Tupras Says Refinery Unit Will Cut Turkey’s Fuel Bill $1 Billion

Turkey’s only oil refiner said a new unit at its Izmit plant will cut the country’s fuel-import bill by $1 billion a year and allow its four refineries to work at 90 percent of capacity.

Tupras Turkiye Petrol Rafinerileri AS, owned by Turkey’s biggest conglomerate Koc Holding AS, will complete the $2.7 billion upgrader in November next year, Chief Executive Officer Yavuz Erkut said yesterday. The unit turns fuel oil, the heaviest product of refining crude, into lighter fuels including diesel.

The project, built by Spain’s Tecnicas Reunidas SA, will convert 4.25 million metric tons a year of fuel oil produced at three refineries into 2.9 million tons of diesel and 520,000 tons of gasoline, among other products. Tupras has an annual crude processing capacity of 28.1 million tons.

The Izmit-based company, is cutting production of high-sulfur products like fuel oil in response to new environmental standards. The new unit will bring the company $550 million a year in earnings before interest, tax, depreciation and amortization, or Ebitda, Tupras said.

“The project will help cut the need for imports of diesel and some other fuels by about $1 billion a year,” Erkut said. It will also increase Tupras’s Nelson complexity to 14.5 from 7.25 now, he said. The Nelson complexity is a measure of a refinery’s ability to turn crude into fuels: the higher the complexity, the higher the value of products produced.

Diesel Demand

Turkey’s diesel demand, which was about 15.8 million tons last year, may rise to 16.9 million tons in 2015 and 19.4 million tons in 2020, Erkut said, adding Tupras met 5.6 million tons of demand from its owns refineries and 3.3 million tons from imports last year. Other fuel distributors, which include OMV Petrol Ofisi AS, BP Plc and Royal Dutch Shell Plc and OAO Lukoil, import the remainder to meet the country’s demand.

Tupras has ordered 300 train tankers to carry fuel-oil from its inland Kirikkale refinery to Izmit and two vessels each with a 23,000 tons capacity to ship fuel oil from the Izmir refinery on the Aegean port of Aliaga, Erkut said.

“The project will help Kirikkale refinery to use its entire capacity of 5 million tons a year compared to 60 percent now,” he said.

The project will also produce 690,000 tons of petroleum coke that Tupras plans to sell to cement plants, Erkut said.

Erkut predicted Turkey’s annual jet fuel demand to remain flat at 3.8 million tons until 2015 and then to rise to 4.2 million tons by 2020 as the airline industry expands.