Red blaze

It is more than evident that the number of vehicles has significantly increased in Azerbaijan in the recent years. While this points to an improvement of living standards in the country, it creates a lot of problems for urban transport facilities, as well as for the agencies responsible for providing uninterrupted fuel supplies to filling stations across the country. To address congestion problems, appropriate authorities start building new roads (which sometimes further exacerbates the problem). In other cases, there are attempts to address the problem immediately as the Azerbaijani state oil company, SOCAR, undertakes action to increase the production capacities of its oil-refining factories. 

Detrimental to exports 

Oil products in Azerbaijan are manufactured by two Baku oil refineries with the total capacity of 16 million tons of oil a year. Both of these enterprises are part of the Azerbaijani state oil company and refine about 7 million tons of oil extracted by SOCAR. The Baku oil refinery specializes in light oil and the Azneftyag refinery specializes in black oil. As well as meeting the needs of the Azerbaijani market, part of the oil is also exported. 

However, the sale of oil products manufactured by our refineries has become increasingly problematic in the recent years. This is not because they are of poor quality. The main problem here is that the demand for oil products has increased on the domestic market and the companies have difficulty coping. 

According to the State Statistics Committee, 4.8 million tons of oil products were used for Azerbaijan's domestic needs in 2012, which is 8.8 per cent higher compared to 2011. In particular, last year saw an increase in the supplies of car petrol, diesel fuel, asphalt oil,  oil lubricants and other types of oil products. On the whole, 6.5 million tons of Azerbaijani-made oil products were sent to consumers (including export), which is 1.4 per cent higher compared to 2011. At the same time, 73.8 per cent of this figure was sold at the domestic market and only 26.2 per cent was exported. 

The dynamics of the falling export of car petrol can be observed in the statistics provided by SOCAR. In particular, in 2012, the company exported 60,140 tons of this type of fuel against 96,540  tons in 2011 and 4,470 in the first quarter of this year compared to 19,170 tons compared to the same period last year. 

Overhauling old equipment …

While such reduction of exports has its reasons, it is detrimental to SOCAR business. If the tendency continues, the Azerbaijani company may lose oil products sales markets abroad. As well as producing, SOCAR has experience in distributing oil products. The company has filling stations in Azerbaijan, as well as networks in Georgia, Ukraine, Romania and Switzerland. 

In view of these factors and guided by a desire to satisfy the increasing petrol demand on the domestic market, the company plans to modernize and renovate the  modernizing and renovating the existing plants. For example, in 2014, SOCAR plans to start works for renovating and expanding the production capacity of the catalytic cracking of the Heydar Aliyev Baku Oil Refinery which manufactures at least 65 per cent of all petroleum. According to the plan, the American company, UOP, is to present a reconstruction project to SOCAR in 2013. The renovation work will start in 2014 and will end in 2015. Modernization will make it possible to increase the production capacity by 1m tons (from 2 to 3 million tons a year) and the production of petrol by 450,000 tons. 

As well as renovating the catalytic cracking, work continues to modernize automatic controls on the catalytic reforming unit and the crude oil distillation unit. Works for the restoration of a number of units of the oil refinery are due to be completed in 2014-2015. 

In addition, one of the important goals is to improve the oil refining efficiency. For example, at the moment, oil refining efficiency at the SOCAR refinery is over 92 per cent. It is planned that the indicator will reach 95 per cent by 2014. The improvement of the efficiency and capacity of producing light oil products is possible thanks to the renovation of power plants across the country, which leads to the reduction of residual oil consumption. 

…and building a petrochemical complex 

All planned works aimed at improving SOCAR's production capacities and quality will make it possible to satisfy Azerbaijan's needs in oil products until the new oil-refining and petro-chemical complex becomes operational in Qaradag District (60 kilometres away from Baku). As is known, works for building a new complex are due to start this autumn and the entire petrochemical complex will be launched at the end of 2020. 

The creation of a new complex that costs 17billion dollars (including interest on bank credits) envisages the construction of a petrochemical enterprise with the capacity of 1.7 million tons of ready products, an oil refinery for crude oil distillation with the capacity of 10 million tons annually, as well as a gas processing plant with the capacity of 10 billion cubic metres annually. This will enable SOCAR to produce oil products that correspond to international standards and to remove oil refineries away from Baku, something that will have a favourable impact on the ecological situation. 

The company's oil refining efficiency is now about 95 per cent while the output of light oil products is 85 per cent. In future, the capacity of the gas refining plant is expected to be increased to 15 billion cubic metres annually. As part of the construction of a new complex, it is proposed to create a thermal electric power station with the capacity of 250 megawatts. 

It should be noted that the new oil refining plant within the petrochemical complex will produce A-95 and A-98 model car petrol. At the moment, SOCAR produces А-92 and А-95 petrol. 

Quality

Now a few words about quality. To say that consumers are 100 per cent happy about the quality of oil produced in Azerbaijan is to distort the truth. State agencies in charge of the sector make no secret of this. 

Therefore, SOCAR's decision to prevent consumer cheating and ensure that their rights are upheld can only be applauded. We hope it will prove effectual. SOCAR president, Rovnaq Abdullayev said that in order to avoid the confusion of A-95 petrol with A-92, SOCAR changed the colouring of the latter. While A-95 is still colourless, A-92 is now red. "We did this so that some people do not cheat car owners," Abdullayev said. 

In addition, it should be admitted that the increasing demand for oil products, violation of the consumer rights and the greater number of cars in the country is not without its ecological consequences. To observe the ecological norms, restrictions have been introduced in the country on importing old cars that do not correspond to the Euro-2 ecological standards. However, these measures are often insufficient. It should also be noted that in view of the existing production capacities, SOCAR will be able to produce petrol and diesel fuel that corresponds to the Euro-3 ecological standards. However, after the petrochemical plant becomes operational, it will be possible in Azerbaijan to produce oil products that will satisfy high ecological standards. All this shows that at the moment, Azerbaijan is undertaking major efforts to improve the capacity and quality of oil processing, and its distribution. This will make it possible to ensure positive results and to bring the oil refining industry close to global standards.