STAR Refinery Achieves 113% Capacity Utilization

STAR Refinery Achieves 113% Capacity Utilization SOCAR Türkiye Chief Executive Officer Elchin Ibadov stated that STAR Refinery meets approximately 25% of Turkey's petroleum product needs, adding, "STAR's capacity utilization in 2022 reached 113%." In his presentation, Ibadov recalled that in 2008, with an approximately 2 billion dollar investment, SOCAR began operations in Turkey by acquiring 51% of Petkim. Emphasizing that no dividends have been paid to Azerbaijan from Petkim since that period, Ibadov stated, "All profits made by Petkim have been reinvested in Turkey. After acquiring 51% of Petkim with a 2 billion dollar investment as SOCAR, we have made an additional 1.6 billion dollar investment." Pointing out that Petkim is today Turkey's only integrated petrochemical producer, Ibadov said, "We meet 12% of Turkey's demand. We used to meet a higher percentage, but as the market grew and demand increased, our share remained around 12%." Noting that the world's most successful refineries and petrochemical plants operate as integrated facilities with each other, Ibadov stated that seeing this need, they constructed STAR Refinery, which began in 2014 and was completed in 2018. Emphasizing that this refinery, with an investment value of 6.7 billion dollars, went down in history as the largest single-point investment ever made in the history of the Turkish Republic, Ibadov stated, "Today STAR Refinery processes 11 million tons of crude oil and produces refined products. This meets approximately 25% of Turkey's petroleum product needs. Of course, this is not sufficient, but we take pride in the fact that we have reduced the market's significant external dependency, contributing nearly 1 billion dollars annually to Turkey's current account deficit." Also drawing attention to last year being one of the most successful periods in financial and operational terms, Ibadov stated: "STAR's capacity utilization in 2022 reached 113%. There is a standard capacity utilization rate in refineries, but with effective planning, value creation initiatives and high-level engineering solutions, you can produce above the refinery's capacity without additional investment. For example, we have a standard capacity of 10 million tons, but we achieved production of 11.3 million tons, which represents 113% capacity utilization." Recalling that Petkim would pay an additional 240 million dollars in 2023 to acquire 6% more share in STAR Refinery, Ibadov noted that Petkim and SOCAR agreed that this amount would strain Petkim's cash position, particularly during a period when the petrochemical sector was not performing well and interest rates were high. Regarding the question of when Petkim would benefit from profitability at STAR Refinery, Ibadov provided the following information: "Petkim paid the installments corresponding to its 12% share. By October 2023, the share transfer will be completed, subject to formal approvals and documentation. After that process is completed by October, Petkim will effectively own 12% of STAR, and 12% of STAR's profits will appear annually as a positive item on Petkim's income statement through accounting." "As of 2023, the amount of gas entering Turkey from TANAP is approximately 21 billion cubic meters" Stating that TANAP is one of the projects providing the greatest contribution to Turkey's objectives of becoming an energy corridor, Ibadov noted that work continues on TANAP expansion in the future and on transmitting more natural gas to Europe through Turkey. Stating that Azerbaijan and Turkey are the two most strategic countries cooperating for the future of energy, Ibadov said, "While we are pleased to follow Turkey's progress toward becoming an energy hub, we are moving shoulder to shoulder in terms of energy supply and security. Through mutual trust and good faith, we will continue to advance this cooperation to ever-greater heights." Noting that these efforts present significant opportunities for Turkey to become a natural gas hub, Elchin Ibadov shared that as of 2023, the amount of gas entering Turkey from TANAP reached approximately 21 billion cubic meters, while the amount of gas going to Europe through Turkey reached approximately 22 billion cubic meters. Regarding the joint venture company established by BOTAŞ and SOCAR, Ibadov reminded that the cooperation between the two companies covers a broad area, stating, "This cooperation is not only related to natural gas transit. We are constantly considering what we can do together, particularly in terms of natural gas infrastructure investments. Discussions are currently ongoing between SOCAR and BOTAŞ top management, Turkish state leaders and Azerbaijani state leaders regarding the scope of the work to be done."

"Our total investment in Turkey has reached 18 billion dollars"

SOCAR Türkiye Refining and Petrochemicals Business Unit Manager Anar Mammadov emphasized that SOCAR Türkiye's total investments in Turkey have reached 18 billion dollars. Noting that STAR Refinery's design capacity is calculated as 10 million tons, Mammadov stated, "In 2022, we operated STAR Refinery at 113% capacity, but our potential is higher. During the testing phase, we saw that we could increase STAR's capacity to 118% without any investment. In other words, if we operated 365 days without stopping, at 118%, we could process nearly 12,000 tons of crude oil." Mammadov also mentioned that there would be a major planned production shutdown in 2024, which occurs once every four years, stating, "During this shutdown period, by making investments, we will add 3% to this production volume and consequently STAR's production volume and capacity will increase to 121%. This is a very important result for our industry."

"The potential in petrochemicals in Turkey is really quite large"

Mammadov informed that the new petrochemical investment partnership planned by bp and SOCAR Türkiye has been suspended, continuing as follows: "We planned to implement this project in partnership with bp. But later bp decided to completely exit the petrochemical sector and sold all its assets. This was the first factor affecting the investment. Second, after the pandemic started, the global balance changed, and under these changing conditions, we suspended this project. But this does not mean the project will not advance. Of course, depending on market conditions, this can be reconsidered. The potential in petrochemicals in Turkey is really quite large. Not only in Turkey, but in our sector, in the manufacturing industry, petrochemicals is the field with the greatest potential. This is of course always on our agenda." Source