Azerkimya as part of SOCAR: Stimulus to development

Analysis Materials 6 October 2010 12:07 (UTC +04:00)

Upon the decree by the Azerbaijani President Ilham Aliyev dated April 2, 2010 on improvement of management tools in the petrochemical industry, Azerkimya state company was transferred to ownership of SOCAR (State Oil Company of Azerbaijan). It is possible to say that from that day, a new chapter started in the history of chemical industry in Azerbaijan.

The order states that this step has contributed to the successful implementation of the new oil strategy, important progress was achieved in ensuring country's energy security, a reliable and convenient management system was implemented based on market requirements. And establishing a modern complex in accordance with international experience in this field to enhance oil and gas refining and petrochemical industries functioning in a single technological process will create more opportunities to attract the necessary investments to comply with environmental standards and competitiveness of the ready product.

Everyone knows that over the past several years, the chemical complex has endured unpleasant periods of regression, caused by an inability of morally and technically obsolete enterprises to meet the changing market and its new demands and working conditions. The gap between investment needs of the industry and its income was too high to make the necessary upgrades and bring it to international standards. SOCAR assumed the responsibility to derive from country's chemical industry from the plight, and for the shortest possible time took actions.

According to the decree by the Azerbaijani President Ilham Aliyev dated April 22 on the amendments and additions to the decree dated January 24, 2003 on improving the structure of the State Oil Company of Azerbaijan, it was decided to create Azerkimya production unit under SOCAR. According to an order signed by the president of SOCAR Rovnag Abdullayev, the plants Surface-Active Substances, Organic Synthesis, Mechanical Repair and Institute Kimyaelmitedgigatlahiya were subordinated to Azerkimya as facilities without the rights of legal entities.

Mukhtar Babayev, who previously served as SOCAR vice-president on Ecology, was appointed the head of Azerkimya.

SOCAR assumed  

Azerkimya has great economic and human potential, but despite this, the majority of enterprises and facilities, included in its structure, have outdated and often do not work. That's why SOCAR has assumed a number of large reconstruction projects in enterprises. Currently some of these programs are already implemented. The experience of local and foreign companies are used in the implementation of projects.

Also, at its own expense, and possibly by attracting foreign investments, SOCAR will create conditions for opening new jobs, using modern technologies, and also increasing the wages of workers employed in enterprises belonging to Azerkimya. If the current number of Azerkimya's employees is about 5-6,000 people, as a result of reconstruction works, 10,000 more jobs are planned to be opened.

And as planned, upgrades started. The process of inventory and equipment check up began at the former state-owned enterprise Azerkimya. As it turned out, many facilities at Azerkimya are outdated and are not in working condition. As a result, the final inventory and inspection will accurately determine the conditions of equipment and the ability to use certain facilities for chemical production in the future.

At the same time, the company began to dismantle the physically obsolete equipment and facilities in its enterprises. This work is carried out for the reconstruction of workshops, establish their activities base on modern and advanced technologies.

Work is underway on major repair works at the Ethylene-Polyethylene plant of Azerkimya, which will cover all operating departments of the plant.

The work of two plants belonging to the chemical industry Azerkimya - Surface-Active Substances plant and Organic Synthesis plant - has been restored almost fully. All facilities are the ethylene and polyethylene plant are in working condition.

In the near future there are plans to repair polypropylene production facility with a capacity of 100,000 tons and facility for the production of high density polyethylene with a capacity of 100,000 tons at the ethylene and polyethylene plant.

Then, SOCAR has adopted its environmental policy in respect of enterprises belonging to Azerkimya chemical complex. As known, the ecological condition at these enterprises is unsatisfactory and very serious measures should be taken to eliminate this. The standards, trends and environmental policies that have been adopted in SOCAR will continue to be implemented here.

Work ready at Azerkimya's head office on connecting to the corporate internet network of SOCAR. In addition, more than 80 computers and other modern office equipment were purchased. Also, a special server room, where a digital telephone exchange has been established, was created. As a result of creating a new network, a possibility will appear in the near future to use automated production management SAP.

Upcoming works

SOCAR plans to make progress in the development of Azerkimya within 2-3 years. SOCAR experts have prepared a great concept of joint development of a production unit of Azerkimya in Sumgayit and the new refinery and petrochemical complex to be built in Sangachal settlement of Baku's Garadagh district. SOCAR intends to establish in Azerbaijan the production of ready chemical products due to lowering exports of chemical raw materials. In fact, chemical raw materials are exported from Azerbaijan, and then returned to the country in form of ready chemical products with a higher cost.

For example, 95 percent of products manufactured here (raw material) is exported. SOCAR tries to lower this figure. It needs to do so about 70-80 percent of the country's chemical production would be consumed and processed in Azerbaijan, and the rest to be exported.

Along with work on modernizing Azerkimya, SOCAR also intends to create chemical industrial park. Due to this industrial park, SOCAR intends to organize production of the ready chemical products, which are currently imported into the country. It is planned that in the industrial park will host a large number of small businesses, which will be engaged in production of ready chemical products from raw materials produced by Azerkimya. These small businesses will be able to produce products similar to those which are imported to Azerbaijan. Every year the country imports about 60,000 tons of ready chemical products. The primary purpose of industrial park is to reduce imports of chemical products at the expense of domestic production.

Small businesses, which will be located here, will not belong to SOCAR, but to private companies. For this purpose, SOCAR works with the Ministry of Economic Development to attract private capital. It will not be very expensive production, so a private business is able to master. Production of ready chemical products will be established in Azerbaijan through small businesses.

Regarding SOCAR's plans on project to build Garadagh petrochemical and refinery complex, a bid was announced on the preparation of concept and feasibility study, which was attended by big companies. The new complex, which will include a refinery with a capacity of 10 million tons of oil annually, which will produce up to 500,000 tons of naphtha per year enough to meet future needs of Azerkimya, will also produce gasoline upon the standards of euro-4 and euro-5.

The project envisages the deep processing of hydrocarbon resources of Azerbaijan. The complex will process natural and associated gas, oil to produce petroleum products, car fuels and lubricants. The project involves the development of new petrochemical based on products of oil refining and gas processing, establishing own power plant to meet the needs of the complex and the possibility of building a complex for production of chemical products. It is assumed that the complex will work at full capacity and in the targeted volume in the 2018-2019.

SOCAR is also currently engaged in plan of Azerkimya's co-operation with the Turkish petrochemical complex Petkim. After all, SOCAR is also a co-owner of Petkim. Cooperation with the union of the two potentials will lead to even more power, more market and even better technologies. It is planned that the cooperation between the two enterprises would be quite close, and it will involve a mutual exchange of raw materials.


In the near future Azerbaijan will turn into one of the leading countries in terms of quality and volume of chemical products due to the work undertaken by SOCAR in an attempt to improve chemical production. If earlier Azerkimya's production capacity depended on the supply of naphtha from SOCAR, and limited amounts of supplies were named as one of the reasons for the low profitability of chemical companies, then, now, when the raw materials and manufacturing facilities are located within a single commercial entity, obviously, the supply and production should take place in well-coordinated operation. The chemical complex in the Sumgait city has a great export potential.

Currently, the production of chemical products at plants of the PU Azerkimya is uneconomic. A great number of people were involved in the production process at small volumes of production. In addition, the plants are operating at the expense of subsidies from the state budget. It is planned to gradually get rid of it, refuse from subsidies and reach profitable levels.

"We want to improve the efficiency of production at the chemical plants. Based on our calculations, integration with the SOCAR refineries, which are the main suppliers of raw materials for PU Azerkimya, will improve efficiency and profitability of the chemical companies," SOCAR President Rovnag Abdullayev said. "Perspective and their integration with the Turkish Holding Petkim, which is under our management, program of such integration is already developed. Petkim supplies part of its products to Azerbaijan and PU Azerkimya - to Turkey. Only the optimization of the logistics of their integration will bring big profits. "

The issue of a new refinery and petrochemical complex is under consideration of the state commission formed by the president. The new petrochemical complex may be located in the Garadagh district, which has an access to oil resources, and a chemical complex, which will integrate with PU Azerkimya, may be constructed close to it.

It is expected to open a new chemical industrial park in next 2-3 years in Sumgait , which will include new small plants for production of finished chemical products. About 10,000 new jobs will be created within a few years in the chemical industry of Sumgait.