REFINED TASTES

Azerbaijan 2016 | ENERGY | INTERVIEW

TBY talks to Rovnag Abdullayev, President of SOCAR, on recent milestones, developing fields, and going downstream with the STAR refinery in Turkey.

Rovnag Abdullayev
BIOGRAPHY
Rovnag Abdullayev was born in Nakhchivan. In 1982, he enrolled at the Azerbaijan Institute of Construction Engineers (now Azerbaijan University of Architecture and Construction). He served in the army in 1983-1985, after which he was transferred to the Moscow Civil Engineering Institute named after V.V. Kuibyshev, and in 1989, after graduate from the institute, began working on “Oil Rocks.” He worked as an Engineer in the 28 May OGPD from 1990. From 1991 to 1997, he was Department Chief and Chief Engineer at Caspian Sea Oil Gas Construction Trust. He became the Director of Trust in 1997. Abdullayev was appointed Director of the Baku Oil Refinery named after Heydar Aliyev in 2003. On December 9, 2005, he was appointed President of the SOCAR. He is President of the Association of Football Federations of Azerbaijan (AFFA) since March, 2008. He was elected the member of Milli Majlis (Parliament) in 2005 and 2010.

What have been some recent key milestones for SOCAR?

Azerbaijan stands among the world's leading countries in the pace of its economic growth. The historical significance of the new energy strategy, which comes from the political determination and wise far-sightedness of our National leader Haydar Aliyev, and which is successfully continued under the wise leadership of President Ilham Aliyev, is clearly more visible as time goes by. Work has commenced on the development of the Shah Deniz field's stage II development and its execution is in line with the schedule and budget. We have also implemented the Southern Gas Corridor project designed for the delivery of natural gas to Turkey and Europe and worked on a new sixth-generation floating drilling rig, brought about the realization of the Absheron and Umid gas-condensate fields' development projects, and reorganized the production areas of the Haydar Aliyev Oil Refinery and Azerikimya Production Union. Other milestones include the construction of SOCAR Polymer as part of the Karbamid plant, an Industrial Chemical Park in Sumgait city, the continuation of work on a new Oil and Gas Processing and Petrochemical Complex project, the modernization of Petkim Petrokimya Holding A.Ş. complex, the construction of the STAR oil refinery in Turkey, and the establishment of SOCAR sales networks in Azerbaijan, Georgia, Ukraine, Romania, and Switzerland.

How would you assess the current level of gas production in Azerbaijan and what is your assessment of doubling gas production by the year 2025?

I believe that we will be able to accomplish this objective and bring the production of gas across the country to this level or higher. We will need to focus on new and already developed fields. In the development of the ACG fields block, the recoverable reserves are estimated at around 1 billion tons of oil and 350 billion cubic meters of gas. In 2015, 31.2 million tons of crude oil was produced from the ACG fields block. Overall, the cumulative oil production on the ACG project between 1997 and 2015 made up 385.5 million tons. The oil volume produced here so far represents only 38% of the fields' overall reserves. Primary reserves of the Shah Deniz field, which is one of the world's largest gas-condensate fields, are estimated at the level of 1.2 trillion cubic meters of gas and over 240 million tons of condensate. Stage I of this project (Shah Deniz I) is under way. Within this stage, 67.7 billion cubic meters of natural gas and 17.1 million tons of condensate were produced from Shah Deniz between 2006 and 2015. In 2015, 9.9 billion cubic meters of gas and 2.3 million tons of condensate were produced from this field. The Southern Gas Corridor Project came up due to demand for the construction of a new gas transmission pipeline through which the natural gas to be produced within Shah Deniz stage II can be exported. This project plans to transport the natural gas from the Shah Deniz gas-condensate field to the Sangachal terminal through an underwater pipeline, and further across the territories of Azerbaijan and Georgia through the South Caucasus Pipeline (SCP) to the Turkish-Georgian border, and onward to Turkey and Europe via the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) transmission pipelines. In the coming years, the necessary steps will be taken to raise the annual gas output at Shah Deniz stage II up to 16 billion cubic meters. In addition, the estimated hydrocarbon reserves of the Absheron field are evaluated in the volume of 350 billion cubic meters of gas and 45 million tons of condensate. The first gas from the field is targeted for 2022. For SOCAR, the Absheron project will add additional export potential for the Southern Gas Corridor project and will be one of the sources of raw materials for a gas processing plant as part of a new oil processing and petrochemical complex to be built in Garadagh. The development of the Umid field will also have an impact on the increase of future gas production in Azerbaijan and 337.8 million cubic meters of natural gas and 55,000 tons of condensate were produced in this field in 2015. This year we plan to complete the construction of the new sixth-generation floating drilling installation. This installation is capable of drilling at a depth of 12,000 meters and will enable us to carry out drilling works on the Absheron, Umid, and other new oil and gas structures situated in the deep-water part of the Azerbaijani sector of the Caspian Sea.

What affect will the SOCAR Polymer joint venture have on the petrochemical industry of Azerbaijan?

The SOCAR Polymer investment project is the first of its nature and scale in the past 40 years in Azerbaijan's downstream oil and gas industry. The Polypropylene and High Density Polyethylene plants of SOCAR Polymer are being built within Sumgait Chemical Industrial Park territory. Set to be operational in 2018, SOCAR Polymer will produce 180,000 tons of polypropylene and 120,000 tons of high-density polyethylene annually, increasing current polymer production by four times. SOCAR Polymer's main objective is to replace imports and increase the export potential of the country. Approximately 30% of the production output will be directed toward the local market and the remaining 70% will be exported to Turkey and other European countries.

Scheduled to be operational in 2018, how would you characterize the progress of the STAR oil refinery in Turkey and what are the advantages of operating a refinery in that country?

This will be the first oil refinery to be built in Turkey in over 40 years. Our refinery will also be the first privately built refinery in Turkey, as the only existing refinery was developed by the state in the 1970s. The STAR refinery is being built as an EPC turnkey project by a consortium of globally reputable companies. With a project cost of $5.7 billion, this is the largest FDI project in a single location in Turkey. Also, the biggest and the longest-term project financing loan agreement in the history of Turkish real sector was signed as a result of this project, at a value of $3.3 billion. The world-renowned Hydrocarbon Processing magazine announced the STAR refinery as the best project of 2015. Works for this project are proceeding in line with the plan and approximately 60% of the overall project has been completed. The project is expected to be finalized in April 2018. Developing an oil refinery in Turkey has tremendous benefits. First of all, the Project represents the key pillar of SOCAR's long-term strategic objective to establish itself as a fully integrated player in the Turkish energy sector. This project will assist the development of Petkim's existing Aliağa site into a world-scale integrated refinery-petrochemicals-energy-logistics-distribution hub. STAR is a strategic project for Turkey, as it will reduce its dependence on imports and decrease the current account deficit. In summary, this project is clear evidence of SOCAR's commitment to enhancing its revenue generating abilities downstream as an addition to its successful upstream operations.

As one of the biggest and most important current projects for SOCAR, how is the Southern Gas Corridor (SGC) project progressing?

The Southern Gas Corridor is SOCAR's biggest project and will allow us to deliver huge volumes of natural gas from the Caspian Sea to European markets. The construction work on this $45 billion megaproject is successfully underway. While we are all dealing with a depressed oil price, we remain fully committed to the Southern Gas Corridor and highly value the strong partnerships we have with all the host governments, consortium companies, and the many stakeholders that are dedicated to seeing this project to fruition. Over 26,000 people are currently employed across the Southern Gas Corridor construction works. Great progress continues in Azerbaijan and Georgia, where over 60% of the project is nearing completion. In Turkey, TANAP is moving forward with precision and keeping to budget and time. In addition, the necessary permits and approvals are being granted and progress continues toward the realization of TAP in Greece. The groundbreaking ceremony of TAP is planned for May 2016 in Thessaloniki, Greece. We also appreciate the great support of the Albanian government and the commitment from the country to see TAP and the Southern Gas Corridor realized. Italy is the final point of this project and we must continue to work closely with the government and our partners to ensure challenges are met and progress remains on track. In the short run, we expect the signing of all the remaining contractual agreements in the framework of TAP, representing a final component of the SGC project. I believe 2016 will be a significant stage in realization of the SGC project. This project is a key part of the EU's energy policy and a strategic project for Europe, diversifying the energy mix and providing a new, secure supply of gas to Europe for decades to come.