REFINERY NEWS: Georgia gives go ahead for first refinery to wean off dependence on Russia

Georgian authorities have given the green light to Black Sea Petroleum, a little-known private company based in Tbilisi, for the construction of the country’s first oil refinery on the Black Sea coast.

The refinery is set to be built in stages in Kulevi near the Kulevi oil terminal, with an initial capacity of 1.121 million metric tons per year, or some 22,000 b/d, according to official project documents published on a local government website in August. In addition, the project documents indicate plans to build a tank farm for 89,000 cu m.

The refinery will be "a modern high-tech plant with a complete infrastructure that meets European standards," according to the documents.

In the future, the refining capacities will be ramped up to 2.921 MMt/y and tank farm capacity to 440,200 cu m, although no concrete time frame for the expansion was given.

Black Sea Petroleum expects the Kulevi plant to deliver petroleum products to both the domestic market and export markets, according to explanatory notes in the project documents.

A spokesperson for Black Sea Petroleum declined to give further details of the project.

Russian dependence

If completed, the refinery will help Georgia wean off its dependence on imports of petroleum products from Russia, which have proven to be less reliable in recent years, according to Vakhtang Mgeladze, a Tbilisi-based independent analyst.

In 2023, Georgia imported 1.42 MMt of petroleum products, amounting to $1.16 billion, Mgeladze told S&P Global Commodity Insights on Aug. 20. In the first half of 2024, imports totaled 742,000 metric tons, worth $632 million.

"The refinery establishment will let [Georgia] substantially diversify the flow of affordable petroleum products [to the domestic market]," Mgeladze said.

Russia has traditionally been the largest supplier of petroleum products to the country, and Georgia also imports petroleum production from Azerbaijan and the European Union. However, recent drone attacks on Russian refineries have raised concerns over the stability of supplies to the Georgian market.

"Russia is restricting fuel exports and imposing export duties," Mgeladze said. "As a result, the Georgian oil product market suffers, witnessing a shortage of relatively cheap fuel and price hikes."