TURKMENISTAN - The Refining Sector.

Refined oil products for local use and for exports are processed at the two refineries, which have a nominal total capacity of 237,000 b/d and are located at Seidi (formerly Chardzhou) and Turkmenbashi (which used to be known as Krasnovodsk).

The refining sector is controlled by the state company TurkmenNefteGaz, which is also responsible for the sale of oil and gas to the domestic market. The company was created in July 1996 when President Niyazov reorganised the energy sector under the Ministry of Oil and Gas Industry and Mineral Resources, formerly the Ministry of Oil and Gas.

The planned throughput at the two refineries for 2004 is 8.2m tons. During the first half of 2004, throughput at the two refineries amounted to 3.4m tons, which was 6.3% more than in the same period last year. Production of LPG and NGLs in the same period increased 50% to 165,500 tons.

Production of polypropylene (PP) in the first half of 2004 went up 26% to 40,600 tonnes. PP is mainly exported.

The Turkmenbashi Refinery: Located on the Caspian coast in western Turkmenistan, this refinery has a capacity of 116,500 b/d. It is being modernised and upgraded under a $1.4 bn programme consisting of several projects.

One of the upgrades was implemented by Merhav Corp. of Israel under a $500m contract signed in February 1996. The company arranged financing from Japanese, German, French and Turkish export credit agencies; and since 1996 the Israeli company has been acting as the official contractor to TurkmenNefteGaz. Merhav has since established a strong presence in Turkmenistan. In 1997 it played a key role in two deals worth $580m by undertaking to arrange the finance for both.

The first involved a $400m polypropylene plant built at the Turkmenbashi refining complex. The plant came on stream in late 2001. The contracting group included three Japanese companies, Itochu Corp., JGC and Nissho Iwai. This is Turkmenistan's first polypropylene plant.

The second deal involving Merhav was a $180m contract awarded to Jewish-owned Bateman Project Holdings of South Africa to develop a gas booster system. The first stage was located on the Central Asia-Centre gasline, Turkmenistan's only gas export pipeline via Russia to Europe. It built a compressor station on the Uzbek border. Bateman Engineering Group of Israel was the main contractor in the venture.

Merhav built a lube oil unit and a 36,000 b/d catalytic cracker, and expanded the refinery's catalytic reforming capacity. The catalytic cracker was built by Technip of France under a $200m contract signed in August 1997. Reports later indicated that a 15,000 b/d catalytic reformer was built at the refinery by Chiyoda Corp. and Nichimen of Japan, together with Gama of Turkey.

Technip has just built a lubricants blending plant, which is much in demand in Turkmenistan. The plant was completed recently.

Merhav is acting as "the ordering party" for construction of a second polypropylene unit at the Turkmenbashi refinery.