The Turkish oil and refining sector is set for a major shake up this year with the commissioning of the country's first new refinery since 1986 but the new plant will not saturate the Turkish products market.
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The 210,000 b/d STAR refinery, operated by Azerbiajan's state-run Socar, is slated to start operating this summer will not only boost Turkey's crude imports, but promises to shake up the country's product markets.
Socar has confirmed that the first cargo of crude to be delivered will be Azeri but that this will only be symbolic.
At full capacity, the 10.6 million mt the plant will process heavier, 28-36 API crudes purchased from both global and regional markets.
Most likely that will mean additional Turkish imports of the same crudes bought by Turkey's only other refiner Tupras; namely primarily Iraqi, Iranian, Russian and Saudi with smaller volumes of Kuwaiti, Egyptian and some more distant global suppliers.
Although first contracts are to be signed this month for delivery from the middle of the year, the two-month time lag before the publication of Turkish import statistics means it could be September before STAR's imports become clear.
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What is clear is that Socar's primary aim in developing STAR was to provide feedstock for its adjacent Petkim petrochemical plant and to meet the growing demands of the local products market.
Exact production capacities will vary according to what crudes are being processed but at full capacity STAR will produce around 4.8 million mt/year of diesel, 1.6 million mt/year of naphtha, 700,000 mt/year of petroleum coke, 1.6 million mt/year of jet fuel, 480,000 mt/year of reformate, 420,000 mt/year of mixed xylenes, 300,000 mt/year of LPG and 160,000 mt/year of sulfur.
The naphtha and mixed xylenes will meet most of Petkim's needs, while the bulk of the remaining products will also go entirely to domestic markets, whose needs are currently met largely by imports.
STAR's diesel will cover little over a third of the 12.4 million mt of diesel Turkey imported in 2016.
The plant's LPGs can replace only 10% of 2016 imports and the petcoke is expected to go to Turkey's huge cement sector which currently imports several times that volume, mostly from the US.
Only the jet fuel is expected to be exported in major volumes. STAR's products output will be competing for a domestic market which, in 2016, was 4.6 million mt of which 93% was met by output from Tupras' three main refineries.
Even there local demand is expected to rise following the opening in 2018 of Istanbul's new main airport, designed to act as a regional hub and over the longer to attract long-haul transit traffic currently using airports in the Persian Gulf. Over the shorter term, however, jet demand may continue to be affected by the continuing downturn in the Turkish tourism sector, due to security concerns.
ROOM FOR MORE CAPACITY?
While 31 years may have passed since the last new refinery commissioned in Turkey, the scale of Turkish product imports is such that even when STAR comes online there will stii be significant scope for the development of further refining capacity.
Turkish diesel consumption in 2016, for example, reached 22 million mt, of which 12.4 million mt (57%) was met by imports and with demand growing at around 7% a year is expected to top 25 million mt in 2019.
Turkish pet coke imports are running at around 4 million mt/year and LPG imports last year reached 3.42 million mt, having grown 21% over the previous decade.
Interest in developing more refining capacity is not new. In 2007 Turkey's Calik Holding was issued a refining license for a 300,000 b/d refinery and petrochemical complex to be constructed at the Ceyhan terminal of the Black Sea-Mediterranean "Samsun-Ceyhan" oil pipeline it planned to develop in partnership with Eni.
The pipeline was never developed but the refinery license remains valid, and Turkish demand for petrochemicals continues to grow.
A major exporter of plastics products Turkey currently relies heavily on raw material imports which reached 6.6 million mt in 2016 against local production of just under 1 million mt.
Calik is apparently still committed to developing the plant and is believed to be actively looking for potential partners.
As with its failed pipeline Calik will need both guaranteed supplies of crude and major international partners if it is to develop its planned Ceyhan facility.
Now with the Iraqi central government again in control of its Kirkuk oil fields and having announced a tender for the rehabilitation of its section of the Kirkuk-Ceyhan oil line, Baghdad could also be in a position to commit crude volumes to a new refinery at Ceyhan.
Interest in refining Iraqi crude in Turkey is not confined to Calik.
In December Turkey's Ersan Petrol was awarded a license to develop a 1.4 million mt/year (28,000 b/d) refinery at Kahrahmanmaras in southeast Turkey, close to the route of the Kirkuk-Ceyhan pipeline.
Although only small the company says the refinery will process both locally produced Turkish crude and volumes from Iraq, with products to be both sold locally and exported to regional markets.