SOCAR refinery in Kyrgyzstan – qui prodest?

Construction of the Azerbaijani oil refinery in Kyrgyzstan becomes a beneficial project for Baku and Bishkek
Elmira Tariverdiyeva, Baku. Exclusively to VK

Baku and Bishkek are holding talks on the construction of a SOCAR oil refinery in Kyrgyzstan.

The agreement on construction was reached by the sides on January 19 when President of Kyrgyzstan Almazbek Atambayev met the head of SOCAR Rovnag Abdullayev.

The president of the Oil Traders Association of Kyrgyzstan, Zhumakadtr Akeneyev, told VK that Azerbaijan will export oil for refinery according to the swap-scheme. According to Akenyev, Azerbaijan will deliver two million tons of oil to Kazakhstan on the Caspian Sea to Atyrau or Aktau, and Kyrgyzstan will receive oil from Kazakhstan through the oil pipeline from Shimkent.

“It is mutually beneficial, because SOCAR enhances geography of its activity toward Central Asia,” Akeneyev said. Moreover, according to preliminary appraisals, prime cost of petroleum which will be produced at the refinery should be low. Probably the refinery could solve the problem of diversification of fuel supply in Kyrgyzstan. Akeneyev added that the next session of the intergovernmental commission of Kyrgyzstan and Azerbaijan is planned to be held in August in Baku.

However, the vice-president of SOCAR on strategic development, Tofik Gakhramanov, from economic point of view, there are some doubts on reasonability of the refinery construction in Kyrgyzstan. “I know that negotiations were held in Kyrgyzstan and the Kyrgyz delegation came to Azerbaijan for further talks. But I do not see benefits from this facility,” Gakhramanov told VK.

“Even European refineries, in Italy, France, are being sold. It is more beneficial to sell raw oil than petroleum,” he added. Gakhramanov supposes that the direct participants of negotiations probably have arguments in favor of this refinery.

The expert on Central Asia of the information center Trend, Viktoria Zhavoronkova says that intensity of the negotiations makes us understand that construction of the facility is interesting both for Kyrgyzstan and Azerbaijan. “According to recent agreement, the scheme of future functioning of the refinery will be the following: the refinery is planned to be built in the north of Kyrgyzstan close to Kazakhstan,” she told VK. The refinery will belong to SOCAR, while Kyrgyzstan will allocate territory for the construction and provide it with functional infrastructure.

Transportation of oil from Kazakhstan is the most beneficial variant, which enables minimization of produced petroleum cost, she thinks. “Delivery of finished products from Azerbaijan to Kyrgyzstan will increase their cost, considering geographic distance. That is why Kyrgyzstan hasn’t considered Azerbaijan as a petroleum exporter previously,” Zhovoronkova said.

Russia – the main petroleum exporter to Kyrgyzstan – risks losing one of outlet markets, as in case of beneficial price Kyrgyzstan is ready to buy 100% of petroleum produced at the refinery. This amount will cover the whole oil demand in the republic, the expert thinks.