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Kommersant, Russia
Jan 26 2007
The Light at the End of the Pipe
// Russia builds an oil refinery in Armenia to annoy the United
States
Gazprom Neft confirmed yesterday that it is considering building an
oil refinery in Armenia. Kommersant has learned that the proposed
plant would have a capacity of 7 million tons of oil per year and be
located on the border with Iran. The refinery would cot 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
political dividends.
Gazprom Neft officially confirmed for Kommersant that it is
considering the project, which was proposed by Armenian President
Robert Kocharyan and approved by Russian authorities. The company
declined to comment on the details of the project, saying that a
final decision has yet to be made and `discussion is at the initial
stages.'
Sources say that the Armenians 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 train, on a line that, like the pipeline from Tabriz, does not yet
exist.
A well-informed Kommersant source said that the project was discussed
with Gazprom Neft, Industry and Energy Minister Viktor Khristenko and
Russian Railways head Vladimir Yakunin during Kocharyan's visit to
Moscow. (Russian Railways would have to build a rail line to the
refinery.) Only Gazprom Neft would confirm the idea though. The
Industry and Energy Ministry declined to comment on the meeting.
Yakunin told Kommersant that that he met with the Armenian president
and discussed the construction of a rail line between the countries,
but that no refinery was mentioned. Kocharyan's press service said
that the president's visit to Russia was `of a private nature.'
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.' Experts also
note that transportation of the large equipment necessary for the
plant would account for much of its cost. The site's distance from a
seaport could double the price of its construction. 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.
Mikhail Perfilov, business development director of Fearnleys oil
shipping company noted that `Armenia has no oil of its own and no oil
trunk lines. So crude oil imports will be expensive and
transportation costs will make export of the petroleum products more
expensive.' Perfilov said the Tabriz and Tehran oil refineries in
northern Iran buy their raw materials in Kazakhstan, Turkmenistan and
Russia. An oil company source said that high transportation costs
would make the refinery's products uncompetitive with Iranian
products. It can be suggested, therefore, that the Armenian refinery
is a political project.
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 U.S. 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. Russia is, of course, risking new upheaval in its relations
with the U.S., although there would be no formal grounds for
objection.
Denis Rebrov, Gennady Sysoev; Ara Tatevosyan, Yerevan
Jan 26 2007
The Light at the End of the Pipe
// Russia builds an oil refinery in Armenia to annoy the United
States
Gazprom Neft confirmed yesterday that it is considering building an
oil refinery in Armenia. Kommersant has learned that the proposed
plant would have a capacity of 7 million tons of oil per year and be
located on the border with Iran. The refinery would cot 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
political dividends.
Gazprom Neft officially confirmed for Kommersant that it is
considering the project, which was proposed by Armenian President
Robert Kocharyan and approved by Russian authorities. The company
declined to comment on the details of the project, saying that a
final decision has yet to be made and `discussion is at the initial
stages.'
Sources say that the Armenians 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 train, on a line that, like the pipeline from Tabriz, does not yet
exist.
A well-informed Kommersant source said that the project was discussed
with Gazprom Neft, Industry and Energy Minister Viktor Khristenko and
Russian Railways head Vladimir Yakunin during Kocharyan's visit to
Moscow. (Russian Railways would have to build a rail line to the
refinery.) Only Gazprom Neft would confirm the idea though. The
Industry and Energy Ministry declined to comment on the meeting.
Yakunin told Kommersant that that he met with the Armenian president
and discussed the construction of a rail line between the countries,
but that no refinery was mentioned. Kocharyan's press service said
that the president's visit to Russia was `of a private nature.'
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.' Experts also
note that transportation of the large equipment necessary for the
plant would account for much of its cost. The site's distance from a
seaport could double the price of its construction. 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.
Mikhail Perfilov, business development director of Fearnleys oil
shipping company noted that `Armenia has no oil of its own and no oil
trunk lines. So crude oil imports will be expensive and
transportation costs will make export of the petroleum products more
expensive.' Perfilov said the Tabriz and Tehran oil refineries in
northern Iran buy their raw materials in Kazakhstan, Turkmenistan and
Russia. An oil company source said that high transportation costs
would make the refinery's products uncompetitive with Iranian
products. It can be suggested, therefore, that the Armenian refinery
is a political project.
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 U.S. 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. Russia is, of course, risking new upheaval in its relations
with the U.S., although there would be no formal grounds for
objection.
Denis Rebrov, Gennady Sysoev; Ara Tatevosyan, Yerevan