Socar To Build 300,000b/d Refinery In Sangachal

Publication: Business Monitor Online
Date: Thursday, May 20 2010

Azerbaijan is planning to construct an integrated oil and gas processing plant and petrochemicals complex at Sangachal, including a 300,000 barrel per day (b/d) refinery, according to remarks made on May 19 by Socar's representative to Austria, Gulmirza Javadov. The announcement clarifies a string of earlier reports about the building of a new complex that would allow Azerbaijan to reduce its dependence on imported chemical products. If the project goes ahead, it could allow Socar to export refined products to markets in the EU and Russia, which are currently inaccessible thanks to high fuel standards.

Speaking at the Rotterdam Global Refining summit on May 19, Javadov said that the complex would include a refinery with a capacity of 15mn tonnes per annum (tpa), equivalent to around 300,000b/d. It will also include a gas processing plant with a capacity of 40bn cubic metres (bcm) per year, as well as power plants and a petrochemicals complex. The integrated facility will be located around 60km south of Baku in Sangachal, where the main Caspian oil and gas pipelines come ashore.

Javadov said that a feasibility study on the project is currently being carried out by France's Technip and US-based Foster Wheeler and is expected to be completed in 2010. The feasibility study also includes an evaluation of Socar's existing refineries. Following the study, an investment decision will be made by the Azeri government, which will allow the project to continue to the basic engineering design phase. The complex is currently scheduled for completion between 2018 and 2020.

According to an earlier statement by Socar president Rovnag Abdullayev, noted by Azerbaijan's ABC news agency on May 11 but not widely reported, the project will be part of a wider plan to expand Azeri chemicals production. As well as the Sangachal site, the project will involve expansion work at an existing complex at Sumgait to the north of Baku, owed by state-run chemicals company Azerikimya. In the statement, Abdullayev said that Azerbaijan currently imports 60,000tpa of finished chemical products that could be substituted with Azeri-made products. In order to meet this target, additional ethylene and propylene plants will be constructed.

As well as providing feedstock for the petrochemicals plants, the new refinery would replace Azerbaijan's two existing Soviet-era refineries. Although the two refineries, Azerineftyag and Azerneftyanajag, have a combined capacity of around 442,000b/d, throughput has historically been significantly lower. A low level of complexity and a lack of facilities to produce fuels that meet exacting EU standards means that the refineries have tended to export products to countries with less-demanding standards such as Georgia. Other less valuable products are consumed locally, with heavy fuel oil being used to power Azerbaijan's eight thermal power plants. The refineries also produce jet fuel, kerosene, diesel oil, stove fuel and asphalt, among other products.

The construction of a new highly integrated refinery would therefore have a major impact on Azerbaijan's position in the regional products market, as well as reducing its dependence on chemicals imports. Russia and the EU are likely to be major potential target markets as they both have high fuels-quality standards (Euro-IV and Euro-V respectively). If the project leads to an increase in Azerbaijan's refined products output, this will result in a large increase in products exports combined with a corresponding decrease in crude oil exports. This would prompt a revision of BMI's oil export forecasts, which currently show export rising from an estimated 965,000b/d in 2009 to 1.3mn b/d by 2014.

http://www.allbusiness.com/chemicals/petrochemicals-industry-petrochemicals/14498135-1.html