Motor Fuels. Gasoline Unleaded. Technical Specifications”. This fuel is unique due to the fact that the oxy­genate mixture structure—an octane number-increasing additive containing oxygen—contains isobutyl alcohol.

Before this development, research was car­ried out on the possibility of involving butyl alco­hols in commercial gasoline production—quality, service properties, and environmental char­acteristics of the new fuel were analyzed. This method of new type Euro-4 gasoline production was developed by experts of Salavatnefteorgsin­tez R&D Centre together with All-Russian Re­search & Development Institute For Oil-Refining (VNII NP).


Certification procedures were performed by “Bashkir Centre for Certification and Inspec­tion” LLC (products and services certification agency) in order to establish their conformity to the technical requirements “On Requirements for Automotive and Aircraft Motor Gasolines, Diesel and Marine Fuels, Jet Engine Fuels and Fuel Oil”.

Obligatory certification of the company’s ma­jor products will raise their market competitive­ness and consumers’ trust in safety of the given types of gasoline.

Beyond a doubt, the economic recession hampers the company’s overall activity. During this time, the issues of the company’s efficiency up­grade are as urgent as ever. However, Salavatneft­eorgsintez has positive feelings about the future, and the company being prosperous, perspective and dynamic. As its management team believes: next year net profits will amount to about RUB 1.7 billion reaching RUB 2.4 billion in 2011.

The company presents itself as a reliable sup­plier of oil products, petrochemicals and mineral fertilizers. The economic crisis has allowed its top managers develop a fresh outlook for some as­pects of its activity, see the weak points and start making things right. It is now that the foundation for the company’s long-term future success is be­ing laid.