Socar Cuts OGPC Capacity, Costs
Azerbaijan state oil company Socar has reduced the planned capacity of its projected gas processing and petrochemical plant known as OGPC to make it cheaper, a company senior official said. The total price of is now estimated at $4bn, Socar vice-president for financial Suleyman Gasimov told reporters in Baku late June.
"We are still considering construction of OGPC that includes gas processing and chemical plants at the first stage. However, for cost reduction we have made some adjustments in technical specifications. The capacity of the gas plant will be cut to 10bn m³/yr, down from the 12bn m³/yr planned earlier. So the total cost of the OGPC stage-1 is now estimated to be around $4bn,” said Gasimov, adding that more accurate figures will be obtained after the front-end engineering and design work is done. Earlier Socar had estimated the project would cost $7bn.
According to Gasimov, households in Azerbaijan are burning the expensive components of raw gas such as ethane, which could be extracted and used as resources for petrochemical products that are in high demand.
OGPC forum in Baku (Credit: Socar)
Gasimov said that the company is in talks with Chinese and Russian companies. Earlier talks with Japanese Mitsui led nowhere because of the high project cost and low prices for petrochemical products.
In early June Socar signed two MOU’s for OGPC, the first with China National Petroleum Corp (CNPC) and the second with Russia’s Gazprombank and Italian partners. "Currently we are evaluating proposals from CNPC and Russian and Italian partners. Considering that oil prices seems to be stabilizing the Japanese could be back on it too, they are still interested,” he said.
As it was reported earlier MOU signed between Socar and CNPC provisions cooperation in oil, gas and petrochemicals. According to Socar’s president Rovnag Abdullayev, CNPC shows interests on OGPC as partner and investor with providing funds through Chinese Ex-Im and other banks.
“The Chinese side said it was ready to provide 100% funds for OGPC”, said Gasimov.
The second MOU signed in Saint Petersburg proposes funding by Gazprombank, Russia’s export credit agency EXIAR and Italy’s credit agency SACE. Gazprombank owns several machinery companies that can provide the equipment for OGPC and their Italian partners, Technimont for instance, also want to be involved in the project, Gasimov explained.
GazPrombank estimated the investment required for OGPC at $3.5bn, based on a preliminary evaluation. It also considers that material, equipment and services provided by Russian companies will be around a fifth of the total budget, it said in a statement.
Socar sees its own gas production as the feedstock, including new fields such as the Umid gas and condensate field and an expected discovery in the Babek prospect, said Socar’s investment department head, Vagif Aliev.
He added that the company is “intensively working on projects” for developing the non-associated gas layer beneath the BP-operated Azer-Chirag-Guneshli oil fields and the first stage of development of Total’s Absheron discovery. “The associated gas that is now reinjected back into the reservoir to maintain oil production at ACG will be produced in the future too,” he added.
Kama Mustafayeva