ALL PETROCHEMICALS IN A SINGLE COMPLEX

With the growth of oil and gas extraction in Azerbaijan, the need for the development of the petrochemicals industry grows too. For a country with a not insignificant role on the world oil and gas stage, it would be simply illogical not to boost the powerful industrial sector of hydrocarbon refining.

Historic mission

Oil was refined industrially for the first time in the world in Baku. Small oil refineries were built here in the 19th century and by the end of the century there were 200 of them! In 1873 kerosene, produced at the Baku factory managed by entrepreneur Kokorev with the support of Dmitriy Mendeleyev himself, was exported to the Persian Gulf.

In the Soviet era two oil refineries were built on the basis of the Tovarishchestvo enterprise which had been created with the involvement of Nobel - the current Azarneftyag and Heydar Aliyev Baku Oil Refinery. Later, in 1992, enterprises producing chemicals were united in a single state company.

However, despite history, the state of oil refining and the petrochemicals industry can hardly be described as good in Azerbaijan. Yes, the factories meet domestic demand and even export their production, but their equipment and current capacity lag behind the high pace of development in the extracting industry. Therefore, the State Oil Company, which is planning to invest billions of dollars in creating and developing petrochemical complexes abroad, was simply obliged to enlarge and improve the industry at home.

This is the logic that guided the country's president, Ilham Aliyev, when he decreed the start of work on creating a modern oil refining and petrochemicals industry in Azerbaijan. "Our oil refineries are working, but they do not yet produce world-class output. Moreover, they were built a long time ago and pollute the air from the ecological point of view," the head of state said, explaining his decision. He said that a new, modern petrochemicals complex needed to be built in Azerbaijan. "In this way, we will more efficiently refine and supply to world markets our oil and gas. This means employment and jobs and industrial potential and innovation and modernization. You know that criteria in Europe are significantly stronger and tougher today. In future it will be impossible to take our diesel or kerosene to the world market. In that instance we will be selling only crude oil. This is also an option, but I don't think that this is the way we want to go."

Old refineries destined for the archive

Under SOCAR's plans the new complex will be built at Sanqacal. The company intends to attract 20-22 billion euros from international financial institutions and invest them in construction of the complex. "First we will determine the market for the complex's output, draw up a master plan, a technical and economic feasibility study, so that we have something to submit to the financial institutions whom we will be asking for credits," a SOCAR spokesman said.

The complex must replace the oil and gas refineries that have been operating in Baku since Soviet times and most of the Azarkimya state company's plants. It will include facilities for the deep processing of gas, production of chemicals and mineral fertilizers, an oil refinery and a power station to supply all these facilities.

Facilities for the deep refining of gas and production of chemicals will be built first within the project. A thermal power station will also be built in parallel. These complexes should come on stream in 2012. Construction of the oil refining and petrochemicals complex will come in the second stage which should be completed in 2018.

The new oil refining complex will have a capacity of 10 million tonnes in the initial stage with the possibility of enlargement. The oil refinery will be designed to refine a mixture of the sorts of Azerbaijani oil, with the exception of Azeri Light. There will also be capacity to process sulphurous types of oil for supplies of Kazakh oil. "The plant's plan is not designed for one day. As a rule, such enterprises are built to take account of market forecasts for the next 30 years, so we must have the capacity to refine other types of oil," the SOCAR spokesman said.

After the complex has begun operation, the current oil refineries will, of course, be closed down, as there is already no point in renewing their equipment and the president has made clear the state of the current equipment. There is also a considerable ecological benefit in moving the production process out of the capital.

The complex for the deep processing of gas is intended to produce raw materials for the chemical industry. The processing capacity will be 20bn cubic metres at the initial stage with a gradual increase to 40bn cu.m. Talks will be held with the consortium exploiting the Sah Daniz deposit to meet the complex's demand for gas. SOCAR is expecting to get up to 4bn cu.m. of gas annually from the field. The plant will be mainly taking SOCAR's own gas.

The company spokesman said, "We can buy gas from the consortium, purify it and then sell it. This is Azerbaijan's gas and we must use it rationally. Products produced in the deep purification of the gas are sent for petrochemical production."

Question mark over Azarkimya's future

The government will decide the fate of the Azarkimya state company's plants. But if they do decide to keep the plants, there will be a question mark over the supply of raw materials while it will be extremely inefficient to have two major enterprises with identical specifics operating. Most probably, Azarkimya's current plants will meet the same fate as the Oil Refinery. But this is in the future.

At present the Azarkimya state company includes: the organic synthesis plant (OrgSintez); the surfactants plant; the synthetic caoutchouc plant (SintezKauchuk); the ethylene-polyethylene plant (Etilen-polietilen); the mechanical repair works; the Azarkimya state design institute; and the Azerbaijani state chemical scientific research institute.

The Azarkimya company, together with technical consultants Technip, who have substantial international experience, Nexant, which drew up the technical and economic feasibility study, White & Case who advise on legal issues, and Societe Generale bank drew up and submitted to the country's president the necessary technical and economic documents on the plan for a new chemical complex.

The new complex is to have a plant to purify gas by separation, a plant to produce ammonia and carbamide, a steam cracking plant and many plants to produce different types of olefins, polyolefins and sweet petrochemicals.

The output produced by these plants will satisfy the country's domestic demand, supplying construction materials, plastic pipes and sections, paints, lacquers and solvents, reagents, different types of rubber and synthetic materials, furniture requisites, various types of domestic equipment and storage tanks for industrial and domestic use.

The new petrochemicals complex will be based on the most up-to-date technology and will meet all international standards. It will be the region's main producer of many types of petrochemicals and nitrogen fertilizers. It will also boost the development of construction, agriculture and engineering, the production of domestic appliances and the creation of new service spheres and will create many different jobs. The main thing is to put all the plans into action.