Interview with Negin Siah Azerbaijan Refinery

Interview with Negin Siah Azerbaijan Refinery

The World of Petroleum and Bitumen Journal had a meeting with Mr. Valizadeh, CEO of Negin Siah Azerbaijan Refinery, on the recent news and events of the Iranian bitumen market, as follows:

– First of all, please tell us about the history, products and target markets of Negin Siah Azerbaijan Refinery.

The first phase of the project of Negin Siah Azerbaijan Refinery was planned in the beginning of 2013 with the great efforts of Mr. Asghar Daghighi and our country’s highly educated and distinguished engineers and was implemented on a land of 20,000 square meters in 1392 (2013), the year that was named the Year of Political and Economic Epic by Iran’s Supreme Leader. This phase was aimed at having a small share in advancing the goals of the so-called resistance economy and playing a role by being present in competitive markets through offering superior products with excellent production quality.

The second phase of the project started in 2020 with the efforts of local experts and hardworking personnel of the company and was put into operation in 2021. The products of this company include pure and functional PG bitumen, bitumen 60-70, 85-100, 40-50, 200-300, 160-200, PG58-22, PG64-22, with an annual production capacity of 360,000 tons and the tank capacity of more than 17,000 tons.

With an active presence in the labor market, this company is one of the prominent companies in supplying bitumen to the executive bodies of the government, including the Ministry of Roads and Urban Development, Islamic Revolution Housing Foundation, Municipalities and Village Administrations Organization, Organization for Development, Renovation and Equipping Schools, and Construction Mobilization Organization.

– What problems and challenges does Negin Siah Azerbaijan Refinery encounter in this industry as a bitumen producer? and what is the solution to these problems?

The most important challenge this company faces as a bitumen producer is the procurement of raw materials, i.e., vacuum baton, which must be obtained through the National Iranian Oil Company. Due to the fluctuations of petroleum derivatives in the global market, the impact on the price of raw materials and thus on-time supplying is not reasonable.

When the price of petroleum and thus vacuum baton increases, the petroleum refineries reduce the supply of vacuum baton, finally causing a fierce competition between bitumen producers and increasing the price of vacuum baton. On the other hand, since the main customers of bitumen producers are the executive bodies of the government, and bitumen is purchased due to the lack of long-term credit, this causes the lack of timely return of capital and the lack of working capital in the factory.

– How do you evaluate the potential of the domestic market compared to the bitumen produced in the country? Then, do you consider the supply and demand of this product sufficient?

As I said before, most of the customers of bitumen producers are the executive bodies of the government and municipalities, and the maximum consumption of construction projects is between two and three million tons in a financial year. This is while the domestic production is more than six million tons by the bitumen companies of the private sector and some refineries. Thus, there is an imbalance between supply and demand, which causes stagnation, suspension and damage to the production companies. We request the government officials to consider rules and arrangements for the export of the production surplus to neighboring countries, even Europe, without any obstacles.

– What is your opinion about the philosophy of bartering bitumen? and please explain whether this process and the government’s support process is in the interest of bitumen production companies.

Bitumen is not only very important in economic discussions, but it has become a controversial issue for several years in various economic and political sectors. The philosophy behind bartering bitumen is to complete road construction projects in the working season, to help the projects of eliminating deprivation from rural areas and in general to protect the asphalt of the country’s road network. On the other hand, this law provides the executive bodies with a lack of liquidity and credit with an opportunity to carry out executive works in the working season.

– Respecting the daily news and the decrease of about 30 percent in Iran’s bitumen export compared to last year, please state your opinion about the cause of this event?

According to the customs statistics, the export of Iran in Farvardin this year (March 21 to April 20, 2022) has decreased by about 30 percent compared to the same period last year. There are several reasons for this. On the one hand, the world’s great bitumen exporters have tried to create an advantage for themselves in the global markets, which has decreased the price difference between Iran’s bitumen and that of countries such as Korea and Singapore. On the other hand, construction budgets have decreased, especially for road construction in target markets, which has reduced the global demand for bitumen. The biggest current problem for the decrease in Iran’s bitumen export can be the significant entry of Iraqi bitumen into the world markets through Iran’s transit, whose FOB Bandar Abbas price is lower than the EXW price of raw materials provided by refineries to bitumen producing companies through the exchange market.

– In continuation of the previous question, is it possible that the percentage of Iran’s bitumen export will decrease even more than this amount compared to last year?

It can be said that it depends on the following factors: JCPOA agreement, the removal of sanctions, global petroleum price fluctuations, and currency fluctuations within the country and bitumen buyer countries.

– Considering that Azerbaijan (Eastern and Western) is one of the major centers of bitumen production in Iran, is there a significant difference in the quality of the bitumen of this region compared to other regions of Iran?

The quality of bitumen depends on the raw materials (vacuum baton) of the petroleum refinery, which is exclusively produced and supplied. Secondly, any product with more supply and less demand creates a competition between producers which increases the quality of that product.