Georgia to tout oil refinery via international stocks
09 December, 2010
Georgia to tout oil refinery via international stocks

The project of a new oil refinery construction in Georgia is supposed to be put at international stock exchanges. The oil refinery is supposed to meet local market demand as well as export the oil product. 
After unsuccessful attempts to make Azeri and Kazakh investors build a new oil refinery in the country, Georgian government changes tactics and plans to tout the oil refinery idea via international stock exchanges.
Georgian demand for oil and oil product accounts for about million

tons per year, and it is fully dependent on import. Meantime Georgia extracts some oil locally [about 50 thousand tons per year] that completely is exported abroad due to absence of the oil refinery infrastructure.
An old oil refinery operating in Batumi [the Black Sea outlet of Georgia in Ajara region] since soviet times is absolutely run-down. The enterprise is now owned by Kazakh national Gas and Oil Company KazMunaiGas that planned to rehabilitate the infrastructure, but stopped the rehabilitation plan due to financial crisis in 2008.
On the other hand the State Oil Company of Azerbaijan (SOCAR) having acquired Kulevi Oil Terminal project [located near Poti, Black Sea outlet of Georgia] in 2004 pledged to build a new oil refinery with 5-10 tons of annual capacity, but did not actually as of yet. The excuse is financial crisis again.
Soso Tsiskarishvili,  an energy sector analyst,  supposes the reason is they cannot see the profit in the venture as far as construction of oil refinery demands big investments that can be paid-off only if the refinery is at least 2-3 million tons of annual productive capacity. Georgian insignificant extraction cannot insure that much volume.
Therefore the new oil refinery idea was not popular to government until this year when the upcoming Azerbaijan-Georgia-Romania-Interconnection [AGRI] project focused on transportation of liquefied Azeri gas to Romania via Georgia was born.
The AGRI idea is based on construction of LNG [liquefied Natural Gas] terminals in Kulevi and Constanta tentatively, and Georgian government’s expectation is that the LNG project coupled with the developing Free Industrial Zone infrastructure in Poti can lay ground to oil refinery project success: to meet increasing local demand and hit oversea export markets.
Georgian national Oil and Gas Corporation (GOGC) announced a tender on feasibility study of construction an oil refinery plant in this past June and an American-based OTC Capital won the tender. The feasibility study is supposed to outline the exact price and productive capacity of the oil refinery [the project tentative value fluctuates between USD 800 million and a billion, and productive capacity between 3.5-4.5 million tons per year].
To convince investors including neighboring oil exporter giants Azerbaijan and Kazakhstan that the oil-refinery project is promising Georgian government decided to put the project at international stock exchanges.
According to Aleko Khteaguri, Minister of Energy of Georgia, as soon as the feasibility study is completed a company responsible to implement the refinery project will be founded. Approximately 20-30% of stocks of this company are supposed to be put at IPO [Initial Public Offering] at international stock exchanges including London and Zurich first and foremost. The remainder 60-70% is expected to attract commercial loans to finance the oil-refinery construction works and put it into exploitation ultimately.
“And only afterwords the state will decide whether or not to keep its stocks in the Company and enjoy profits of dividends or divest its package,” Khetaguri told Georgian Journal.
To feel the ground to IPO of the projected refinery [and to attract more investments to energy sector generally] Khetaguri has already visited Kuwait and met Kuwaiti Investment Agency, Investment Fund and Financial House. However attraction of investment groups of other countries is also considered. 
“After the American company gets through with the feasibility study we will have a high-level expertise evaluation how profitable the refinery venture is. The key thing why we want to put the refinery project on IPO is to show potential investors the profit and attract more investors. And as far as stocks of the project will be put in free circulation at international stock exchanges the circle of potential investors is supposed to increase. The more foreign stockholders are attracted in the project the more companies will be able to have an insight of Georgian energy sector and got interested in new [upcoming] projects,” Khetagur eiaborated.   
He does not rule out that in construction of the oil refinery in Georgia Kazakh and Azeri investments can be attracted along with the Kuwaiti ones. Construction works are supposed to start not later than first half of 2012 and be through in 2-3 years.

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