Socar Turkey secures financing for refinery

ISTANBUL - Reuters

The Star plant on Petkim peninsula along the Aegean coast is expected to have an annual capacity of 10 million tons, when it becomes operational. DHA Photo

Azeri state oil company Socar has secured financing for its Turkish oil refinery project after two lenders dropped out, it said March 18.

Socar, which owns Turkish petrochemical company Petkim , is building the $5.5 billion Star refinery in partnership with Turcas Petrol to supply feedstock to Petkim and cut Turkey’s dependence on imported refined products.

The World Bank’s International Finance Corporation (IFC) and the European Bank of Reconstruction and Development (EBRD) have withdrawn from a consortium financing the refinery, Socar said.

Socar Turkey’s chief executive Kenan Yavuz told Reuters it had agreed with a commercial bank fresh financing of $500 million to replace the EBRD and IFC share and that the funding agreement, worth a total of $3.5 billion, was expected to be signed by the end of March.

Yavuz declined to name the commercial bank but sources close to the deal said it was Turkey’s Denizbank, owned by Russia’s Sberbank.

Socar said it would use $2 billion of its own equity for the project but has tapped the markets for funding for the rest.

It signed a $3.46 billion engineering procurement and construction contract in May last year with a consortium comprising Tecnicas Reunidas, Saipem, GS Engineering & Construction and Itochu Corp.

The firm has said it received strong demand from banks keen to be a part of the financing consortium, but a final signature on the funding agreement has been delayed.

“The target is to conclude by March 31, but it could be delayed to April as well,” Yavuz told Reuters.
He dismissed suggestions of a delay in the project, slated to come online in mid-2017, saying it was still on track.

High hopes

Turkey has a surplus of gasoline but is heavily dependent on imports of diesel, which are expected to rise towards 20 million tons annually from around 12 million last year.

Turkey’s only refiner Tüpraş has four plants across the country with a combined oil processing capacity of 28 million tons.

The Star plant in Aliağa on the Aegean coast is expected to have an annual capacity of 10 million tons, 1.6 million tons of which would be naphtha which could feed the Petkim plant. It will also produce diesel, jet fuel and LPG.

Socar owns 81.5 percent of the Aegean refinery project at Aliağa, with Turcas owning the remaining 18.5 percent.