Azerbaijan to Launch Major Petrochemical Project in 2009

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Azerkimya State Company (Sumgait, Azerbaijan) has signed a memorandum of understanding and confidentiality with world-leading companies to develop petrochemical and chemical projects in Azerbaijan. The companies include ExxonMobil (NYSE:XOM) (Irving, Texas), KBR Incorporated (NYSE:KBR) (Houston, Texas), LyondellBasell Industries (Rotterdam, The Netherlands), Technip (OTC:TKPPY) (Paris), INEOS ABS (India) Limited (BSE:506222) (Vadodara, India), ThyssenKrupp AG (FRA:TKA) (Duesseldorf, Germany) and Uhde Gmbh (Dortmund, Germany).

A massive petrochemical complex comprising 19 plants based on modern technologies is planned to begin construction in 2009 in the industrial area between Sumgait and Abshero. The complex is scheduled for completion by late 2012. The project will enable Azerkimya to reinforce its position in world markets and cover Azerbaijan's internal demand. The complex will be the largest multistream petrochemical product producer in the region and the first in the Caspian and Commonwealth of Independent States (CIS) zone.

The complex will produce 700,000 tons per year of high- and low-pressure polyethylene, 130,000 tons of polypropylene, 40,000 tons of benzol and other petrochemical products. The products will help to meet Azerbaijan's demand for construction material, plastic tubes, paints, varnish, rubber and synthetics. Special equipment is expected to be installed in the complex to clean gas with separation technology, and to produce ammonia and carbamide, including olefin, polyolefin and petrochemical products. Azerkimya began the project in 2006. Its partners include technical adviser Technip, legal adviser White & Case LLP (New York, New York), financial adviser Societe Generale (OTC:SCGLY) (Paris) and business consultant Nexant Limited (London), which will submit a feasibility study of the project to Azerbaijan's government in mid-January 2009.

The project will allow Azerbaijan to ensure its petrochemical products and mineral fertilizers domestic demand, and will make Azerkimya the leader in petrochemical production in the Caspian and CIS. The implementation of the project will allow Azerbaijan to develop a nonoil economy, producing higher-quality and more competitive oil products for export. It will cover the country's nitrogen fertilizer demand and enable Azerbaijan to receive additional funds through exports.

The complex should enable Azerbaijan's petrochemical industry to expand over next five years on the condition that the government also tackles the country's poor business environment, according to recent petrochemical reports on Azerbaijan. The country's considerable energy reserves and rising gas output have not yet led to any substantial improvement in the country's petrochemicals capacity, largely because of the poor business environment, which has deterred investors considerably. Despite its significant oil and gas reserves, Azerbaijan's capacity in the petrochemicals industry, ranging from feedstock availability to downstream units, remains the lowest of the countries in the CIS-Caspian region. The country's sole cracker facility had a capacity of 250,000 tons per year in 2007, with an extra 50,000 tons per year to be added by 2009. The government believes that for Azerbaijan's industry to compete on global market, it would require $1 billion over next five years.

Azerkimya is being restructured into a joint-stock company in order to attract investments from foreign companies. When the restructuring is completed, Azerkimya will step up talks with investors in France, Israel, Japan, Italy and Turkey. Manufacturing production will concentrate on chemicals, pharmaceuticals, plastics and rubber.

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