The market for oil and gas downstream in Azerbaijan is expected to register a CAGR of more than 1.21% during the forecast period of 2020 – 2025. Factors, such as increasing demand for natural gas and rising production of oil and gas, coupled with increasing demand for petroleum products in the country, are expected to boost the demand in the market during the forecast period. However, a decrease in oil consumption is expected to impede the growth in the market.
- In a process to modernize the downstream industry, new petrochemical plants integrated with the old refineries are making headway. The increase in investment is expected to augment the growth in the market.
- The government may reduce the sulfur contents in the refined crude oil to follow the climate agreement. Modernizing the desulfurization process is expected to create an opportunity in the downstream sector in the near future.
- An increase in the production of oil and natural gas is expected to drive the market in the forecast period. An increase in production of oil and gas increases the refinery throughput and increases exports to other countries.
Key Market Trends
Petrochemicals Plants to Witness Growth
- In 2018, a new bitumen plant was installed in an effort to modernize the Heydar refinery, completing the first phase of the 120,500 barrels per day refinery’s long-planned modernization project. The project is expected to bring growth in the sector.
- In 2018, Heydar Aliyev Baku Oil Refinery was processing 21 out of 24 grades of Azerbaijan crude and 15 different petroleum products, including automotive gasoline, aviation kerosene, diesel fuel, black oil, petroleum coke, and others. The plant is meeting the republic's entire demand for petroleum products completely.
- Natural gas production in the country increased by 5.6%, from 15.3 million metric ton oil equivalent (Mtoe) in 2017 to 16.1 Mtoe in 2018. Natural gas consumption in the country increased by 1.9%, from 9.1 Mtoe in 2017 to 9.3 Mtoe in 2018. An increase in natural gas consumption is likely to be used as a feedstock for the petrochemical industry.
- Hence, a further increase in petrochemical plants is expected in the forecast period, due to the government’s efforts to modernize the downstream sector.
Increase in Production of Oil and Natural Gas to Drive the Market
- Azerbaijan's one of the most essential crude oil blends is the BTC, with API gravity of 36.6, a high quality, and low sulfur 0.16% crude oil. The oil grade is of excellent quality and requires a low level of refining maintenance and equipment.
- Oil consumption in the country decreased by 2.1%, from 4.7 million metric ton of oil equivalent (Mtoe) in 2017 to 4.6 in 2018. Oil production increased by 0.3% from 39.1 million metric ton of oil equivalent (Mtoe) in 2017 to 39.2 Mtoe in 2018.
- In Azerbaijan, the capacity of refineries remained stagnant at 205 thousand barrels daily (kb/d) in the 2015 – 2018 period. The refinery throughput increased considerably by 6.2% to 125 kb/d in 2018 from 118 kb/d in 2017. As the production of oil and gas increases, throughput is also expected to increase in the forecast period.
- Hence, the Azerbaijan oil and gas downstream market is expected to grow slightly in the forecast period, due to an increase in oil and gas production in the country.
The Azerbaijan oil and gas downstream market is consolidated. The major companies include the State Oil Company of the Azerbaijan Republic, Royal Dutch Shell PLC, Total SA, KBR Inc., and TechnipFMC PLC.
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