David O'Byrne in Istanbul -
Liberalisation, as any emerging market player can tell you, works both ways - creating new opportunities for established local operators, but at the same time opening the door to more experienced foreign competition. The more so in the Turkish petroleum sector, where local operators like Turcas have seen margins slashed by rapidly increasing oil prices and market share whittled away by international oil majors expanding into the freer market.
For Erdal Aksoy, chairman of Turkey's oldest private petroleum distributor Turcas, the challenge has been to find a way of not just surviving in an increasingly hostile market, but of using the new opportunities to recast the company as a fully integrated player. But, as he explains, change is something that should be planned for, not just coped with.
"We knew that Turkey would have to liberalise its energy markets and we've spent the past 15 years preparing for the change," Aksoy tells bne. "We kept abreast of all the global changes in regulatory systems to the extent that we have even been able to advise the Turkish authorities on how to implement changes."
Aksoy says that when liberalisation arrived in the late 1990s, Turcas was first in line with applications for licenses. Those reforms have since seen the ending of the near monopoly of the Turkish state over oil refining and control over oil and product imports, and is in the process of ending the state monopoly over most of the energy sector, from gas importation, through power generation, to distribution.
It also spelled the end for Turcas' refining joint venture with Shell, BP and Exxon Mobil. This venture comprised the ATAS refinery at Mersin, which was built to get round the state imposed limit on imported petroleum products, but was too small to compete with imports in the newly open market from 2003. However, far from being a wasted venture, the refinery now operates as a major storage depot and provided a springboard for Turcas' next move. "That refinery and storage partnership with BP and Shell has lasted 50 years and has defined our company's culture as one of long-term cooperation," Aksoy says, explaining how two years ago it enabled Turcas to broker the merger of its Turk Petrol chain of petrol stations, Turkey's fourth largest, with the number=two player owned by Shell. "We had a number of offers to sell outright, but we were interested in creating new synergies with which to grow."
The first indication of the size of those possible synergies has been a tie-up with Azeri state oil company Socar in a series of ventures that began with a plan to build a new 10m tonnes per year refinery at Turkey's Mediterranean oil hub of Ceyhan, utilising Socar-owned crude arriving via the Baku-Tiblisi-Ceyhan oil pipeline, and expanded to involve the $2.04bn purchase of Turkey's state owned petrochemical firm Petkim. "Once we had partnered with Socar to build a refinery, the move into petrochemicals was a logical one," Aksoy says, pointing out the synergies created by Socar providing the crude to supply the refinery, which in turn produce the feedstock for Petkim.
The search for more synergies has seen the two partners bring in Saudi group Injaz, which has valuable expertise in both petrochemicals and port management - the better to make the most of Petkim's harbour facilities, the second largest of Turkey's Aegean coast.
Further partnerships have followed with joint ventures with Germany's E.On to build two 800-megawatt (MW) power plants - one of them using imported gas, which in turn Turcas hopes to supply by importing Azeri gas via its partnership with Socar, as and when Turkey's gas importation market is completely liberalised.
And with Turkey boasting the second-highest wind power potential in Europe and talk of the potential for 20,000 MW of wind power capacity, Turcas has established yet another joint venture with Innovative Wind Power of Dubai to construct six wind farms, while ongoing plans for the sale of Turkey's state-owned power distribution sector has seen Turcas form a partnership with Spain's Iberdrola to bid for regional distribution operators.
It's a carefully honed strategy that Turcas plans to develop over the coming decades. "To succeed in the modern business environment, you have integrated operations and you have to think ahead," Aksoy says. "Even now with all these existing projects, I'm looking at market projections for 20, 30 years ahead and planning our next moves.
Although coy on what exactly his next moves will be, Aksoy is able to give a few pointers. "As always, we're looking for synergies with our existing operations, and especially now in neighbouring countries," he says. "As yet, although we are building Turcas into an integrated energy company, we don't have any exploration or production activities. When we feel we're ready, that's something we'd definitely be interested in."
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