SOCAR and Central Asian markets

Besides supplying to Afghanistan and Georgia, SOCAR may enter the market of oil products in Central Asia. Kyrgyz President Almazbek Atambayev and SOCAR president Rovnag Abdullaev met last week. They agreed to start construction of a refinery in Kyrgyzstan with a capacity of 2 million tons per year. The expected period of putting a refinery in operation is late 2013. The estimated cost is $ 150 million. According to the agreement, a group of SOCAR specialists will be sent to Kyrgyzstan in February to explore the construction of a refinery and to start the company's activity in the fuel-energy sector of the country. Why Kyrgyzstan?

Production of oil products in Kyrgyzstan (thousand tons):

	2006	2007	2008	2009	2010	2011
Petrol	9,8	13,6	12,8	9,9	14,7	13,5
Diesel fuel	31,3	51,6	59,9	48	39,6	27,4
Black oil	42,1	55,5	58,9	39	43,2	41,9

Source: the Kyrgyz national statistics committee

Import of oil products in Kyrgyzstan (thousand tons):

	2006	2007	2008	2009	2010
Petrol	324,2	434,9	509,1	523,3	423,8
Kerosene	396,2	408,7	505,1	630,3	320,9
Diesel fuel	136,2	289,1	194,2	219,9	247,9
Black oil	1,7	43,7	41,7	128,3	128,5

Source: the Kyrgyz national statistics committee

Comparing the ratio "production-import", we find out that the share of imports of oil products was 89 percent in 2010 without taking into account the import of kerosene. Then Kyrgyzstan's interest almost entirely dependent on imports, from one country - Russia (more than 90 percent of total imports) and SOCAR's position, which can begin developing a new, unsaturated and dependent oil market become clear.

The growing shortage of oil products and increasing prices, the problems with railway transportation from neighboring countries, periodic bans on exports from Russia and Kazakhstan, due to various circumstances, the introduction of export duties for oil suppliers to Kyrgyzstan from time to time are objective and subjective factors threatening energy security one way or another.

The minimum demand for oil products in Kyrgyzstan is 1.5 million tons per year with own production of 80,000-90,000 tons. The government intends to increase oil production and refining capacity. Speaking at the press-conference in Bishkek on the eve of New Year, President Atambayev briefly expressed this thought: "Kyrgyzstan must extract its oil and gas. If we have our own oil, why can not we provide ourselves with a diesel fuel?"

According to Kyrgyz experts' forecast, the oil reserves in the country range from 300 to 500 million tons.

The construction of a new refinery may be one of the measures for strengthening Kyrgyzstan's energy security. SOCAR has another opportunity for making profitable investments and increasing its foreign assets.

Azer Ahmadbayli /Trend/