SOCAR to implement major projects in next five years

MOSCOW (MRC) -- Construction of a new complex processing oil, gas and petrochemicals in Azerbaijan is the largest project to be implemented in the next few years, not only for the State Oil Company of Azerbaijan (SOCAR), but for the whole country, said Trend.az.

This was recently stated by head of SOCAR Rovnag Abdullayev during a meeting with the president and CEO of the American company Air Products John McGlade.

According to a statement issued by SOCAR, Abdullayev spoke about projects implemented by the State Oil Company in Turkey, construction of a new shipyard and the Sumgayit plant for production of nitrogen fertilisers in Azerbaijan, construction of a new oil refinery in Turkey, expansion of the petrochemical complex Petkim's port, as well as a power plant to be built there.

"These are big challenges for SOCAR and its partners in the next five years," Abdullayev said.

The Air Products Company has more than 20 years of experience in manufacturing equipment for the production of industrial and liquefied gas for oil refining and petrochemical industry facilities. The company has more than 40 subsidiaries and its annual sales exceed USD10 billion.

SOCAR includes production association Azneft (companies producing oil and gas on land and sea) and Production Association Azerkimya (chemical industry), production association Azerigas (gas distribution).
The State Oil Company is the only producer of oil products in the country (it has two refineries on its balance sheet) and also owns petrol stations in Azerbaijan, Georgia, Ukraine and Romania. SOCAR possesses a network of petrol stations in Switzerland and is the co-owner of the largest Turkish petrochemical complex Petkim.
MRC

Gazprom reports weakening European gas sales amid economic slowdown

MOSCOW (MRC) -- Gazprom's sales are likely to fall further in 2013 as weak economic conditions lead to continued low demand in Europe, the company's key market for natural gas, reported hydrocarbonprocessing with refrence to Fitch Ratings' new report released on Monday.

Russian gas production data for 2012 indicate that Gazprom's European and FSU gas sales fell slightly more than expected.

Europe and the FSU remain key markets for Gazprom, which has a monopoly on the export of Russian natural gas. For example, in the second half of 2012, it generated over 76% of its revenue from sales of gas outside of the Russian Federation, which accounted for only 44% of its gas sales by volume.

The drop in European gas volumes and prices was partly caused by litigation by some of its European gas buyers, and price renegotiations and compensation payments that followed. This shows that Gazprom's position in Europe remains somewhat challenging, the credit-watch company said.

Fitch added that it believes prices and volumes of European gas consumed under take-or-pay arrangements will not dramatically change in the foreseeable future.

Take-or-pay provisions usually cover 80% of contractual gas volumes; therefore there is some headroom for gas volumes to fall before triggering the take-or-pay clauses.

Gazprom's concessions to European buyers represented no more than 10%-15% of the total oil-based price, leaving the prices under these contracts well above market gas prices, which are now almost delinked from the oil price.

Fitch said it believes that Gazprom will have to continue negotiating further concessions with those European buyers that may have alternative sources of gas supply.

Fitch forecasts that eurozone GDP will contract by 0.1% in 2013, following an expected 0.5% contraction in 2012. The trend should reverse in 2014, when 1.2% GDP growth is forecast. The company expects that gas demand in Europe will continue to be weak in 2013 but may start increasing in 2014.

Last week the Russian Ministry of Energy said that total natural gas production in the country fell by 2.2% in 2012 to 655 billion cubic meters (bcm), while Gazprom's gas production declined by 5.1% to 482bcm.

Russian gas sales abroad in 2012, mainly to Europe and the FSU, fell by 8.7% to 186bcm. Gazprom previously reported a 10% volume drop in first-half 2012 sales to Europe and a 29% volume drop in sales to the FSU countries.

As MRC wrote previously, Gazprom also continues to closely examine the situation with shale gas. At present, Gazprom believes that shale gas production in Russia is not feasible due to the high availability of conventional gas reserves, the cost of production is significantly lower than the estimated costs of shale gas development, and also carries significant environmental risks, but Gazprom will continue to monitor the shale gas development in various regions of the world, the results of which it will report to the Board of Directors in the IV quarter of 2013.
MRC

Qatar Petrochem and Shell make a step forward in the development of Al-Karaana Petrochem Complex

MOSCOW (MRC) -- Qatar Petrochemical and Shell is expected to award the Front-End Engineering and Design (FEED) contract for their world-scale petrochemicals project in Ras Laffan Industrial City in Qatar, named Al-Karaana Petrochemicals Complex, in 2013, while Mitsubishi Chemical will provide its production technology of oxo alcohols, reported plastemart.

The project, which is planned to utilize feedstock derived from natural gas, will include a steam cracker, oxo alcohols, mono-ethylene glycol and linear alpha olefins plants. Mitsubishi Chemical (MCC) has agreed to license its production technology of oxo alcohols to Qatar Petroleum and Shell Chemicals. The selection of key technologies for the derivative processes has been completed.

We remind that, as MRC wrote earlier, Saudi Arabia's largest petrochemical company SABIC and the Anglo-Dutch company Shell are considering expansion to its joint project Sadaf. The companies plan to build a plant for the production of styrene, propylene oxide and polyurethane.
MRC

Russian makers of PVC reduced their dependence on imports

MOSCOW (MRC) - Russia’s imports of PVC in December on low season declined to 29,200 tonnes. Growing domestic production and large carry-over stocks from 2011 allowed to reduce the imports of resin to the Russian market by 9% in 2012, according to MRC DataScope.

In 2012, the dependence of the Russian market of PVC imports decreased by 9%. SayanskKhimPlast and Kaustik (Sterlitamak), which increased their capacity of PVC by 50,000 tonnes helped to reduce the dependence on external supplies. Cold February - March and large carryover stocks (over 50,000 tonnes) in 2011 also affected greatly.

SayanskKhimPlast in 2012 after the planned reconstruction increased its production capacity of PVC to 270,000 tonnes. Over the eleven months of last year, the company produced about 247,000 of resin. Whereas in 2011 its total production volume was about 259,000 tonnes.


Kaustik (Sterlitamak) in 2012 increased the annual capacity of 220,000 tonnes. The company aims to expand the capacity of PVC up to 600,000 tonnes per year, if key Russian producers also expand their capacity on ethylene production. In 2011, despite the conflict with Gazprom neftekhim Salavat regarding the supply of ethylene, Bashkir plant produced 174,400 tonnes of resin, over the eleven months of 2012 the output rose to 181,000 tonnes. In February 2013 Kaustik plans to get additional volumes of ethylene from Nizhnekamskneftekhim, which helps the company to increase capacity utilization.

2011 was quite unusual for Russian converters. Significant growth of export prices of PVC in the U.S. forced Russian processors significantly increase the volume of purchases in the first half of the year, while the growth in demand for finished products made of PVC was less dynamic. These factors resulted in a serious surplus in the market in August and by the beginning of 2012 the total amount of carry-over stocks at the Russian producers and trading companies had exceeded 50,000 tonnes.
The beginning of 2012 due to severe cold resulted in bad sales of finished products made from PVC, said many market participants. The demand in January increased, in February - March due to the severe cold the sales dropped to 30%. Which also slowed down the growth in demand for PVC in Russia.

In December, under pressure from seasonal factors PVC imports to Russia declined to 29,200 tonnes. In general, in 2012 the total imports of suspension to Russia amounted to 417,600 tonnes, up 9% compared to last year. About 70% of the total imports accounted for PVC makers from the U.S. and China, their share in total imports was 46% and 23%, respectively.


MRC

Dependence of Russian PE market on imports strengthened in 2012

MOSCOW (MRC) -- In December, imports of polyethylene and its copolymers to Russia made 70 thousand tonnes. In 2012, Russia’s dependence on imports of PE rose by 28%, according to MRC DataScope.

The year of 2012 brought the further dependence of the Russian market on imports of polyethylene and its copolymers. Last year, imports of this commodity group grew by 28% year-on-year and made almost 762 thousand tonnes. It is worth pointing out to a lengthy outage at Stavrolen due to a failure at the production and a rapidly growing demand for the polyethylene stretch film as main drivers of the growth of the dependence
on imports.

Due to a failure at a gas-distribution unit at the pyrolysis workshop, on 15 December 2011, Stavrolen had to suspend production of high density polyethylene (HDPE) for a few months. The production of HDPE was resumed only in early October. As a result, HDPE import rose by 3% and made about 408 thousand tonnes.

The outage at Stavrolen influenced the working schedule of Nizhnekamskneftekhim. The Tatar company had to focus on HDPE production last year, while the output of linear polyethylene (LLDPE) was carried out only in two months: in May and November. Over the past two years, the LLDPE production dropped to 55 thousand tonnes in 2011 and to 29 thousand tonnes in 2012.

The linear polyethylene market keeps on showing high growth dynamics. As per preliminary information, in 2012 demand for LLDPE in Russia made over 200 thousand tonnes, while a year earlier this index made about 147 thousand tonnes. The largest increase in consumption accounts for producers of polyethylene stretch films.


In December, imports of polyethylene and its copolymers made about 70 thousand tonnes. In general, in 2012 exports of this commodity group made almost 762 thousand tonnes, up 28% year-on-year. Despite the launch of new production facilities with the total capacity of 320 thousand tpa over the past five years, the Russian polyethylene market is still a net importer.

MRC