Turkey's only and Europe's 8th largest refinery company
Tüpraş is Turkey’s only refining company, operating four oil refineries with an annual crude oil processing capacity of 28.1 million tons. Tüpraş, which joined Koç Group in 2006 following the privatization, is Turkey’s largest industrial enterprise and the 8th largest refining company in Europe. With its large market share, corporate reliability, production complexes and affiliates, Tüpraş is a leading integrated petroleum company.
Tüpraş, a supplier of 36 different petroleum products across Turkey, has one of the higher complexity refineries in the Mediterranean.
Tüpraş sells its products through a range of channels, with petrol distributors accounting for the largest share, with more than 50% of sales. In addition, export sales, LPG distributors, municipalities and the military make up other important customer groups.
Distribution and Marine transport
Tüpraş has 40 % share of Opet which is the third largest distribution company of Turkey.
Tüpraş owns a 79.98 % share of DİTAŞ, which has a significant role in its overall operations. DİTAŞ carries out its crude oil shipping operations (which constitute 95% of its total marine transport) according to Tüpraş’s requirements. The Company conducts its crude oil shipment operations with the tankers it owns and the tankers it charters based on of the time or voyage, as necessary.
Tupras’s Competitive Advantage
The structural factors providing differentiation from other refinery companies are as follows: the refineries are positioned in the centre of consumption areas, Turkey is a net importer in many products, the price advantages brought by high volumes of crude oil and product purchasing, the refineries are designed to have the ability to process different, heavy and high sulphur crude oil, supplying crude oil with advantageous cost and variety, a strong infrastructure for crude oil and product import, low storage requirement of the customers due to the direct pipeline connections to the customers, strong financial structure. In addition to this, Tüpraş’ qualified and experienced workforce is also an important asset.
To own a modern production technology which is developed by planned and stable investment strategies is a major asset for sustainable profitability.
According to the sector wide data published by the Energy Market Regulatory Authority (EMRA) regarding petroleum product consumption, Tüpraş’ share is 90% in gasoline, 100% in jet fuel, 99,4 % in fuel oils except bunker fuel, 100% in asphalt and 70% in low sulphur 10 ppm diesel fuel. This share falls to 54% in total diesel.
Developments in the sector and Tüpras’ operations
During the course of 2008-2009 there has been a decline in global demand of 1.6 million barrels per day, as reported by the International energy agency. Combined with an increase in refining capacity in 2009 of 1.98 million barrels per day, mostly in China and India, it is easy to see why the sector so easily slipped from shortage to surplus. In such an environment, refineries which were low complexity and reliant on exports, with the exception of those benefiting from state support, were unable to maintain operations. Thus in the second half of 2009, particularly in Japan and the USA, 1.2 million barrels per day of capacity were taken out of operation. Those refineries that were most inefficient were either mothballed or closed down completely.
Following a global contraction in 2009, expectations are for economic growth in 2010. This will drive demand growth for energy and middle distillates in particular. This demand will come primarily from developing markets.
However the road to complete recovery will be slow and a full recovery will not be before 2011, at the earliest.
Tüpraş Strategy
As the global crisis widened and deepened, Tüpraş emphasised operational and financial flexibility, enabling the company’s to deal effectively with the changing conditions.
By focusing on costs reductions and profitability enhancements, big improvements were achieved.
The Turkish market is short on Gas Oil, Jet and LPG and on the contrary long in Gasoline and Fuel Oil. A production strategy focusing to meet the Gas Oil deficit by production brings 50 % export necessity of Gasoline and Fuel Oil. Production was planned primarily to meet domestic demand, and to maximise value added. As global demand fell, exports and capacity utilisation were decreased, in order to boost profit. Production of high value white products, with strong domestic demand, was maximised. The result was margins well above the industry benchmarks.
This is a strategy that will continue to be utilised, to the extent that market conditions dictate.
Completion of 2.2 billion dollar master plan investments enable production in EU norms
Over the past few years, Tüpraş has invested heavily in projects which are meant to boost Tüpraş’ profit potential and competitive edge, modernize refineries and enable production according to EU’s environmental standards. With the completion of the İzmit Refinery Gasoline specification improvement project, Gasoline products also meet Euro V specifications in terms of sulphur, aromatic and benzene values, and the whole master plan project has been realized.
80 projects have been undertaken as part of the operational excellence programme, in all the refineries. The result has been a contribution of $244 million to EBITDA, making Tupras more profitable and a stronger company.
Meanwhile in the field of energy efficiency, 35 projects were completed in 2008, and 51 projects in 2009, leading to a total saving of 73.4 million dollars.
The savings in energy consumption translate into a decrease in CO2 emissions of 121,000 tons. A further improvement in efficiency of 81,78 Gcal/h is planned, equal to a saving of 8.5 tons of fuel oil per hour or 150,000 tons of CO2 annually, 2.5 % of Tupras total emissions.
Residuum Upgrading Project
It is clear that the country needs investment in diesel production to close the gap between the demand and local supply rather than in refining other products for which there is already excess supply. The addition of value will be more significant if imports of diesel and other white products for which there is excess demand in Turkey can be reduced.
To this end, Tüpraş has initiated the “Residuum Upgrading” project, which has commenced, as originally planned prior to the crisis, with the basic engineering stage. The project, estimated to cost between $1.5-2.0 billion, is scheduled for completion by the beginning of 2014.
By using excess fuel oil, this project will produce 3.5 million tons of white products, 2.5 million tons of which is diesel, in addition to 800,000 tons of petro-coke. As a result, the amount of black products will decrease by 50%, the production of white products will increase by 83% and Tüpraş İzmit Refinery's Nelson Complexity Index will rise from 7.8 to around 14.5. While providing optimization for the Tüpraş İzmit Refinery, the project will also increase capacity utilization rates at the Refinery by allowing raw material flow from other refineries to İzmit and provide product flexibility and maximization at the refineries. The project is estimated to generate an additional $1 billion revenue and $420 million of EBITDA.
A Safe, Clean Working Environment
In all its activities, Tüpraş emphasizes development, quality, environment, and communal and employee health. It holds the ISO-9001:2000 quality, ISO-14001 Environment and OHSAS 18001 Occupational Health and Safety Management System certificates. In addition, all Tüpraş laboratories have TURKAK accreditation.
For 2009, the Accident Incident Rate was 2.5, versus a target of 3.5 whilst the Accident severity ratio at 63, reached the target for 2012. The corresponding target for 2010 was 2.2.
Fitch Ratings Reach Investment Grade
For long term foreign currency, Fitch increased their rating to BB, which is the highest possible level for Turkish companies and represents an investment grade. For Turkish Lira, the rate was increased to BBB-, and the Outlook for both is stable. The factors behind this rise are Tüpraş’ strong operational and financial structure, efficient storage capacity, leadership in the Turkish market and a cash balance exceeding the refining sector average.
Corporate Governance Index
Tüpraş improved its Corporate Governance rating from 7.91 to 8.34 and is a pioneer among the companies that form the ISE Corporate Governance Index.
Tüpraş recognizes the importance of the Residuum Upgrading project to meet Turkey’s demand for diesel. These mid- and long-term investments in domestic production will lead to a higher level of added value for the country
AccountAbility
Tüpraş has further enhanced its corporate and ethical management philosophy and standards by issuing its first Corporate Social Responsibility Report in 2008. In its first Corporate Social Responsibility Report, Tüpraş adopted the Global Reporting Initiative’s (GRI) G3 Reporting Principles. In the international arena, the “Ethical Accountability Capacities” of states, NGO’s and companies regarding corporate social responsibility are evaluated under the control of the “AccountAbility” organization. In Turkey, the second of these evaluations was conducted by the Institute for Corporate Social Responsibility, the accredited Company of the “AccountAbility” organization in our country. In the “Ethical Accountability” evaluation, based on a survey covering 50 companies with the highest turnover, Tüpraş was ranked second.
Emphasis on R&D
To better manage R&D operation, a new R&D department was set up in 2009. Its aim is to work in conjunction with Universities, Research Organisations and other Industrial companies to develop new technology.
Currently there are joint R&D projects between Tüpraş and Koc University, TUBITAK, Bosphorus University, METU, and the 29th September University.
Four projects with a budget of 7.9 Million TL have applied for grants from the Technology & Innovation Support Council. The “Izmit Hydrocracker Real Time Optimisation and Control System Design Project”, with a budget of 2.3 million TL and the 3.5 Million TL “Izmir Injection System Monitoring, Simulation, Optimal Maintenance and Energy Loss Prevention project” have received approval. Projects for Flue Gas Cleaning and Mathematical Simulation of Refinery Operations are also be evaluated.
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