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Interview with Robert Storey, CEO Advisor at SOCAR Turkey(2015)

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Can you give us an update of the STAR Refinery integration project since last year?

The project so far is on schedule and budget, the contractor has taken advantage of some very competitive pricing both in equipment supply and sub contract prices. All long lead items have been ordered and are currently on schedule to be delivered on the required contractual dates, extensive inspection and expediting is being carried out globally.

Procurement is currently 90% complete, minimum ECA sourcing levels have been achieved and the PETLIM Container Port will be ready to receive the first heavy equipment in October. The heavy lift and transport contracts have been placed and routing from the port to the site confirmed.

The project itself is 22.5% complete as scheduled, the three new Naphtha storage tanks have been handed over to PETKIM and are being operated successfully, the site offices are complete as well as the first phase of the construction labor camp to accommodate 5000 workers.
Most sub contracts have been finalised the largest being the Electromechanical split between Turkish based companies, the majority of the STAR/PMC teams have moved to the Aliaga site.

In summary the real hard work is just starting, focusing on the construction of the process units, storage tanks, jetties and offsites.

Last year you spoke about the strategic importance of the project, can you give us an update on how essential this has been?

SOCAR Turkey Enerji AS is the most important representative of the ever-reinforcing economic collaboration between Azerbaijan and Turkey. Being one of the most powerful global oil companies, SOCAR has been carrying out its activities in Turkey since December 2011 under the banner of its Turkish subsidiary.

A reflection of the importance of SOCAR Turkey is that on August 14th 2015 Goldman Sachs International acquired 13% of SOCAR Turkey Enerji AS; this acquisition shows the international interest in the STAR refinery and its sister projects on the Aliaga Peninsular.

What challenges or difficulties have you had to overcome over the past 12 months?

It has been a challenge maintaining health/ safety and environmental standards and working in a joint venture contract of four different nationalities.

Also stabilizing the site in an earthquake area has had its challenges. Another obstacle has been reducing the social effect of employing 15,000 construction workers on the local town of Aliaga.

Managing the environmental impacts of the marine facilities has had its difficulties as well as having to procure equipment within the minimum sourcing requirements of the Export Credit Agencies.

How important is it to create added value within the project and how are going about doing this?

This is a Lump Sum Turkey Project (LSTK) so the JV is under pressure to complete the project on schedule. Value engineering is continuously being reviewed. STAR will reduce the Turkish deficit for ULSD and jet fuel and will also provide feedstock to PETKIM.

The project will assist development of the existing Aliaga peninsula into a world-scale integrated “Refinery-Petrochemicals-Logistics” hub, can you tell us more about the progress of this?

The development of the ALIAGA PENINSULAR is on schedule, the STAR refinery is well underway and the PETLIM container port 1st Phase will be complete in October. Other projects under consideration are a major co-generation power project, exclusively for PETKIM to reduce their power costs, and a wind farm which would be a renewable energy project for the area. In addition to this the TANAP pipeline has started construction.

You previously stated that STAR will secure Petkim’s feedstock at stable quality and market prices, has this been the case?

It is very early to say yes or no to this question, we are very confident the with STAR providing feedstock to PETKIM it will become a much bigger player in the global petrochemical market, competing with major global players such as SABIC and BASF.

What are the next steps for the project?

Next steps include making sure long lead items of equipment to be delivered to site on time, completing the process unit foundations and making sure high standards are maintained on site in terms of health, safety and environment (HSE) with zero tolerance. We will also be managing the social impact on the local town and recruiting a refinery commissioning and operational team. Another step moving forward will be to focus on Quality Assurance.

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