Azernews.Az

The groundbreaking of a $5 billion oil refinery to be built by Azerbaijani state-owned oil company Socar and Turkey's Turcas (SOCAR-Turcas) was held in the Turkish city of Izmir, on Tuesday.

Turkish Prime Minister Recep Tayyip Erdogan and Azerbaijani President Ilham Aliyev attended the ceremony.

The project is the largest single private investment realized in Turkey. Expected to be operational by 2015, the Star Refinery's total oil refining capacity will be 10 million tons a year. Azerbaijan will hold a 75 percent share in the new refinery, which will supply raw materials, including jet fuel and similar oils, for Petkim, a major Turkish petrochemicals group controlled by Socar. The oil products produced there will also be exported to countries in the Meditterranean region.

Turkey currently imports up to 75 percent of its chemical products, but Socar-Turcas’ investments in Petkim will allow to reduce the figure to 30 percent and enable the country to gain access to regional oil product markets.

Observers say the new project is significant in that it will domestically produce liquid petroleum gas (LPG) and other petrochemicals of which Turkey is presently a net importer. Turkey's dependence on foreign oil and gas is the most significant reason for the country's consistent foreign trade deficit, which in turn results in a high current account deficit (CAD), Todays Zaman reported.

The project will provide jobs to 10,000 workers during the construction period, after which 1,000 will have permanent employment following its completion by 2015. It also involves the construction of a high school that will provide vocational training for Turkish and Azerbaijani students, who will later have the opportunity for jobs at the refinery.

Erdogan said the project would contribute to Turkey's 2023 economic development vision while also creating job opportunities and added value for the Turkish economy. Turkey expects to become one of the world's 10 largest economies, but the CAD problem remains one of the major challenges on that road.

"Turkey and Azerbaijan cooperate to maintain political and economic stability in the region…We share the same vision and goals, and this sets an example to other countries in this part of the world."

Also addressing the audience, President Aliyev said Turkey and Azerbaijan have realized prominent projects in the past and will continue to join forces in similar investments in the years to come. "This giant project is a clear indicator that Azerbaijan is committed to maintaining close business relations and trade partnership with brotherly Turkey," he said.

Aliyev also praised the fact that entrepreneurs from Turkey and Azerbaijan give priority to joint projects in both countries and also in third countries. Aliyev joined Erdogan in saying that the Baku-Tbilisi-Ceyhan (BTC) main export pipeline was a great example to mark close cooperation between the two nations and that he looked forward to also seeing the completion of the Iron Silk Road project.

"The Baku-Tbilisi-Erzurum natural gas pipeline carried the first Azerbaijani gas to Turkey in 2007, and it was another successful example...We can increase its capacity in the coming years."