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Home / Issue Archive / 2008 / September #9 / Vadim Shumkov’s Tyumen Leverages Oil&Gas Riches to Strengthen Economy

№ 9 (September 2008)

Vadim Shumkov’s Tyumen Leverages Oil&Gas Riches to Strengthen Economy

Tyumen region – “It’s not just about oil and gas.” So says the literature that the region’s Department for Investment Policy and State Support of Entrepreneurship hands out to investors in English and in Russian languages.

By Pat Davis Szymczak, Oil&Gas Eurasia

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Tyumen region – “It’s not just about oil and gas.” So says the literature that the region’s Department for Investment Policy and State Support of Entrepreneurship hands out to investors in English and in Russian languages.
But it is Tyumen’s proximity to Russia’s oil and gas production areas  – the Khanty Mansiysk autonomous okrug and Yamal Nenetz – mineral raw materials and logistics support such as highway and rail (the Trans-Siberian as well as the only rail line through Yamal Nenetz and Khanty Mansiys) that make Tyumen an ideal location for heavy and light industry to service West Siberia’s oilpatch. Logistically, Tyumen even suits export to Kazakhstan and beyond.
And though you won’t find it in the investment literature, Tyumen is also “not just about manufacturing – be it heavy or light.” Tyumen is a center for higher education and as such, aims – with the help of high technology companies that are locating there – to develop as a center for research and development and new business innovation. The Tyumen University of Oil&Gas for example, graduates more oilfield specialists than the more famous Gubkin University in Moscow. Recognizing the potential, Halliburton is in fact establishing a training center there.
And this autumn, Tyumen regional authorities will open the doors to a new Scientific Research and Business Incubator and Innovation center downtown. First companies to locate offices there are Baker Hughes, CISCO, LUKOIL and Schlumberger, according to oblast authorities. The model is one that has been used throughout the world – particularly in the United States – to develop synergies between research and business to create new products and companies.
The next step is to construct a Technology Park on the city’s outskirts with hotels, convention and exhibition center, business office park and other amenities. Also planned is airport renovation to accommodate direct flights from Europe.
Vadim Mikhailovich Shumkov is the driving force that sets the pace in realizing the region’s ambitions. Born in Kurgan and educated in English and law in Tomsk, Shumkov heads the Department for Investment Policy and State support of Entrepreneurship of the Tyumen region, a department within the regional administration of Tyumen. “We’re not asking for money from investors; we have our own money. What we offer investors is a chance to make money,” Shumkov told foreign journalists (including this writer from Oil&Gas Eurasia) who had just ended a whirlwind week in Tyumen region that only scratched the surface of what is really going on there.
“We want big foreign companies for their technologies, their expertise, their management know-how,” he continued. “And if companies from your countries don’t do it, companies from others will,” he added, referring to those journalists’ homes – Germany, Romania, Russia and the United States. “Siberia is a very strong brand, and like Americans say, 80 percent of success is in making a good impression.”
And most importantly, while Shumkov might work for the government, he believes that only business – left to its own devices – can grow the economy. “If things are left to business, problems are resolved more efficiently,” Shumkov said. “It works this way in every country.”
Fueled by 3.2 billion euros of investment from both inside and outside in 2007, Tyumen Region’s GDP hit 10 million euros in 2007, nearly double the 2004 figure. Tyumen regional authorities say this rate of growth is twice the average for the 86 administrative units that make up the Russian Federation.
Soon, even McDonald’s hamburgers will arrive in Tyumen. “McDonald’s is important to have on the list because other international companies take its presence as an indicator of a desirable business location. If McDonald’s has studied you and decides to come in, that means something to other investors,” Shumkov told OGE. But while McDonalds might be a brand that offers certain “bragging rights,” Tyumen’s most serious investors will always be those the equipment and technology companies that make oil and gas production possible; and their suppliers – of steel, construction materials, electrical parts and the like.
Russia’s big oil companies, all have offices in Tyumen: TNK-BP, LUKOIL, Rosneft, Gazprom, and state-owned oil pipeline operator Transneft; also Austrian producer OMV. It is these companies that draw the attention of the international service and supply companies – Schlumberger, Halliburton, Baker Hughes; German drilling contractor KCA Deutag, and the equipment makers that supply these companies.
Here are just a few examples taken from Tyumen region’s investment literature. Some are nearing completion, some are in earlier stages of development. But these examples, only scratch the surface of what is going on today in the heart of West Siberia:
Schlumberger has invested more than 100 million euros to build facilities that will serve the West and East Siberia and Kazakhstan. Manufacturing is focused on electric submersible pumps (ESPs); perforating equipment; and a variety of other equipment for enhanced recovery operations. The most recent Schlumberger development is the completion of a Siberian Training Center.
German rig maker and engineering company Bentec is investing 17 million euros in a manufacturing plant located at the same industrial park as Schlumberger’s ESP facility a 30 minute drive from Tyumen city center. That plan it scheduled to be opened by early November 2008. (See related article.)
Integra, the drill rig manufacturing unit of Russia’s Uralmash, is spending 500 million rubles to modernize and further develop its Tyumen facility for the manufacture of mobile drill rigs in the 125 to 260 ton category. Integra currently supplies these rigs to Rosneft, Burgas, TNK-BP and Belarusneft.
TNK-BP is investing 2 billion euros in developing the green-field Yvat oilfield in Southern Tyumen Region, a project that will generate jobs for nearly 800 people.
Tobolsk Polymere is a 2 billion euro project to develop 550,000 tons annually of polyethylene production at the Tobolsk Petrochemical plant.
To woo private investment be it foreign or Russian, Tyumen regional authorities have offered combinations of tax and budget credits and guarantees as well as direct investment of regional budget funds and loans. Talks are underway right now with Baker Hughes which is seeking to develop a factory to construct cables for running ESPs. The 40 million euro project would serve markets in West and East Siberia and in Kazakhstan.
Developments such as these create further demand for construction materials, steel and refined oil products which pushes the economy to grow in other directions. Some examples of these projects include: 
Tyumen Electro-Metallurgical Works – The Ural Mining and Metallurgical Co. (UMMC) is investing 550 million euros in a plant in the City of Tyumen that by 2010 will be converting iron and steel scrap into 550,000 tons a year of rolled-section steel. Production will be sold into the domestic market – Tyumen region, Khanty-Mansi, Yamal-Nenetz, Omsk, Kurgan and Sverdlovsk regions – in “made to order” small batches. General contractor on the project is  Austria’s STRABAG. Italy’s Danieli Co. is supplying and installing manufacturing equipment; Italy’s SIC and SIAD are supplying electric furnace aggragates.
MC-Bauchemie Russia – This German-Russian joint venture is in the top five manufacturers of dry masonary mixes for the building industry in Russia with plants already in Moscow and Leningrad regions. The JV’s new Tyumen plant will start up in the 2nd quarter of 2009 and build to a capacity of 30,000 tons a year for dry construction packs, and 8,000 tons a year for priming coats and concrete additives. The plant is situated on the Tyumen-Tobolsk-Khanty-Mansiysk highway.
NefteBitum Ltd. – Given Tyumen’s proximity to Russia’s oil production centers, this project envisions the processing of heavy fuel oil (mazut) from the Antipinsky Oil Refinery, into road asphalt, roofing asphalt and construction bitumens to be marketed under European and Russian brands.The purchase of $15 million in foreign equipment is anticipated. An immediate market is to be found in highway construction projects such as the Tyumen-Omsk (500 km) Kazakhstan bypass; Tyumen-Yekaterinburg (300 km) and Tyumen-Kurgan (200 km) road expansions. The plant will be situated in the Bogandinsk settlement.
Partner Holding – This 2.5 million ruble construction materials plant is being built on the territory of a former brick manufacturing facility in Yalutorovsk. It will produce beginning in 1st Quarter 2009 dry construction mixtures, and phase in over the remainder of the year production of autoclave gas-concrete; silicate bricks, artificial stone and paving slabs. The German company MASA HENKE Maschinenfabrik GmbH is supplying the automated production equipment. Marketing will be to South Tyumen region but could extend into Khanty-Mansiysk and Kazakhstan as production capacity is raised.
To press home the point that Tyumen is a lot “more than just oil and gas” Tyumen officials enjoy showing off major investment projects such as the Ochakovo Brewery, a local dairy processing plant, Krim vegetable farm which also develops scientifically engineered seed potatoes for export to farms across Russia and into Central Asia, and even tourist destinations – for example, the Village of Pokrovsk, childhood home of Rasputin, and Yalutorovsk and its Museum to “The Decembrists” and Tobolsk Monastery (after a tour of the nearby refinery and petrochemical plant.)
But this is to beg the question of whether Tyumen is about “more than oil” or not. Oil workers do take their families to tourist attractions and those families, eat, require housing, and when they’re of a certain age, they do drink beer. Such spinoffs are the stuff of diversify an economy – Tyumen style.  

Pat Davis Szymczak is Editor in Chief of Oil&Gas Eurasia.

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