Azeri firm seeks deal to finance refinery

ISTANBUL - Reuters

Azeri state oil company Socar will sign a preliminary deal with a group of lenders within a month to help finance a $4 billion Turkish refinery, the head of its Turkish unit said on Feb. 14, which would provide needed capacity and compete with Turkey’s one refiner.

In December, Socar selected a consortium of Tecnicas Reunidas, Saipem, GS Engineering & Construction and Itochu to build the refinery at Aliağa on the Aegean coast in western Turkey. Construction is expected to be completed by 2016.Turkey currently imports nearly all of its oil products, while sole refiner Tüpraş operates four plants across the country.

“Excluding financing costs, the total cost of the refinery will be $4 billion. Of that we will provide $1.9 billion from our own equity,” Socar Turkey Chairman Kenan Yavuz said.He said total investment in 2013 would be $800 million, which will come out of the $1.9 billion planned from its own equity.
The refinery will have a capacity to process 10 million tons of crude a year. Tüpraş has total annual capacity of around 28 million tones.

Socar, which owns Turkish petrochemical company Petkim , has so far invested $200 million from its equity in the Socar Turkey Aegean Refinery project in areas such as engineering and infrastructure.
“By the end of 2013, we will spend another $800 million from our own equity. Thus we will have completed some 20 percent of the project by end-2013 from our own equity,” he said.

Yavuz said the company held meetings with lenders in London on Feb. 4 and in Istanbul on Feb. 6, most of them export credit agencies, to discuss financing the more than $2 billion in remaining costs.
“We will sign a preliminary agreement on financing with interested lenders within one month,” he said.Along with the cost of financing, the total investment will be $4 billion to $5 billion, he added.Socar owns 81.5 percent of the Aegean refinery project at Aliağa, while Turkey’s Turcas Petrol owns the remaining 18.5 percent.

The plant will target annual production of 500,000 tones of jet fuel, 6 million tons of diesel, 500,000 tones of petroleum coke, 300,000 tons of liquefied petroleum gas and 1.6 million tons of naphtha, company documents showed. 

Meanwhile, Turkish Prime Minister has recently said the construction on the Azeri-Turkish Trans Anatolia Pipeline (TANAP) project would begin this year. Turkey and Azerbaijan signed an agreement on June 26, 2012, for TANAP that would be actualized in six years with an investment of $7 billion. Turkey’s BOTAŞ and Azerbaijan’s SOCAR will work together in the project, which is slated to carry large amounts of Azeri gas to western Turkey, from where it will be transported to Europe.