Azerbaijan's SOCAR Secures $3.3 Billion in Project Financing for Star Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--The State Oil Company of Azerbaijan (SOCAR) (Baku, Azerbaijan) has signed a $3.3 billion credit agreement to finance the Star Refinery in Aliaga, Turkey. The agreement was between SOCAR Turkey Enerji AS's Star Rafineri AS and 23 different local and foreign banks.

According to a filing from SOCAR's Turkish subsidiary Petkim (BIST:PETKM) (Izmir, Turkey), a credit facility of $2.7 billion will have a grace period of four years and a maturity of 18 years; the remaining $600 million portion will have grace period of four years and a maturity of 14 years. The company also secured a direct loan of $640.7 million from U.S. Ex-Im Bank in December 2013. For more information, see December 10, 2013, article - U.S. Ex-Im Bank Approves $640.7 Million Credit to Finance Turkish Refinery Project.

The Star Refinery is expected to have an annual capacity of 10 million tonnes, 1.6 million tonnes of which would be naphtha to feed the Petkim plant. This would help reduce Turkey's dependence on imported refined oil products. The refinery will produce 4.9 million tons of diesel per year and 1.63 million tons of jet fuel.

Last week, Petkim said it signed an agreement to buy up to 1.6 million tonnes of naphtha feedstock from the Star Refinery. The company said that it estimates the purchase agreement will cut its raw material costs by $30 per tonne.

The license to build a refinery near Petkim was secured from Turkey's energy market regulator in June 2010. SOCAR signed a $3.46 billion engineering procurement and construction contract in May of last year. In 2011, SOCAR started the construction of the Star Refinery complex on Turkey's Aegean coast. It is projected to become operational in 2017. Currently, SOCAR's stake in the project is 60%, while the remaining 40% belongs to Azerbaijani state.

Turkey has a surplus of gasoline, but depends heavily on imports of diesel. These imports are expected to reach 20 million tonnes annually, from about 12 million last year. Turkey's sole refiner, Tupras (BIST:TUPRS) (Kocaeli, Turkey), has four plants across the country with a combined oil-processing capacity of 28 million tonnes.

SOCAR Turkey is tnow he sole owner of Star Rafineri AS, which owns the refinery, after Turkish energy firm Turcas Petrol (BIST:TURCS) (Istanbul, Turkey) sold its 18.5% stake for $59.4 million in March.

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