Oil products “Made in Armenia” will become reality, with oil refinery to be launched in Armenia this August

ArmInfo. Construction of oil refinery in Armenia is rather a serious and unique project in the region,Mr. Alfred Abedi, Managing Director of "Armoil" CJSC, says in an interview with ArmInfo. “Basing on years-long experience in the UAE, Iran, some European, Asian, African countries, as well as the operating plants in Dubai and on the African continent, Henrik Ter-Ghukasyan founded the first of its kind ‘Armoil’ Company to make the Armenian brand recognizable in the world.”

As you have said the construction of oil refinery in Armenia is rather a serious project connected with many risks.  How did that idea emerge? What this will eventually give to our country?

Armenian market of oil products has many gaps to address. First and foremost, it lacks professional approaches. Conducting various surveys, the company’s shareholders made a business plan, appealed to the Government of Armenia, and fortunately received its approval. Our engine oils are widely presented in Kazakhstan, Belarus. In European countries, we offer the products manufactured at Lubrex Company in Dubai. However, there were quite serious problems with transportation of goods from Dubai to those countries.  By manufacturing similar products in Armenia from highly-quality raw materials imported from Iran we will settle these problems. This will foster economic growth in Armenia turning some “geographical cons” into “pros” and supplying high-quality raw material from Iran.  Oil products «Made in Armenia» are our goal.

I’d like to mention another, not less important circumstance. It appears that asphalting of local roads is a permanent process in the country. I think the reason is the low-quality and sometimes even hazardous products.  After all, it is high time to understand that having no oil reserves is not a reason to avoid being represented in the oil market. Germany has no oil reserves, but it produces the highest quality of oil products in the world. In addition, the countries having big oil reserves are not always interested in oil refinery. Many just recover and sell it.

How much do you plan to invest in the project and when it will be implemented?

The construction of the oil refinery is a part of the project on development of the oil-refining sector of Armenia. The investment program will be implemented in three stages, with the total amount of investments to be $35mln. The first stage of the project envisages construction of the oil refinery in Yeghvard. It will be equipped with German, Italian and Iranian machinery.  According to the business plan, the production capacities of the enterprise will initially be 15 thsd tons of engine oil and 6 thsd tons of tar oil per annum. In the future the plant will have an opportunity to process waste oil and use it as a raw material. This will help to prevent environment pollution. The plant will have a unique specialized laboratory in the region, which will be equipped with up-to-date facilities for testing and examining the compliance of products with international standards.

The company seeks to produce oil products for 100 million drams for the domestic market alone. The plant will occupy an area 5 thsd sq m with possible further enlargement to 15 thsd sq m. It will also have underground and ground-mounted storage facilities to store 4 thsd tons pf diesel, 2 tons of bitumen, and 2-3 thsd tons of raw materials, as well as   20 thsd tons of finished products.  The office buildings will be build on the site, while the storages, laboratories and other premises will imported as fabricated part and assembled on the site. Nearly 15 mln USD will be invested in the first stage of the project and this stage is expected to be over in August 2016. The oil refinery will have 150 employees.  The entire project envisages creation of 350 jobs at an average salary of 200-250 thsd AMD.

I’d like to say that we have a special approach to the staff recruitment.  The company’s leadership comprehends the importance of highly qualified specialists for the establishment and development of the company. Therefore, qualification upgrade courses are held at the plant of Lubrex Comp-any in Dubai. As for the second and the third stages of the investment program, I think it is early to publicize any details. What I want to say is that further steps will be taken towards development of the oil-refining sector and that the success will depend on the outcome of the negotiations with the partners.

What do you think of the oil market in Armenia, amid statements on monopolization threats? Do you expect any clashes of interests with other big actors in the market?

For the given case, I do not understand what it means. I do not think there is monopolization of the market of oil products in Armenia.  Oil business is a serious strategic direction of business, as fuel supply to the country is a strategic task. The companies having enough qualification and resources to supply the necessary volume of oil products to the country have the right to satisfy the country’s demand for oil. At present, “Armoil” offers a wide range of oil products. I can say that we have no problems with either Rosneft or any other supplier company, as we are always open for long-term cooperation.  At present, we are negotiating with Russian company for possible cooperation. The prospects of cooperation with new players of the local aviation market are also being discussed.    

The key word here is – professional. That is, if professional tackles an issue, there is no need to do anything with reservations, to try to justify omissions or lay one’s guilt on others. For instance, dumping is one of the efficient ways of competitive fight. In this fight the winner is the one that has a positive background and makes right calculations. The oil product market in Armenia is too small. For comparison, the annual engine oil consumption in the country is equal to our monthly sales volume in Iran. The goal of “Armoil” and its founder Henrik Ter-Ghukasyan is to create a local, Armenian brand. And we have absolutely no desire either to compete here with anyone or forcefully enter anyone’s business.

Did you take into account the global market trends when developing your project? Don’t you think that the sliding oil prices may affect the company’s further activity?

Risks always exist.  On the one hand, it appears that the falling prices are in favor of our company, as we are buying raw materials at a lower price. On the other hand, for instance, we buy 20thsd tons of fuel from Turkmenistan every month, and the products reach us in two-three months after tenders, while the world oil product prices are going up and down constantly. So, this may affect the sales price of our products. This business is connected with permanent risks and depends on precise and timely calculations and measures. 

To recall, the investment program of the company was approved at the Government's session on December 24, 2015.  The then Minister of Economy of Armenia, Karen Chshmarityan, said that the ministry suggests exempting the company from VAT for 3 years - until 5 January 2017. The minister said that the first stage of the project implied creation of a storage base for nearly 4,000 tons of oil derivatives.

To note, "Armoil" CJSC carries out its activities in the petroleum market in Armenia and CIS countries by presenting petroleum products and engine oils. The company was founded in 2013 by founders who have more than 20 years of professional experience in this area. Before founding the company in Armenia they carried out their activities in the UAE, Iran, some European, Asian, African countries. "Armoil" CJSC is the official representative of the famous brand "Lubrex" in Armenia and in the CIS countries and it imports the engine oils from the UAE. "Armoil" offers a wide range of engine oils, hydraulic oils, gear oils, transmission fluids, compressor oils, brake fluids, antifreeze, greases, diesel fuel, bitumen and etc.