RENAISSANCE

Under the 2 April 2010 decree by Azerbaijani President Ilham Aliyev "On the improvement of management tools in the petrochemical industry", the state company Azarkimya became part of SOCAR (State Oil Company of Azerbaijan).

Under the 22 April 2010 decree by Azerbaijani President Ilham Aliyev "On amendments and addenda to the 24 January 2003 decree 'On improving the structure of the State Oil Company of Azerbaijan'", it was decided to create the Azarkimya production association within SOCAR. According to an order signed by the president of SOCAR, the Azarkimya production association includes factories producing surfactants and organic synthesis agents, mechanical repair factories and a design institute. In addition, based on the material and technical base of the synthetic rubber and ethylene-polyethylene factories, the Ethylene-Polyethylene plant was set up, which also operates as part of Azarkimya.

Thus, one might say that a new page in the history of the chemical industry has begun in Azerbaijan. This step was facilitated by the fact that as a result of the successful implementation of the new oil strategy, important progress was made in ensuring energy security and a reliable and convenient control system was introduced based on market requirements. The organization of a modern complex in accordance with international experience in the field in order to enhance oil and gas refining and petrochemical industries functioning in a single technological process will create more opportunities to attract the necessary investment, comply with environmental standards and increase the competitiveness of the finished product.

Everyone knows that over the past few years, the country's chemical complex has experienced a rather unpleasant period of regression caused by the inability of morally and technically obsolete enterprises to comply with the changing market and its new demands and working conditions. The gap between the investment needs of the industry and its income was too high to upgrade and to bring it in line with international standards. SOCAR undertook to lead the country's chemical industry out of the plight, coming to grips with this matter in a short period of time.

The chairman of the Supervisory Board of the Azarkimya production association, Muxtar Babayev, speaks about the ongoing work to restore some of the chemical industry enterprises.

- What changes occurred in the country's chemical sector after the state-owned Azarkimya company became part of SOCAR?

- The situation in the country's chemical complex is now drastically changing. The decision of Azerbaijani President Ilham Aliyev to merge the two companies is correct and justified. To date, we have already received the first positive results. The effect of synergy is obvious. The forms of cooperation and production optimization, which were not implemented because these two entities operated separately, make it possible to do a lot today.

For example, if previously we received only straight-run gasoline from an oil refinery, and it was the only product for processing, today we receive light gasoline of C3-C4 fractions for the manufacture of chemical products, and we have been receiving C1-C2 fractions since April. The unification process made it possible to expand and increase the resource base and improve the infrastructure. In a short period of time, a 60-km gas pipeline was built to supply dry gas to the Heydar Aliyev Baku Oil Refinery. If good results are achieved, the possibility of increasing supplies will be considered. Under the project, it is planned that at least 35,000 tons of dry gas will be delivered to the Ethylene-Polyethylene plant this year.

This year, the production association plans to recycle as raw material 200,000 tons of straight-run gasoline and 26,000 tons of natural gasoline from the gas processing plant of SOCAR and more than 50,000 tons of C3-C4 fractions.

To date, through the optimization of production, we have been able to increase our output. SOCAR has big plans in Sumqayit and is considering projects to create low-pressure polyethylene and polypropylene plants and their subsidiary units, which can be implemented within 3 years.

To carry out repair work at enterprises of the production association, SOCAR is still using its own investments and small loans. But if major new plants and factories are built, additional investment will be required.

- What activities are planned in the medium- and long-term to develop the country's chemical industry?

- At present, SOCAR is considering a programme to expand the infrastructure and increase production at the Azarkimya production association. We have divided it into two stages: the first stage covers 2011-2013 and the second - 2013-2015.

The main directions of the programme are to optimize processing facilities by expanding the resource base, increase production, expand the assortment and improve the quality of the finished product.

This year we started with a survey of plants available on the balance sheet. SOCAR has asked two major Russian design institutions, who were previously engaged in the design of the Ethylene-Polyethylene plant, to carry out a detailed examination of our plants. They have already begun this work. By August of this year, we will have a clear picture of what we need to replace and where and how much we need to invest to be able to optimize the process in the near future.

According to the survey, in the initial stage, it is planned to increase the production of polyethylene to the design capacity of 120,000 tons per year. The next stage involves the modernization of some plants and increasing the production of polyethylene to 180,000 tons. The construction of the polypropylene plant will make it possible to start processing all produced propylene and release a marketable product.

To date, SOCAR already has a new task - to build a modern factory for the production of mineral fertilizers - carbamide. We hope that this plant will be built in Sumqayit, and SOCAR has already begun to address this issue, carrying out preparatory work and negotiations. This will be a plant which will provide the country with high-quality fertilizers.

- What activities are planned for 2011 within the framework of the programme to expand the infrastructure of the chemical complex?

- Plants have been working for more than 20 years, and they need upgrading, refurbishing and new technologies. In the last 10-15 years, the chemical industry has taken a very big step on the global market, whereas in Azarkimya, we have only just started reforms and changes.

In 2011, it is planned to carry out current repair work in surfactants and organic synthesis factories, as well as repairs at the Ethylene-Polyethylene plant and to build a new system of packaging for finished products. We are going to start work on the construction of a new modern plant for cooling water, as well as installations to produce nitrogen-oxygen.

According to the results of the first quarter, the production association is approximately 5.6 per cent ahead of production targets. Given that in summer, we will stop the production for about 1.5-2 months due to repair works, we'll have to catch up after the resumption of production.

- How many companies operate within the structure of the Azarkimya production association and how profitable are they now?

- The production association operates eight companies. Due to the optimization of production and reduction of costs and losses during production, we will try to achieve profitable production by the year's end.

Thanks to the work planned within the framework of the renovation and reconstruction of enterprises belonging to the production association, Azarkimya intends to become a profitable enterprise for SOCAR as a whole within a short time.

- At what stage is the process of creating an industrial estate on the territory of Azarkimya?

- It's a very interesting project which is being developed jointly with the Ministry of Economic Development. The project provides for the creation of an industrial estate in the territories of the chemical complex, which have now begun to be cleared from old plants that have been inactive since the Soviet era. The plants, which will be established in the estate, will be mostly connected with the manufacture of industrial products. Specifically, it is planned to manufacture finished products required on the market by processing semi-finished products made by AzerKimya. It is planned to establish production with the involvement of private businesses.

At the present time, Azarkimya exports about 92 per cent of its products. And it is possible that after processing, some of these exports return to Azerbaijan in the form of finished products. The geography of the export of chemical products is large enough - Europe, Turkey, China and other Asian countries, and CIS countries. We have an opportunity to establish many types of production here and to process what is produced at chemical plants into finished products in Azerbaijan. Many countries such as Germany, Singapore, Arab countries, Iran, Turkey, Russia and others have already created a lot of such industrial estates where "small chemistry" works alongside "big chemistry" enterprises.

A very important task is to introduce new technologies, establish modern production and resolve the issue of employment.

Along with the raw material for processing in industrial enterprises of the estate, the production association can also provide an extensive infrastructure and communications. We are planning to build coastal berthing facilities to provide alternative delivery of raw materials by sea and export finished products. The terms of the construction of quaysides will depend on when the technology park begins its work.

Now work towards the establishment of industrial estates is in its active phase, a regulatory framework is being prepared and we are studying the experience of already established industrial estates in other countries.

- What sources of funding are being considered for the establishment of enterprises in the industrial estate and what is the estimated cost of the project?

- It is difficult to say anything about the amount of investment yet. When you create an industrial estate, you can consider different sources of funding - both private and government investment.

In order to create an additional database of raw material for processing in the industrial estate, SOCAR is going to expand the range of products by promoting the production of low pressure polyethylene and polypropylene. At present, negotiations are underway with companies that supply equipment. In funding our projects, we successfully cooperate with the International Bank of Azerbaijan. At present, the bank's credit line is $40 million.

In Sumqayit, there are so many opportunities. Firstly, there are human resources, a well-established infrastructure and resource base, that's to say the potential that really needs to be used.

Currently, an industrial park is operating in Sumqayit, which produces energy products, and Azersun Holding is building several plants, which will produce different kinds of products.

The decision taken by our country's president to transform Sumqayit into an industrial centre of Azerbaijan is actively being implemented.

- What work is being carried out to establish a petrochemical complex in Sanqacal? What synergy effect is expected from SOCAR's management of two of its assets enterprises located in Sumqayit - Azarkimya and plants of the Turkish chemical complex?

- A department recently created by SOCAR is engaged in a project to build a new oil and gas refining and petrochemical complex. Currently, the feasibility study of the project is being developed by consultants.

With regard to cooperation between Azarkimya and Petkim, there are great opportunities here. We are actively working with Petkim and are trying to learn a lot from them. It is a modern chemical complex with great prospects. We have successfully started to introduce innovations, familiarizing Petkim with them and giving them the right to organize the sale of our products in Turkey. Some of our products are processed by Petkim and successfully exported to the world market.

SOCAR plans to make this cooperation closer. We will benefit from this.