FERTILISER TO COMBAT HUNGER

Azerbaijan will soon be among the leading producers of nitrogen fertilizers in the countries of the former USSR. At the initiative of the Azerbaijani State Oil Company (SOCAR) two plants for the production of carbamide are to be commissioned in our country and in neighbouring Georgia. In the middle of September this year, at SOCAR's initiative, the ceremony took place of the laying of the foundation stone for one of these enterprises near the Black Sea port of Poti. Another local company, AzMeCo, is also developing the production of this mineral fertilizer that is so vital for agriculture.

Carbamides against hunger

According to the UN Food and Agricultural Organization (FAO), the number of hungry people on the planet has reached one billion. In the opinion of international experts, the reason for the reduction in crop production volumes in the developing countries is to a considerable extent linked with the depletion in land fertility, the low level of agricultural and mechanical technology and, of course, the shortage of mineral fertilizer, which increases in price from year to year. In particular, in the countries of the European Union, where there is a traditionally very high level of use of non-organic fertilizer, their use will grow in the next 20-30 years by a minimum of 20%. In the developing countries, where the increase in population and, accordingly, demand for food is substantially higher, the use of mineral fertilizer for a comparable period of time will increase 1.5 times.  According to the same FAO experts, despite the broad distribution of ecological methods of farming and the switching of some European and North American farmers to organic fertilizers, it is not possible to ensure high yield with a relatively low level of expenditure by biological methods alone.  Therefore in the coming decades a key trend in global food security will be an increase in the production of the time-tested non-organic chemicals, especially nitrogen fertilizer.

The trend towards an increase in the global demand for non-organic fertilizer has not gone unnoticed in Azerbaijan, which possesses considerable supplies of raw minerals and has a wealth of experience in the chemical industry. The idea for the localization in the country of capacities for the production of the more sought-after nitrogen fertilizer has been discussed at government level for some years now. This is not surprising if you take into consideration that the annual demand of Azerbaijan's domestic market is no less than 250,000 tonnes for nitrogen fertilizer alone. However, the real volumes of mineral fertilizer consumed by our manufacturers are much lower. Thus, from the start of the implementation of the state programme of subsidies for rural manufacturers, from 2007 to 2011 about 294,700 tonnes of fertilizer was sold to Azerbaijani private farms. Even taking into account mineral produce sold on the market at the initiative of private companies, the annual volume of fertilizer used by farmers is less than a third of the amount required by agro-technical standards.Nitrogen fertilizer is reckoned to be the most sought-after raw mineral in our country's agriculture. The localization of its production in Azerbaijan would enable its use by private farmers to be less expensive and to be expanded.

The first company to conquer this segment of the market was the Azerbaijan Methanol Company (AzMeCo), which in 2009 began the construction in Qaradag District of a gas-chemical complex where up to 720,000 tonnes of methanol annually are due to be produced. The overall cost of the AzMeCo gas-chemical complex will be about $1bn. When the second and third sections of the complex are up and running the company will commence annual production of 300-400,000 tonnes of nitrogen fertilizer - carbamide and ammonia nitrate, formaldehyde, and then the derivatives of methanol and carbamide - acetic acid, DME and melamine. A large part of the future output of AzMeCo is designed for export, and not only to the markets of the CIS and Europe, but also to Asia and even North America.

According to the FAO's research, carbamide is believed to be the most widespread, effective and relatively safe nitrogen fertilizer. The inconsiderable cost and high yield in the use of carbamide have meant there is a stable demand for this product, which today accounts for up to a third of all the mineral fertilizer used in the world.

The production and sale of carbamide is being carried out on the world's markets in virtually all the states of Europe, Asia and America. At the same time, the US, China and India, which are the world's biggest producers of this product, are only to an insignificant extent taking part in export programmes because they consume virtually the whole volume of the raw material they produce. This has prompted the developing markets to introduce new carbamide capacities - in the last five years alone about 20 new plants have been built in the world. However, demand for this mineral product is still quite heavy and it is expected that since 2009 world production of carbamide will have increased by 30% and by 2014 will reach 222m tonnes.

SOCAR's contribution

The Azerbaijani State Oil Company is ready to make its contribution to the world's production of carbamide. At SOCAR's initiative, the foundations for a carbamide plant were laid on 24 hectares of the "Azerkimya" production association premises in Sumgayit in December of last year. The enterprise is being built as part of a state programme to provide the population with reliable supplies of food in 2008-2015, and the plant is due to be commissioned by the end of 2014. The structure of the enterprise consists of three units - for the production of ammonia and liquid and commercial granulated carbamide. At the same time the plant's capacity will be 1,200 tonnes of ammonia and 2,000 tonnes of carbamide a day. Natural gas will be used as the basic raw material. From the beginning of this year experts of the "Neftegazstroy" trust have been carrying out preparatory excavation work and shaping the infrastructure on the site of the Sumgayit carbamide plant.

And on 18 September this year another SOCAR project for the production of mineral fertilizer got underway: this time a carbamide plant will be sited on the Black Sea coast of Georgia, 4-5 km north of Poti. Georgian President Mikheil Saakashvili and SOCAR head Rovnag Abdullayev, who attended the festive ceremony, laid the foundations of the carbamide plant with a capacity of 660,000 tonnes of output annually in the free economic zone of Kulevi. "The carbamide plant, construction of which will be completed in 2016, will operate in a free economic zone, and recently the Georgian government adopted the relevant decision on this. The planning and construction of the Sumgayit and Georgian plants will be carried out simultaneously, which will enable us to considerably reduce contractual and production costs," Rovnag Abdullayev said.

The joint expenditure for the construction of the two plants is estimated at about $1bn. According to SOCAR's calculations, such a substantial sum will raise interest in the contract among serious companies, enabling a single general contractor to be encouraged and thus obtain the maximum possible discount for the implementation of the project. However, whereas the construction of the carbamide plant in Sumgayit is funded through the state budget (AZN 160m have already been put up for these purposes), the Georgian project will be built from the funds of investors, the key one of which will probably be SOCAR.

And so, in a few years' time, the enterprises built at the initiative of the State Oil Company and AzMeCo will begin production of about 1.6m tonnes of nitrogen fertilizer and in this respect our country will be able to occupy third place in the CIS after Russia and Ukraine. Bearing in mind the comparatively modest domestic demands for carbamide, about 80-90% of Azerbaijan's output will be exported. According to experts' estimates, world demand for this type of nitrogen fertilizer will reach 174.6m tonnes by next year and will constantly increase, bearing in mind the high yield, ecological properties and comparative harmlessness of carbamide for people's health.