Kazakhstan will have to put on hold its idea to build a 20 milliontonne refinery in Ceyhan. The reason for that lies in the differences between Kazakhstan’s national company KazMunaiGas and Azerbaijan’s state company SOCAR, an informed source told New Europe.
The proposed refinery in Ceyhan promises to become a large Mediterranean hub for delivery of crude, as well as a nodal point for several mega-projects.
According to the specialists, Ceyhan has the most favourable economics for that. First, the good location of the Ceyhan port. Presently, crude is delivered there by the Baku-Tbilisi-Ceyhan pipeline, the design capacity of which is 50 million tonnes a year. The Turkish government is planning to build another 50 milliontonne route in its territory – Samsun-Ceyhan.
In addition, it is possible that a 70 million-tonne Kirkuk–Ceyhan pipeline will soon start pumping crude there from Iran. In the future, three major arteries will come together at the port of Ceyhan bringing in the aggregate 170 million tonnes of crude. This is more than in the world’s largest port of Rotterdam which currently receives about 150 million tonnes of oil.
Second, the climate in the area of the port of Ceyhan is benign for this business. It gets almost 365 sunny, windless days a year. Third, the existence of promising markets. First of all, Turkey itself. The country lacks oil refining capacities. Its present demand for oil products is 32 million tonnes.
“In principle, up to 177 million tonnes of crude oil should concentrate there, and it would be unreasonable not to have a refinery there. This refinery has a right to life,” a Kazakh refinery specialist said. So the Kazakh side started to actively promote the Ceyhan project. It created a consortium that included KazMuniGas, Oil India, Turkish Calik Enerji, and Italian ENI.
At the same time, SOCAR showed an interest in the Ceyhan refinery project. It, too, set up a consortium. As well, a number of major Russian companies would like to join the Ceyhan project. However, the first hurdle on the way to the implementation of this project has become the land issue. As soon as the idea of building a refinery in a desert place called Ceyhan became to take some real shape, some enterprising businessmen bought out land there, skyrocketing the prices. “A part of the land that was planned for the refinery belongs to the government of Turkey while the other part has become private property. The prices that the private owners ask are exorbitant, driving the cost of the project up,” the source said.
The government of Turkey is interested in the refinery project, so it has promised to provide every possible support in the implementation of the project and to resolve the issues with the land owners. Of the 20 million tonnes that the new plant will produce, Turkey will use 10 million. “To get land is not such a big problem.
It is a matter of time. The main problem is different,” the source said. According to him, the national company wanted to enlist the support of a fifth partner, the Azeri SOCAR. It would be logical to have another partner representing an oil producing country. “We invited SOCAR to the project because we believed that we should unite our efforts: ENI – as the operator of the Kashagan project, Oil India – as the developer of the feasibility study, a local partner represented by Calik Enerji, and SOCAR – as an owner of the Baku- Tbilisi-Ceyhan pipeline and of crude. This way the project would proceed very smoothly.
However, as it has transpired, the colleagues from Azerbaijan have their own vision of the composition of the future consortium. They have proposed their own partners ruining all the plans of the Kazakh side. We could not overcome the differences with the Azeri partners on the project, so we have decided to put it on hold. Therefore, by signing the memorandum we have left the door open,” the source said. The matter now depends on the negotiations between KazMunaiGas and SOCAR on the composition of the future consortium. The 20-milliontonne a year Ceyhan refinery project was scheduled to be completed in 2012. Its future products include high-octane gasoline, diesel fuel, jet fuel, and petrochemical products.