Strategies to Remain Competitive in Türkiye

How can Türkiye’s downstream producers stay competitive in the current and short-term scenarios, evolve and reach their objectives through new developments, investments, strategies and projects? As our flagship IDW 2023 - Downstream Conference moves to Istanbul, we reflect on the outcomes from 2022’s focussed Türkiye panel, joined by SOCAR Türkiye, The Investment Office of the Presidency of the Republic of Türkiye and Honeywell UOP.

As a principal player in the region, SOCAR Türkiye, is expecting refining demand to peak between 2024 and 2027. These expectations are largely based on the market penetration of electric vehicles, followed by the evolution of internal combustion engines: increased efficiency, coupled with the introduction of sustainable renewable fuels, projections show 10% of the global fuels demand by 2040 – all of which will create new opportunities for producers. Any excess capacity can be shipped to the Middle East and Asia - this is currently a growing trend. In order to stay competitive post-2027, it will be critical for European and Turkish producers to rationalise their outputs in order to balance and maintain profitable margins. Middle East and Asian refineries are expected to be more resilient by further expanding their capacities, due to the favourable advantage of local demand in these regions. 

All the above-mentioned factors mean that traditional refining economics are likely to become more challenging, due to the declining demand, where older and less complex refineries will not be in a favourable position and will face the threat of closure. SOCAR Türkiye sees two major levers for complex and integrated companies, which can be adjusted for successful and resilient operations. Firstly, the design of refinery systems needs to be flexible and future-proof, allowing for higher yields of LPG, Naphta and basic gasoline components – this is in order to meet the rising global chemical demand. At its core, the second parameter is also based on production flexibility, and this has allowed STAR refinery to redirect jet fuel streams to diesel production, which during the covid pandemic allowed the facility to maintain healthy margins. 

Since the internal combustion engines (ICE) auto park will remain present, the company is also looking into expanding its sustainable fuels capacity by 80% come 2030 and this will be focused mainly on hydrotreated vegetable oils. If confirmed this will constitute a significant investment - the final investment decision will be based on the evaluation of many complex factors such as existing refinery configuration, feedstock availability, proximity to the market, as well as regulatory incentives.

Other areas that are being focused on by producers include, increasing overall energy efficiency and lowering refinery carbon intensity by implementing advanced digital tools for monitoring and controlling of the processes – this is a must for today’s refiner, especially in the presence of the Carbon tax. SOCAR Türkiye has also invested in non-traditional energy assets in the form of 17 wind turbines for renewable electricity generation. 

The importance of industry collaborations was once again highlighted during this panel - where the close ties between each involved party of the downstream segment are essential. We are witnessing this through the many jointly developed technologies, combining resources and R&D knowledge which allows the licensors to provide reliable and scalable production paths for the producers in time. 

Türkiye’s role within the downstream industry is an important one - the country’s geographical position means that it can easily serve the Middle East, North Africa, Iran, Pakistan and even India if needed. Therefore, local producers are closely monitoring these markets, evaluating industry benchmarks and last but not least periodically they do exchange information, allowing to plan production operations better. 

The importance of Türkiye’s downstream sector is reflected in the levels of investment and overall energy plans for the country. The country is following best practices in terms of development and avoiding concentrating all efforts and resources in one specific area. This is shown in the many energy investment programs running in parallel to support the development for a stable and secure energy mix, including electrification, renewables, biochemicals and fuels, bioethanol and green hydrogen, and importantly reducing dependency on imports of natural gas and coal. 

Due to its geographical position, Türkiye is aiming to strengthen its energy positions and push forward to become an energy hub, capable of producing and exporting a variety of energy carriers, with a special focus on green hydrogen. 

On the ‘conventional’ side, is has been witnessed that the global demand for olefins has been increasing over the years with the same pace as for the aromatics. Therefore, the country will work towards securing the production and supply of ethylene, propylene and base aromatics, with main focus on polypropylene and polyester value chains.  

We're excited to continue the conversation on 19-20 September in Istanbul

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