TURKEY - The Global Perspective.

Turkey's consumption of refined petroleum products now is limited to about 610,000 b/d of crude oil equivalent, due to the country's shift to natural gas and use of coal in power generation. Domestic oil demand is projected to exceed 700,000 b/d by 2015 and 800,000 b/d by 2020. But there is a question mark about the viability of major refining capacity expansions in Turkey and other countries in Southern Europe and the Mediterranean.

World oil refining margins may narrow from 2009 as new capacity comes on stream and ethanol takes a more prominent role in the gasoline mix. Alan Gelder, a consultant for downstream oil at Edinburgh-based Wood Mackenzie, has recently warned that new refineries including Reliance Industries' huge Jamnagar plant in India and the increased use of ethanol in gasoline could cause refining margins to decline through 2012.

Gelder recently told a refining conference in Barcelona that increased ethanol use in North America meant less oil-based gasoline was required, which will lower demand and cut profits for refiners. Slowing world economic growth will also lead to less consumption of gasoline (see the global perspective for petroleum in APS Diplomat's news18Egypt&TurkoPersianImperialismApr28-08 and ood4-Iraq-IranE&PcomptnApr28-08).

Refining margins, or the profit from turning a barrel of crude oil into fuels, in the first quarter this year averaged 86 cents a barrel, according to data compiled by Bloomberg. Refiners using Brent crude oil (a light/sweet blend which is a world marker in oil pricing) in their facilities in North-West Europe may have earned $1.10/b so far this year. But such a margin could be much lower in the subsequent years.

The same could be true in the case of an expanding petrochemicals sector, with new ethylene cracking plants being proposed in Turkey and the Persian Gulf - the latter emerging as a world leader in petrochemicals (see DT No. 19). Gelder said investments in petrochemical production using naphtha crackers should stop because there is ample spare capacity and margins will be weak up to 2010 and beyond.

Petrochemicals mainly include ethylenes, building blocks for consumer goods like plastics. Reliance (the biggest private refiner in India) will produce propylene, another building block for plastics, using a fluid catalytic cracker (FCC), at its second refinery in Jamnagar. FCC's are normally used in the production of gasoline.

New Refining Projects In Turkey: The Azerbaijan State Oil Co. (SOCAR) is planning refineries in Turkey, Ukraine, and Central Europe. It is also seeking to extend its network of crude oil and natural gas supplies into Central Europe via Turkey and thus compete with Russian pipelines. The interest from energy-hungry Europe is strong, but the question is how much oil and gas the small state of Azerbaijan can provide. The crude oil pipeline from Baku to Tblisi (Georgia) to Ceyhan in Turkey is one alternative to Russian domination. Built by a BP-led consortium which includes SOCAR, ENI, and Total, this carried 20.5m tons of crude oil in 2007.

Ceyhan has become a primary European centre for crude oil trading. SOCAR plans to have a 100,000 b/d refinery there at Ceyhan which would cost $4 bn - with and option of doubling its capacity at a later phase. This would be a JV with private Turkish fuels distributor Turcas Petrol (49%). SOCAR has built up a strong presence in neighbouring Georgia, where it participates in the country's natural gas distribution network. SOCAR has had a 100,000 b/d crude oil terminal in the Georgian port of Kulevi, on the Black Sea, which went on stream in mid-February 2008 (see OMT 19 - see a survey of Azerbaijan to be serialised in the next volume, No. 71, in July 2008).

Turkey's energy regulator EPDC has approved three new refineries to be built at Ceyhan which, including the SOCAR-Turcas JV, which it says will have a total capacity of 700,000 b/d and would cost $15 bn. One of these will be a 300,000 b/d refinery which is to be part of an integrated complex to produce petrochemicals. The promoters of the latter project are a consortium of Celik Enerji, a private Turkish company, and the state-owned Indian Oil Corp (IOC). In a 50-50 JV with ENI, Celik is spearheading a project to have a 1.5m b/d crude oil pipeline from Samson on the Black Sea to Ceyhan.

Petrol Ofisi (POAS) and its shareholder OMV of Austria, have since 2006 been evaluating a 200,000 b/d refining project at Ceyhan. But experts say this or either of the other refining projects planned for Ceyhan might be delayed - or even shelved - in view of current fears of a possible glut in such ventures in the Mediterranean region.

TransCentralAsia, a Russian-Kazakh investment JV which in 2007 bought $51% in the privatised petrochemicals group Petkim (see DT No. 19), is to spend at least $3 bn in a 200,000 b/d refinery to be built in Izmir, western Turkey. This, too, would depend on refining economics in the coming years.

Kuwait Petroleum Corp (KPC), an integrated state-owned trans-national, is considering having a refinery built in Turkey - probably in Ceyhan. This was discussed on April 2, 2008, between Energy Minister Hilmi Guler and Kuwait's Acting Oil Minister Muhammad al-'Olaim. 'Olaim on April 2 was quoted by the Kuwaiti news agency KUNA as saying Turkey had asked Kuwait to join it in building a new refinery.

'Olaim, who then was on a visit to Ankara, said the Turkish government asked him to get the Kuwaitis to invest in the proposed oil refinery. He said Turkey also wanted Kuwait to invest in crude/fuel storage facilities in the country. Kuwait is the world's seventh-largest crude oil exporter. 'Olaim told the Kuwaiti daily al-Qabas KPC was to make a decision about these projects after a feasibility study. He said KPC was considering using Ceyhan to store Kuwaiti crude oil and refined petroleum products as a gateway to Europe.