SOCAR Turkey: TANAP’s commercial operation not affected by global crises
Trend’s exclusive interview with Murat LeCompte, Chief External Affairs Officer at SOCAR Turkey
Trans Anatolian Natural Gas Pipeline (TANAP)
The Trans Anatolian Natural Gas Pipeline, which is the most important section of the Southern Gas Corridor, is a backbone of the natural gas transmission infrastructure needed by Turkey to become the east-west energy center.
TANAP, which started gas supplies to Turkey from June 2018, has been operating in line with our goals. The volume of gas supplies from Azerbaijan to Turkey via TANAP will reach a total of 6 billion cubic meters from June 30, 2020, after two years since the start of commercial operation.
The global economic and social crises do not cause any delays in TANAP’s commercial operation, since under the 15-year gas transportation agreements with predetermined volume of transportation and tariffs, a constant transport income is guaranteed every year.
STAR Refinery with investment value of $6.3 billion, meets 25 percent of Turkey’s demand for refined petroleum products alone. Its refining capacity is 10 million tons of crude oil per year.
STAR Refinery produced 3.6 million tons of diesel, 1.2 million tons of jet fuel, approximately 800,000 tons of naphtha, 200,000 tons of liquefied petroleum gas (LPG), 600,000 tons of reformat and 400,000 tons of petrocoke as of the end of 2019. The volume of crude oil refined at STAR Refinery in 2019 reached 7.1 million tons. The start of domestic sales by STAR Refinery in 2019 contributed to around $2 billion worth of import cuts to Turkey.
STAR Refinery, which fully meets Petkim’s naphtha demand, started 2020 quite well. However, with the outbreak of COVID-19 worldwide, some changes in the production plans in this period came up. The demand for jet fuel went down rapidly, as the aviation and logistics industry was affected by the pandemic. Thanks to its advanced technology and operational flexibility, STAR Refinery continued production by converting 1.6 million tons of jet fuel production capacity to diesel. STAR Refinery’s priority is to ensure naphtha production, which is the main raw material of Petkim and meet Turkey’s domestic demand. Therefore, export has low preference for us. Meeting the domestic demand was a priority for us also during the period from January through May.
During the first years of STAR Refinery’s operation, predominantly refined crude oil was imported from Russia. Afterwards, we started purchasing crude oil from various countries, especially, from the Middle East and Africa. STAR Refinery has a lot of options in this regard. STAR Refinery, which has the most modern technology and can refine 214,000 barrels of oil per day, is able to refine more than 100 types of oil. Naturally, it provides flexibility to the refinery. With special models developed, we are able to buy crude oil at the best price and quality under the market conditions.
The sources of import and volumes also change depending on the modeling. Of course, we always continue studying new import sources.
STAR Refinery, which performed successfully in 2019, indeed, made a good start to 2020 as well. However, after detecting the first COVID-19 case in Turkey on March 11 and the subsequent developments, STAR Refinery had to change its production plans. As a result of the rapid fall in jet fuel demand starting from April due to travel restrictions caused by COVID-19 pandemic, we converted our jet fuel capacity to diesel. With this operation, our refinery continued to operate at full capacity without disrupting its production. As a result, the total volume of crude oil refining at STAR Refinery stood at 4.3 million tons in the first five months of 2020.
We continue making additional investments to increase the operational flexibility and storage capacity of STAR Refinery. In order to increase operational flexibility and profitability, we implemented three projects that included additional storage and piping investments in 2019.
We opened the SOCAR Storage Terminal Tank Expansion Project, one of the two projects implemented in this context, in September 2019. We also laid the foundation of STAR Refinery Crude Oil and Oil Intermediates’ Tanks Project.
Product storage capacity of STAR Refinery will reach 2.5 million cubic meters with new investments.
Petkim Petrochemical Complex
Petkim Petrochemical Complex, which is the first and only integrated petrochemical plant of Turkey, is of strategic importance for Turkey’s economy and industry with its 55-year history. Despite the contraction in the petrochemical industry in 2019, Petkim achieved a historical record in production with 3.4 million tons in 2019 and operated with a high production capacity of 97.2 percent throughout the year.
The first half of 2020 was a challenging period for many sectors due to the COVID-19 pandemic, which impacted the whole world. However, as a result of the synergy with the STAR Refinery, which started operating in the last quarter of 2018, Petkim increased its production by 1.7 percent compared to the same period of the previous year, from 788,000 tons to 802,000 tons even at the peak of the pandemic.
Petkim played a crucial role in supplying of plastic, medical and raw materials for the packaging industry as part of the fight against COVID-19. It uninterruptedly supplied raw materials needed in this difficult period in Turkey. Petkim once again showed that it is the safe supplier of the Turkish industrialist. The total sales revenue of Petkim reached 2.8 billion Turkish liras in the first three months of 2020, which is similar to the amount recorded in the same period of 2019.
In order to turn Petkim into the most digitalized company of Turkey and Azerbaijan, we launched the “digitalization period” in 2018. The digitalization team at Petkim has up to now implemented more than 40 projects and financial implementation was ensured with 20 active projects within the digitalization program. All those projects were implemented with such technologies as machine learning, artificial intelligence, image recognition, robotic process automation.
Thanks to the digital projects implemented, Petkim was able to increase its efficiency under the current conditions, throughput, energy efficiency and product quality. These projects also ensured efficiency and improvement in the businesses of financial units and human resources units. These improvements are reflected in financial results as well. Thanks to the digitalization projects implemented so far, Petkim will get additional revenues in the amount of approximately $43 million in the coming years.
Since Petkim is a publicly traded company listed on the Istanbul Stock Exchange, it is not possible for us to provide information about production figures in the first five months of 2020 at the moment. However, despite the COVID-19 pandemic, which affected the whole world, Petkim performed quite well in the first three months of 2020.
Petkim played a crucial role in supplying of plastic, medical and raw materials for the packaging industry as part of the fight against COVID-19. In order to meet the demand, Petkim operated 7/24 to produce raw materials of medical supplies and packaging demanded by Turkey.
On the other hand, as a result of the steps taken for normalization of the situation starting from June 1, the demand of other sectors for Petkim’s raw material also increased. This allows to expect positive results for the end of the year.
SOCAR-BP petrochemical complex project
Before the COVID-19 outbreak, in 2019, we announced about a project to construct a petrochemical plant in Aliaga, Izmir jointly with our partner. This plant will allow to reduce Turkey’s Pure Terephthalic Acid (PTA) imports to zero and at the same time, to produce currently imported 800,000 tons of paraxylene (PX) domestically in Turkey.
This project is extremely important in terms of reducing the dependence of Turkey’s plastic sector on raw materials’ import.
We were planning to make the final investment decision based to the results of field studies in 2020. However, due to the pandemic, we had to change the plans for field works to protect the health of our employees and postponed our work to 2021.
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