Interview with Nilüfer Yalçın Evrenler
“The region is under pressure in one hand to meet the market demand in processing volumes, but on the other hand under increasing pressure to push the standards of clean burning fossil fuels to new limits.”
Nilüfer Yalçın Evrenler, Technical Consultant to President & CEO, SOCAR Turkey Enerji A.Ş.
In your opinion what are the main pressures in the CEE and Turkey region at the moment in terms of refining and petrochemical industries?
As known, the CEE region has struggled through number of challenges over the past years. The production capacities in both CEE Region and Turkey are limited compared to the new high capacity plants in North America and Middle East. However there is big potential, since the countries in the region are developing, investing and consuming. There are number of factors affecting regional refinery and petrochemical dynamics in general such as geopolitical developments, underperforming global economy, currency wars, US unconventional shale gas revolution, and decline in crude oil prices.
In regards to refining, the region is under pressure in one hand to meet the market demand in processing volumes, but on the other hand under increasing pressure to push the standards of clean burning fossil fuels to new limits. Consequently this creates more challenges, but on the other side is making people feel better about themselves, what they do for their companies and the societies that we live in. Security of facilities is also of becoming a higher concern particularly in the region.
Additionally the wider oil and gas market in the CEE region is undergoing significant changes as a result of countries trying to align their legal systems with EU standards. Many countries have either recently received significant reforms or anticipate them to be implemented shortly. These regulatory and legislative changes may create pressure for new investors and market players waiting for confirmation of new laws before making any significant investments.
In addition there has been growing consolidation in the region’s Oil and Gas markets, with companies solidifying their market share. There is hope that these large companies will begin to see increased competition in the market.
In regards to petrochemicals, globally 2015 has been a highly profitability year for naphtha based producers in particular, as well as in the CEE region and Turkey. Relatively limited price decreases in petrochemical products, compared to sharp decreases in petroleum and refinery products, was the major reason for the increase in the sectoral profitability. Therefore, petrochemical product prices were seriously boosted by a controlled supply policy last year. Contrary to these positive developments, nevertheless, some adverse development occurred in the petrochemical sector. Led by China, a slump in the emerging markets and the rest of the world caused a weak or even decreased demand in many petrochemical products. Naturally, sluggish global demand ended up in fierce competition between big producers of North America and cheap raw material advantages of Middle East suppliers over net importers of CEE region and Turkey.
Although similar conditions are expected to prevail, some major changes may take place in 2016. The most important of all is of course the early indications that the oil price has bottomed up. As this will inevitably be reflected in refinery products prices and thus push up the cost of petrochemical products meaning high profitability will easily erode.
Weak demand due to global slump, financial risks caused by market uncertainties and ever increasing risk awareness in the commodities markets predicts a decrease in the general manufacturing industry. Consequently given all of this export oriented countries like Turkey and CEE Countries with in-sufficient scale economies and disadvantageous raw material supply can expect to be more competitive and difficult year ahead.
In summary, Turkish petrochemicals production growth has slowed over the past year and the country’s industry entered 2016 with further downward pressure on prices in an increasingly challenging market. Greater political certainty has not provided a sufficient basis for stronger growth in the immediate future. However Turkey continues to invest in refinery and petrochemical capacities at its Petkim Peninsula in a drive to become more competitive and self-sufficient by providing a fully integrated Refinery-Petrochemical-Energy-Logistics hub.
Increasing the level of integration is one of the main global competitiveness opportunities. Although there are some pressures in the refining and petrochemicals sectors in CEE Region as well as in Turkey, Countries in the region have strong cooperation and understanding of each other, which creates more opportunities for producers. Access to multiple types of feedstock resources, proximity to markets and integration into pipeline networks, creates important flexibility for producers.
Can you reflect on the last and next 12 months for SOCAR in terms of its main challenges and opportunities?
SOCAR Turkey is the most important representatives of ever-growing economic cooperation between Azerbaijan and Turkey. SOCAR (State Owned Oil and Natural Gas Company of Azerbaijan) has been operating in Turkey under SOCAR Turkey since the privatization of Petkim on 30 May 2008.
SOCAR Turkey has been realizing its strategic plans and new investments at the Petkim Peninsula with the Petkim “Value-Site” project, the first petrochemical industrial park project in Turkey.
SOCAR Turkey targets to decrease Turkey’s external dependence on manufacture and export fields and to make the Petkim Peninsula one of the biggest manufacturing centers of Europe by enabling Refinery-Petrochemical-Energy-Logistics integration, launching a value added chain cluster model. We do not expect to see any negative effect of the global difficulties in the refining and petrochemical markets on our investments and operations. All ongoing projects at the Petkim peninsula as well as TANAP project are proceeding in line with project schedules.
2015 was successful year for SOCAR Turkey. We think 2016 will be better year for our company and Turkey. Strategic and operational investments by SOCAR Turkey are continuing at a great pace and we are confident that we will complete all of our projects on time.
Our refinery project will be completed on time and within the budget. With today’s Oil prices at or around 40$/barrel there was more than a 20% decrease in oil investments in 2015 compared to the previous year. A fall in oil investments in 2016 is expected too. However this business like all other commodities is inevitably cyclical. Supply, demand and prices rise and fall. Therefore, in this ongoing low oil price environment, we have seen a declining trend in energy related capital expenditure, globally. The cancelling of investments due to the low oil price increases the importance and value of the feasible investments.
Every crisis creates an opportunity in itself. Companies who have strong liquidity and ability to withstand the challenges will come out overall stronger from this period. On global scale, SOCAR will be one of the companies coming out as stronger.
What are the priority topics that you look forward to being covered at this year’s CEE & Turkey Summit?
There are number of challenges for both the petrochemical and refining sectors at the moment because of the global economical and geopolitical risks. I’m looking forward to discussions on;
•How global threats (Economical, geopolitical, societal, environmental and technological) are affecting the refining and petrochemical sector both globally and specifically in this region
•How long are the low oil prices and high refining margins expected to last?
•New trends in refinery-petrochemical integration
•New trends in petrochemical industrial clusters/parks
•The industry’s short-to-mid-term threats, regional and globally
•The effect of the removal of Iranian sanctions on the regions refining and petrochemical sector
•Regional current and planned refining and petrochemical projects
Nilüfer Yalçın Evrenler , Technical Consultant to President/CEO, SOCAR Turkey Enerji A.Ş.
Nilüfer graduated From Department of Chemical Engineering Department of Middle East Technical University. She received Master Degree between 1984-1986 from the same department. She started her professional career at Research and Development Center at Petkim Yarımca Complex and had positions as Chief and Lead Engineer at Process and Catalyst Subgroups. She established Catalyst preparation and characterization laboratory in R&D Center. After privatization and assigning to Tüpraş of Petkim Yarımca Complex, she kept working at Petkim Aliağa Complex since 2003. She appointed as General Manager Technical Consultant at 2004. After Privatization of Petkim Aliağa Complex at 2008, she was appointed as Technical Consultant to SOCAR Turkey President/CEO. She is still working in SOCAR Turkey in the same position. She has written a number of articles in both national and international publications. Nilüfer is fluent in English and married.