Sep. 4, 2013
Turkey's role in the regional petrochemicals industry looks set to grow, with the expansion of refinery capacity and participation in multinational projects.
Noting Turkey as one of the two largest petrochemicals producers in the region, Iran proposed the formation of an alliance called the National Iranian Petrochemical Organization (NIPO), which would also include Egypt, in May 2013. Shortly afterward, Turkey and Egypt agreed to the proposal, seeing it as an association similar to the Organization of Petroleum Exporting Countries (OPEC). With hopes to attract other countries to the NIPO, members of the D-8, a group of developing countries including Bangladesh, Indonesia, Malaysia, Nigeria, and Pakistan, are also welcome to join. The two largest players in the petrochemicals sector, TÜPRAŞ and Petkim, represent 25% of the market and are expected to benefit from the NIPO agreement. The alliance could also spur companies operating in Turkey to ramp up R&D and increase investment, thereby reducing import dependency.
Turkey's $21 billion petrochemicals industry produced an export volume valued at $8.5 billion in 2012, marking 10% growth in annual terms. In total, 820,000 tons of plastic was produced domestically, with 670,000 tons manufactured by Petkim. Of the total exported output, plastic took the lion's share with sales aboard reaching $4.6 billion, or 60% of Turkey's domestically produced plastic. The plastics sector employs over 250,000 people nationwide. However, with 75% of the raw materials used in the process still being imported, investments and partnerships are key for the future of the sector.
Turkey's interest in petrochemicals dates back to 1965, when the Petkim Oil Refinery Complex was established in the province of Izmit. Today, the complex specializes in petrochemicals manufacturing and produces ethylene, polyethylene, polyvinyl chloride, polypropylene, and other chemical building blocks for use in the manufacture of plastics, textiles, and other consumer and industrial products. While the complex's 14 plants supply a significant portion of the domestic petrochemicals market, its products are also exported to countries in Europe, the Middle East, and Asia, in addition to the US. As a key player in the industrial sector, Petkim is listed on the Borsa Istanbul. Today, the State Oil Company of Azerbaijan Republic (SOCAR) owns an 81.5% stake in Petkim, as part of its investment diversification strategy. Upgrades for the plant to be incorporated by 2023 include boosting annual capacity to 1 million TEUs at an integrated port and 10 million-15 million tons of refinery products per year. In addition, an area of 1,500 acres will be developed as a logistics hub and terminal. SOCAR is also seeking to enable the plant to produce a minimum of 2,000 MW of power and generate $20 billion in turnover annually. Work on the project and operations beyond 2023 could create 10,000 jobs, both directly and indirectly, and add $5 billion of value to the local economy.
With increased incentives and attractiveness, Turkey is looking forward to receiving more FDI in the petrochemicals sector and creating a more lucrative industry to reduce the current account deficit. In summer 2012, Indian polyester producer Polyplex announced a $150 million investment to build a PET resin production plant in Çorlu, Tekirdağ. With a proposed production capacity of 600,000 tons, the plant's annual export volume is estimated to reach $1 billion by 2015, with up to 80% of its products exported to Europe and the US.
Looking to the future, companies such as Dow, DuPont, and Bayegan—all of which began operating in Turkey in the mid-20th century—are seeking ways to improve R&D capabilities in the local chemicals sector in 2013. “When you consider Turkey's young population, the country's education standards, and its economic aspirations, there needs to be a more focused effort on developing vocational education and training," İhsan Necipoğlu, General Manager of Turkey and Central Asian Republics for Dow, told TBY. “In particular, the chemical industry needs to take responsibility for increasing awareness of innovation through investment in R&D."