Senior Vice President of Norilsk Nickel Sergei Dubovitsky on the launch of the second stage of the sulfur program

Norilsk Nickel has launched the first phase of its sulfur program, which provides for a significant reduction in sulfur dioxide emissions. The project was implemented in the conditions of refusal of contractors and equipment suppliers to provide services to the Russian company. Senior Vice President – Head of Strategy and Business Development at Norilsk Nickel Sergey Dubovitsky told Kommersant what difficulties there are before the second stage.

— According to media reports, due to the refusal of contractors, Norilsk Nickel is stalling with the last stage of the sulfur program, hoping for a solution by the end of 2023. Many Russian companies solve technological problems at the expense of Chinese companies. Are there solutions in this market that are applicable to the sulfur project?

— The answer to this question consists of two parts, just like the sulfur program, which covers all our metallurgical enterprises. On October 25, we launched the project at the Nadezhda Metallurgical Plant (NMZ). Initially, it provided for the use of a large amount of Russian equipment: approximately 75% was equipment from Russia and friendly countries, and 25% was imported from unfriendly countries. At the beginning of 2022, we crossed the equator of the project – a significant part of the equipment had already been delivered and installed. And it was at this moment that many suppliers essentially refused to fulfill their obligations to ship ordered and paid for equipment. Because of this, we had to reorient ourselves, as they say, during the play and make urgent substitutions. The final picture looks like this: 90% is equipment from Russia and from friendly countries, including China. Another 10% is equipment that was imported earlier, before supplies were stopped. If we talk about Russian equipment, we used control and measuring instruments. We ordered individual elements of large equipment, heat exchange and pumping equipment from China.

The next stage of the sulfur program is the second metallurgical enterprise of Norilsk, the Copper Plant. Solving the issue with its emissions is more difficult. The specifics of this project are such that it includes not only the creation of a new production facility for the utilization of sulfur dioxide (collection of waste gases, their conversion into sulfuric acid and its subsequent neutralization), but also a large metallurgical part, which provides for a significant reconstruction of the entire plant. Partly because of this, the project that was approved for the Copper Plant included a much larger share of imported equipment, and now requires a deep redesign.

As we reported to the Prime Minister during his visit to Norilsk, we expect to complete work in this area by the end of this year, after which we will inform the government what options there are, in principle, for resolving the issue with emissions from the Copper Plant.

— If we talk about Russian equipment, are there ready-made solutions for the sulfur project on this market?

— There are no “off the shelf” solutions, since the sulfur project is unique not only for Russia, but also for the world. The whole world is moving towards the production of sulfuric acid from waste gases; this technology provides the highest percentage of sulfur dioxide utilization. Therefore, companies around the world are faced with the task of how exactly to produce and transport it. In our case, transporting sulfuric acid from the Norilsk industrial region is, to put it mildly, difficult. Therefore, we went further: we have sulfuric acid as an intermediate product, we neutralize it with limestone and produce a neutral product from it in the form of gypsum. In the case of the Copper Plant, the degree of uniqueness is squared, since it involves not only the utilization of sulfur, but also a significant modernization of metallurgical production. In fact, as part of the sulfur program, it is necessary to build a new conversion stage at the Copper Plant from scratch.

For the Nadezhdinsky plant, we were able to solve this problem and finalized the standard solution. It is important to note that the single complex technology initially used on Nadezhda was developed by Russian institutes and Russian engineers.

— Will the cost of the project increase due to problems with contractors?

— We will be able to name the total cost after we carry out a complete redesign of the project. The cost of the stage at NMZ is 180 billion rubles. The budget has grown under the influence of various factors: the pandemic and labor shortages, difficulties with technical equipment, and the complication of supply chains.

— What will be Norilsk Nickel’s investment program for the next year?

— We have not yet completed the preparation of the budget, so I will not tell you the figure, it is in the process of discussion. In recent years, the company’s investment program has increased 2.5 times. Several years ago (4–5 years), the average level of company investment was from 100 billion to 120 billion rubles. in year. Last year we reached a figure of almost 300 billion rubles. We expect similar numbers this year and do not expect a decline for the coming year. This is due, among other things, to the implementation of such large investment projects as the sulfur program. In addition, we have large projects for the modernization of fixed assets and development, which also started in 2020–2021.

— Norilsk Nickel is changing its key sales markets from Europe to Asia. Do you see the need to increase investment budgets specifically for logistics projects?

— We have been investing quite actively in logistics over the past few years. We mainly use river routes and the Northern Sea Route (NSR). At the end of 2022, we increased cargo traffic in these two directions by 40%.

We are already building new logistics routes, including strengthening the role of North African hubs (we are talking about the “western” route). We are looking at how we can diversify our cargo flow in the eastern direction. Last year we made one flight east from Dudinka to China on open water. This year we are making three such trips, making the most of the open water season. The logistics of the eastern route of the NSR have yet to be established. But we are actively testing it from the point of view of both the direction itself and from the point of view of interaction with our counterparties in China. We are also studying the possibility of reloading ships in China.

— Are export deliveries through European ports still possible? And are there any problems there?

— The geography of our supplies is, of course, changing. Previously, half of the company’s production went to Europe and about a quarter to Asia, mainly to China. Now the ratio has changed. Nevertheless, supplies to Europe continue, albeit via different routes. European clients continue to work with us. Although, as you know, there is a problem with so-called voluntary sanctions, which, of course, do not make life better in terms of interaction with European counterparties.

— Norilsk Nickel planned to build an icebreaker at a shipyard in Finland. However, the Ministry of Foreign Affairs of this country did not give export permission. Does this mean a refusal to build?

— Construction has been stopped. But we have an agreement within the framework of cooperation with Rosatom: we are looking at the Russian project to build a diesel-electric icebreaker, it is planned to replace the Taimyr (Vaigach) type icebreaker. In accordance with the agreement that Norilsk Nickel and Rosatom entered into in 2022, a project for the construction of such a diesel icebreaker is currently being developed. Its cost, as well as construction time, will be determined after completion of the design study. A long-term guaranteed contract is considered as the basic financing scheme.

In fact, this is now the basic option for the long-term formation of icebreaking capacity. Taking into account the fact that the icebreaker fleet is not getting any younger, all users of the NSR will need capacity to replace retired icebreakers. But at the moment we are provided with icebreaking capacities. We have a unique contract with Rosatom for the icebreaker Siberia, which we signed a year ago – a contract for 18 years with the possibility of extension for another ten. This is the newest nuclear icebreaker, Project 22220, which now operates almost entirely in the interests of Norilsk Nickel and our contracts.

Interviewed by Evgeniy Zainullin