"Azerbaijan Petrochemicals Report Q3 2013" now available at Fast Market Research

From: Fast Market Research, Inc.
Published: Fri Jun 07 2013

Azerbaijan is beginning to address major infrastructural constraints with a view to becoming a significant petrochemicals producer. Capacity utilisation at existing plants is restricted by lack of investment and maintenance, as well as the predominance of old and environmentally damaging technology. Projects outlined by the economy ministry are formulated based on prospective export markets. However, BMI believes that the industry is highly underdeveloped and there is a gap between the country's petrochemicals ambitions and available feedstock.

The focus in 2013 will be on the new export-oriented 560,000 tonnes per annum (tpa) methanol production facility, which came onstream in Q113 and raised total methanol capacity in Azerbaijan to 720,000tpa. Around 90% of production will be sold abroad with the remainder utilised by non-oil sectors, including in the production of acetic acid (165,000tpa), formaldehyde (18,000tpa) and melamine (15,000tpa).

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However, the increased methanol production capacity has come online at a time of global over-capacity, which has led to a decline in prices; meanwhile, the poor state of the European economy is the principle reason for sluggish demand in the methanol market. BMI believes that while there is little room for growth, the market will remain stable and Azeri production should be competitively priced and therefore resilient. The size of the volumes of Azeri methanol that will be marketed in Europe relative to the amounts sent to Asia will be a crucial issue; in terms of the latter, Azeri supply to Asia is unlikely to have much impact on regional supply-demand dynamics.

Over the last quarter, BMI has revised the following forecasts/views:

* Azerbaijan is set to move ahead with the expansion of petrochemicals capacities in 2013. In March 2013, the State Oil Company of Azerbaijan Republic (SOCAR) awarded KBR the contract to oversee the front-end engineering design (FEED) phase of its gas processing plant within the new Oil-Gas Processing and Petrochemical Complex (OGPC), which will have total gas processing capacity of 10-12bcm and oil refining capacity of 10mntpa and is due to begin construction this year. The petrochemicals complex is set to have capacities of 700,000tpa high-density polyethylene (HDPE) and low-density polyethylene (LDPE), 130,000tpa polypropylene (PP), 40,000tpa benzene and 110,000tpa styrene. Although the country has had many false starts in terms of expanding petrochemicals capacity from a small base, BMI believes the current drive - in the context of restructuring and consolidating operations under SOCAR - will achieve its objectives.

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