Agency WPS
The Russian Oil and Gas Report (Russia)
January 29, 2007 Monday
GAZPROM NEFT MAY BUILD A REFINERY FOR IRANIAN OIL
On January 25, 2007, Gazprom neft confirmed that it is considering
building an oil refinery in Armenia. The proposed plant would have a
capacity of 7 million tons of oil per year and will be located on the
border with Iran. The refinery would cost a minimum of $1.7 billion,
not counting transportation infrastructure, which would cost an
additional $1 billion. Industry analysts say that the project is
senseless from an economic point of view and attribute interest in it
to political considerations. An oil refinery in Armenia would indeed
be a political undertaking and provide the participants with
significant political dividends.
Armenia originally suggested a refinery with a capacity of 3-4
million tons per year. The Russians, however, responded by suggesting
that the capacity be doubled, although Armenia’s consumption of
petroleum products does not top 250,000 tons a year. The location of
the plant, on the Armenian-Iranian border near Megri, explains the
excess. Oil would be received by the plant from Iran through a
200-km. pipeline from Tabriz, where a refinery already exists.
Petroleum products would be transported back to Iran by rail, on a
line that, like the pipeline from Tabriz, does not yet exist.
Experts say that there is no economic basis for the proposed
refinery. Alfa Bank’s Andrey Fedotov estimated that a refinery with
that capacity would cost "a minimum of $1.7 billion." Troika Dialog
analyst Valery Nesterov estimates that a pipeline in that terrain
would cost about $400 million. The cost of the rail line was
calculated earlier. The Armenian Ministry of Transportation suggested
that a line from Marand (near Tabriz) to Jermuk and Megri would cost
$700-1000 million. Thus the total cost of the project would be no
less than $2.8 billion.
It may be suggested that the Armenian refinery is a political project
political dividends are the likely motive for participants.
Armenia’s interest in the refinery is obvious. After relations
between Moscow and Tbilisi deteriorated and Georgia adopted a
pro-NATO and pro-U.S. stance, Armenia was threatened with being cut
off from Russia, its main strategic partner and sponsor. Shipments
from Russia to Armenia could become problematic and Armenia could
find itself facing its enemy Azerbaijan alone. The refinery would
allow Yerevan to preserve some of its current status in the region.
The refinery could be beneficial to Iran in case the US decides to
undertake military action against Tehran. Experts suggest that the
Americans would most likely hit strategic objects in Iran with
missiles, destroying all Iranian refineries within days. The
Americans would not hit a partially Russian-owned refinery in
Armenia.
Source: Kommersant, 26/01/07