Azerbaijan targets petrochemicals in push to reduce reliance on oil and gas

Expects $2bln in 2019 non-oil exports, up from $1.7bln in 2018


BAKU- Azerbaijan is betting on petrochemicals investment to diversify its oil and gas-dependent economy, industry and government officals told Reuters.

Plummeting global oil prices five years ago sent the former Soviet energy producer's economy into decline, devalued its currency and led to bankruptcies among its commercial banks.

But lessons appear to have been learned as Azerbaijan has sought additional sources of revenue, investing in petrochemical plants at home and abroad as it chases the bigger margins from turning crude oil into plastics rather than oil products.

Construction has been completed on three new petrochemical plants in Azerbaijan over the past 12 months. The plants are producing polypropylene, carbamide and high-density polyethylene.

Azerbaijan also produces methanol and other petrochemicals and plans to begin construction of a new petrochemicals plant in Turkey to produce various materials in partnership with British oil major BP at the end of 2020, aiming to complete the project within three years, said BP and state-controlled Azeri oil and gas company SOCAR.

Plans to construct a second carbamide plant in Azerbaijan with Tekfen will also boost the South Caucasus country's potential as a petrochemicals exporter.

"Azerbaijan is deliberately conducting a policy of non-oil sector development," Vahit Akhmedov, a member of Azerbaijan's parliamentary economic policy committee, told Reuters.

"Development of petrochemicals is one of the priorities as this sector will bring good profits and provide the country with these products."

Oil and gas account for about 95% of Azeri exports and 75% of government revenue, with the hydrocarbon sector also generating about 40% of the country's economic activity, making the Caspian Sea republic particularly vulnerable to a downturn in gas and crude prices.

"Rapid development of the petrochemicals sector will help us to support economic growth if the oil price falls," said SOCAR vice president Suleyman Gasimov.

Oil output in Azerbaijan, led by BP and SOCAR's Azeri-Chirag-Guneshli oilfields (ACG), has been stable over the past couple of years. BP and SOCAR say that ACG, which has so far produced 3.5 billion barrels of oil, has the potential to pump a further 3 billion barrels by 2050. Azerbaijan is also a major producer of gas in the region, aiming to export supplies to Europe. 

"Azerbaijan's oil and gas reserves are enough for rapid and successful development of the petrochemicals industry," an industrial source told Reuters.

New enterprises have allowed the country to satisfy domestic petrochemicals demand while boosting exports, with Azeri officials saying total petrochemical exports are projected to reach $241 million this year, up from $190 million in 2018.

Its export markets for petrochemicals include Georgia, Turkey, Russia, Ukraine, Europe, China, Egypt and Israel. Other non-oil exports, including the agriculture and mining sectors, are projected to grow to $2 billion in 2019 from $1.7 billion last year, Azeri officials said.

"We are confident that 15% of the growth in non-oil sector exports this year will be from the petrochemicals sector," said Ramil Huseyn, analyst at the Baku-based Centre for Analysis of Economic Reforms and Communication.

(Writing by Margarita Antidze Editing by David Goodman) ((; +995322999370; Reuters Messaging:

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