RUSSIAN PETROCHEMICAL INDUSTRY GROWTH LIKELY TO CONTINUE IF EXPORT TAX REGIME SURVIVES

A new strategy for the petrochemical industry, drafted by the Russian government, implies a growing role for this already-booming sector in the national economy. There are already signs of recently increased petrochemical investment by traditional players as well as by relatively new market entrants. CERA concludes that significant further expansion of Russian petrochemical manufacture is possible, provided the current fiscal incentives remain in place, with important implications for the evolution of the Russian oil and gas industry (the primary source of feedstock for petrochemical manufacture) as well as for the debate over Russian energy price liberalization more generally:

*The longer-term profitability of investment in Russian petrochemicals hinges largely on continuation of a favorable export tax regime.

*Growing manufacture of petrochemical products will drive expanding domestic consumption of certain feedstocks produced by the oil and gas industry, with established market players poised to benefit the most.

*The new petrochemical industry expansion goals may serve to moderate gas and electricity price liberalization targets.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.