MODERNISED REFINING

The fluctuations in oil prices and February's devaluation of the manat have meant that the plans for implementing major projects in Azerbaijan have had to be amended. At one time, the press inflated rumours that even SOCAR's rather ambitious project to build a new oil refinery and petrochemical complex (OGPC) in the Qaradag district of Baku was under threat of stagnation. This talk was the result of statements by state oil company officials on postponing the deadline for commissioning the complex from 2020-2022 to 2030. But during the Caspian Oil&Gas 2015 conference statements by SOCAR [State Oil Company of Azerbaijan] managers dispelled the sceptics' pessimistic forecasts.

According to SOCAR vice-president for strategic development, Tofiq Qahramanov, it is planned to bring in investment partners for the joint implementation of the project, and there are moreover already concrete proposals on the table. "Some companies have submitted their applications to be investment-partners in this project. In this connection, SOCAR has begun talks with the potential stakeholders," he noted. T. Qahramanov said that, if the talks were successful, the following stages in this project can be realised jointly with the chosen investment partner.

We would like to note that SOCAR's plans for this project have not changed. Just as before it is expected that the construction of the complex will be carried out in two stages, during the first of which the construction of the gas processing (GPZ) and petrochemical plant (NKZ) are planned; in the second stage, the oil refinery will be built. The total cost of the first stage, taking into account the payment of interest on the loans, will amount to 8,45bn dollars, with a profit margin of more than 20 per cent and an investment repayment term of four to five years.

At the moment, concrete details of the project's total cost are not available, but, according to various estimates, we are talking about 17bn dollars. To begin with it was planned that 70 per cent of the investments would be obtained from various financial organisations. In November 2014, SOCAR president Rovnag Abdullayev reported that UniCredit, RBS, Societe Generale, BNP Paribas, Credit Agricole and ECGD (the UK export loans guarantee department) had made proposals with regard to the financing of the complex. 

Moreover, until the construction of the new oil refinery starts, SOCAR is trying to manage with the existing Baku Heydar Aliyev oil refinery, which was expanded by the addition of the second Azerneftyag oil refinery in 2015.

It is precisely at this refinery that SOCAR plans to start production of the Euro-5-standard petrol by 2018. According to T. Qahramanov, the relevant upgrading work will be carried out at the plant in order to do this. After this has been done, not only will the quality of the petrol produced in Azerbaijan improve, but the volume of it will be boosted from 1.3m to 2.2m tonnes and that of diesel fuel from 2.3m to 2.9m tonnes, and of aviation fuel from 0.7m to 1m tonnes," the state oil company vice-president noted. Thus, these volumes will be able to satisfy the country's demand for fuel at least until the end of the 2020s.

Besides this, the naphtha supplied by the "Azerkimya" production association plant, will be replaced by gas and fractions of propane-propylene and butene-butylene which are much more effective for the petrochemical industry.

"To achieve these aims, it is also planned to increase the capacity of the primary oil refining installation from 6m to 7.5m tonnes per year and the catalytic cracking installation from 2m to 2.5m per year. It is also planned to build installations to produce bitumen, for isomerization and to purify liquefied gases and petrol fractions extracted from sulphurous compounds and others," T. Qahramanov noted.

The reconstruction work at the "Azerkimya" enterprises will be aimed at providing raw materials for the polypropylene and polyethylene plants which SOCAR Polymer is to build. "As a result of the reconstruction, the volumes of ethylene and propylene produced will be increased compared with the figures for 2014 from 160,000 to 290,000 tonnes," T. Qahramanov said.

The OGPC and "Azerkimya" enterprises will be reconstructed and modernised in two stages: the first is to be completed in 2018 and the second in 2019, and, according to the preliminary estimate, this will cost 1.2bn dollars.  "Some work on design, buying and selling and construction will be done in parallel to speed up the process," T. Qahramanov stated. As far as financing of these projects is concerned, the state will be picking up the bill.

According to SOCAR President Rovnaq Abdullayev, the reconstruction and modernisation of the complexes will take from 2015-2018; the construction of a new bitumen installation is also proposed for the first stage. "The capacity of the existing bitumen installation at the Azerneftyaq oil refinery is 250,000 tonnes per year. But at the present time, we are doing work to transfer this plant. In this connection, the reconstruction has begun of the OGPC has begun, at which a new bitumen installation with a capacity of 400,000 tonnes per year is to be built. This will allow us to completely satisfy the demand for bitumen in Azerbaijan," he noted. As far as the fate of the used installations is concerned, R. Abdullayev said that after the Azerneftyaq plant had been dismantled, they would, like a number of other primary oil refining installations, be offered for sale.

According to the estimates of SOCAR managers, the reconstruction and modernisation of the OGPC will bring in 700m dollars in extra income. Of the total volume of petrol produced at the complex, 75 per cent will be supplied to the domestic market, as well as 60 per cent of the diesel and aircraft fuel.

Moreover, most of SOCAR Polymer's output, 70 per cent will be exported to Georgia, Turkey and the CIS countries. We would like to remind you that the "SOCAR Polymer" project is being implemented at the Sumqayit chemical and industrial park; it will make it possible to produce 180,000 tonnes of polypropylene and 120,000 tonnes of polyethylene per year. Production of propylene is to start in 2016.

Thus, in the opinion of SOCAR's experts, both projects will be extremely advantageous and financially attractive for the country's economy, as well as creating additional possibilities for protecting the environment from the industrial production and fuel consumption.