Azerbaijan-Türkiye synergy paves way for development of fuel sector roadmap
SOCAR consolidates its role in Turkish market

ANALYTICS  20 March 2024 - 12:11

Over the past decade and a half, the State Oil Company of Azerbaijan (SOCAR) and its subsidiaries have invested billions of dollars overseas to become one of the world's leading international oil and gas companies. These investments have covered the logistics and transportation of oil and gas, the petrochemical industry, the production of fuels and the retail sector - the development of a network of petrol stations.

The most significant project implemented by SOCAR Türkiye Enerji since 2008 is the development of the Petkim Petrokimya Holding petrochemical complex in Türkiye, with an investment of $1.7 billion. Elchin Ibadov, Director General of SOCAR Turkiye Enerji, recently spoke to the Turkish newspaper Dunya about the achievements and new plans of the state oil company's Turkish unit.

The state oil company's assets include such large-scale projects as the construction of the Black Sea oil terminal in the Georgian port of Kulevi, the creation of a gas distribution system and the establishment of a fuel retail network in Georgia; SOCAR's subsidiaries own a network of petrol stations in Ukraine and several countries in Eastern and Central Europe. With the growth of foreign capitalisation, SOCAR is now positioned as a transnational company: representative offices, trading (SOCAR Trading) and retail subsidiaries of the state oil company have been established in Georgia, Türkiye, Romania, Austria, Kazakhstan, the UK, the USA, Iran, the UAE, Germany, Ukraine, Belgium, Switzerland, Singapore, Vietnam, Nigeria and Russia.

In recent years, Azerbaijani trading units have been very active in such promising regions as the Black Sea, the Mediterranean and Southeast Asia, playing a great role in oil transhipment and liquefied natural gas (LNG) swaps. In addition, three of SOCAR's largest Aframax oil tankers, each with a capacity of 115 thousand tonnes of raw materials, are currently involved in various intermediary operations for the transhipment of liquid hydrocarbons in the seas and oceans.

The prospect of participation of Azerbaijani traders in projects to develop the production of hydrogen fuel (including "green" hydrogen) and its supply to world markets is no less significant. Last year, however, the Swiss subsidiary of SOCAR Energy Switzerland began construction of the first hydrogen filling station in Grauholz Süd, not far from the Swiss capital, Bern. In the future, projects for the retail sale of hydrogen fuel through the company's own network of SOCAR-branded filling stations will be expanded.

The foreign activities of SOCAR's subsidiaries are aimed at diversifying the state company's capital investments and are a kind of insurance against global force majeure, in addition to direct profits from participation in logistics, production, trading or retail projects. This policy, which improves both the financial performance of the national oil company and the country's credit rating, has repeatedly received well-deserved praise from rating and donor agencies. In general, in the second half of last year, SOCAR's total investment in projects abroad exceeded $20 billion and continues to grow dynamically, considering new projects.

It should be noted that the largest and most capital-intensive foreign project of SOCAR was its participation in the privatisation, subsequent modernisation and expansion of the petrochemical complex in Türkiye. Over 15 years, a total of $18.3 billion was invested in this and other projects in the brotherly country. It is worth recalling that SOCAR Turkiye Enerji currently owns the majority (51%) of the Petkim Petrokimya Holding petrochemical complex in Izmir. SOCAR's Turkish subsidiary has also invested in the construction of the STAR refinery, a container terminal, and a power plant, and is currently involved in projects to supply gas to the domestic market and to supply fuel to aircraft refuelling points at airports in many major Turkish cities.

"Since 2008, SOCAR Türkiye Enerji has invested $1.7 billion in the development of Türkiye's Petkim Petrokimya Holding petrochemical complex, in addition to privatisation investments of $2.04 billion," Elcin Ibadov, CEO of the Turkish subsidiary, told the Turkish daily Dunya. - At present, the Petkim complex is the first and only integrated petrochemical company in Türkiye, which is of strategic importance for the Turkish economy".

Thanks to this investment, Petkim, together with the STAR refinery, is making a significant contribution to diminishing the Turkish market's dependence on imports. It covers approximately 12 per cent of the country's petrochemical needs. At present, Petkim's petrochemical complex comprises 15 production plants and six auxiliary plants, with an average annual gross production capacity of 3.6 million tonnes and around 60 types of petrochemical products. These include ethylene and polyethene, polyvinyl chloride, polypropylene and other polymers used in the production of plastic and textile products, detergents, plastic pipes and other products for the needs of the construction, agricultural, automotive and pharmaceutical industries, etc.

Meanwhile, the STAR refinery, which was commissioned in October 2018 and is designed to process 20 grades of oil (including Azeri Light, Kerkuk and Urals) and reached a refining capacity of 12 million tonnes of oil per year last year (with plans to increase the capacity to 13 million tonnes per year in 2024), currently meets around 20% of Türkiye's needs for aviation fuel, diesel fuel, petrol and other petroleum products.

It is noteworthy that the uninterrupted supply of chemical raw materials and components produced in Azerbaijani plants to Türkiye is ensured by the integration of Petkim's technological processes with the operation of Azerikimya State Company's petrochemical plants in Sumgayit, creating an effective production and commercial synergy.

"In 2024, SOCAR Türkiye Enerji will continue to invest in the STAR refinery integrated with the Petkim petrochemical complex to increase the refinery's capacity," Elchin Ibadov said. He stressed that the company will continue to raise its production capacity, and commercial and operational capabilities to the highest standards following the roadmap.

According to Ibadov, new projects are currently being developed in the petrochemical sector, which is one of the most important components of the Turkish energy sector: "Taking into account our knowledge and experience, in the coming months we will start working on a master plan to evaluate investment alternatives and prospects for their implementation, which will ensure the most accurate and efficient contribution for our two countries".

The medium-term development plans of SOCAR Turkiye Enerji include expanding international trade in petrochemicals, increasing exports of electricity and natural gas, investing in improving the reliability of logistics and storage systems, and sustainable aviation fuel operations. New investments in Türkiye's provinces to ensure the continuity and efficiency of natural gas supplies are also on the company's agenda.

Between 2019 and 2023, the Turkish company will invest $170m in the gas distribution companies KayseriGaz and BursaGaz, ensuring the casing of around 1.9 million customers. In the short term, SOCAR Turkiye Enerji's focus is on the development of gas distribution networks in line with customer needs.

Caliber.Az