Background
The State Oil Company of Azerbaijan Republic’s (SOCAR) proposed oil & gas processing and petrochemical complex (OGPC), covering an area of approximately 4,500ha, will be located near Sangachal terminal, along the boundaries of the Absheron and Garadagh Districts, approximately 60km south of Baku.
SOCAR is implementing the project with its joint venture (JV) partner FosterWheeler Engineering, while DuPont serves as the technical consultant for the project.
The new complex is expected to replace the existing processing facilities in Baku and Sumgait. The products from the complex will primarily meet the domestic demands and the excess will be exported. The project is expected to generate approximately 15,000 construction jobs and 2,000 permanent jobs.
The complex will be developed in two phases, with the first phase of construction expected to begin in 2015 and start operations in 2019. Site preparation activities are currently in progress.
The overall investment for the project is estimated to be $15bn, with its payback period reckoned to be approximately eight years.
Majority of the funding will come from foreign investors, loans acquired from financial institutions, issuance of Eurobond loans and SOCAR’s own internal resources, while the remaining will be funded from the state budget.
Brief Introduction
Phase I of the GPC project will primarily involve the construction of a gas processing plant (GPP) with a capacity of 12 billion cubic metre (bcm) a year, a petrochemical plant integrating a steam cracker, with a production capacity of approximately 850,000t a year, and a 250MW thermal power plant.
The natural gas liquids recovered from the GPP will be used as feedstock to produce polypropylene and polyethylene from the petrochemical complex.
The project will also involve the construction and installation of related utilities and off-site infrastructure, including roads and rail connection, electrical interconnection with the national grid, and port facilities and pipelines for raw material and product transportation.
Phase II will involve the construction of a refinery with an initial crude oil refining capacity of 8.6 million tonnes a year.
Phase I construction is expected to be completed by 2023, whereas Phase II is proposed to be implemented in the 2030s. The project will involve the construction and installation of more than 30 technological facilities and licensing of 20 technologies.
Company behavior
Technip, Foster Wheeler, and UOP were appointed to undertake the conceptual and feasibility study for the project.
Fluor, PricewaterhouseCoopers (PwC) were appointed as the technical, financial advisors, Clifford Chance LLP and OMNI as legal consultant for the project. AECOM was appointed to provide environmental consulting services for the project.
Fugro N.V, British BP, and French Total were appointed to conduct the topographical surveys for the project.
On March 7, 2013, KBR was awarded a contract by SOCAR to manage Front-End Engineering Design (FEED) works on the gas processing plant within the new OGPC.
The project will be financed by the Azerbaijan’s Oil Fund and the Turkish banks: Türkiye Is Bankasi, Finansbank, Garanti Banki, Ziraat Banki, Vakifbank, TSKB, Yapikredi, Denizbank, Unikredit, TEB, Akbank, Halkbank and Denizbank.
In December 2014, SOCAR has appealed to the Central Bank of Azerbaijan for a major loan to finance construction of the project. The loans to be received during construction.
In March 2015, Fluor appointed as the project management contractor (PMC). Fluor will support SOCAR’s selection and management of future contractors that will perform detailed engineering, procurement, construction, commissioning and start-up of the gas processing plant as well as front-end engineering design, detailed engineering, procurement, construction, commissioning and start-up of the petrochemical plants including associated offsite facilities.
In June 2015, SOCAR announced plans to appoint investor and partners (developer) in joint construction of the complex. Several companies have submitted their proposals on participation in the project.
In March 2016, Japanese corporation Mitsui rejected to participate in the construction of the complex due commitment of high expenditure cost.
Dutch ING Bank, China Development Bank and the Russian Gazprom Bank will act as financial advisors of the project. American Vinson & Elkins is a legal consultant at the international level, and the law firm PSG is engaged as a legal advisor in Azerbaijan.
In April 2016, front end engineering design (FEED) was completed on the project.
In July 2016, the cost of the project has been reduced by approximately 50% from US$7,000 million to US$4,000 million following the decision to cut the capacity of the gas processing plant.
DuPont has been appointed as Technical consultant.
On March 17, 2017, Univation Technologies LLC, secured a contract to provide technology licensing and associated design work for polyethylene (PE) plant. Univation will provide its proprietary XCAT metallocene PE technology, which SOCAR GPC will use to produce advanced metallocene film structures suitable for food packaging, stretch wrap, heavy-duty sacks, and specialized multilayer applications.
On May 15, 2017, SOCAR signed a Memorundum of Understanding (MoU) with PetroChina, subsidiary of CNPC. As per the agreement, China Huanqiu Contracting and Engineering Corporation (HQC), subsidiary of CNPC and Technip Italy will undertake the preliminary detailed design work, where HQC will undertake the engineering and civil engineering works. Russian gas giant Gazprom also participated in the agreement with PetroChina on underground gas storage, natural gas power generation, liquefied natural gas supply.
Final investment decision (FID) on the project is expected to be taken in 2019. Construction works will begin in the first quarter of 2020, and the complex will be commissioned in the third quarter of 2023.The final phase by 2030.