Two Caspian Oil Giants Eye Turkey’s Fuel Market

Two oil companies from the Caspian region may team up to strengthen their foothold in the Turkey’s fuel retail market. Russia’s oil giant LUKOIL is looking to expand its presence in Turkey by entering into an agreement with the Azerbaijan’s largest oil company, the State Oil Company of Azerbaijan Republic (SOCAR).

"Our company is exploring opportunities to expand its participation in the Turkish market. We discussed with the representatives of the State Oil Company of Azerbaijan the acquisition of assets of third companies in the Turkish market,” Senior Vice-President at LUKOIL Vadim Vorobyov said Monday in a conversation with a group of Turkish journalists in Moscow. 

A joint venture in Turkey would not be the first partnership between LUKOIL and SOCAR. Both companies hold a 10 percent stake in a consortium that manages Azerbaijan’s Shah Deniz natural gas field underneath the Caspian Sea. Starting next year, the Shah Deniz field will pump gas to Europe through the gigantic three-phase Southern Gas Corridor, which runs through Azerbaijan, Georgia, Turkey, Greece and Albania before reaching southern Italy.

Vorobyov revealed that LUKOIL, one of the world’s largest vertically integrated oil and gas companies, has already allocated up to $1 billion for the proposed project. 

“The retail fuel market of Turkey remains attractive for LUKOIL, which actively promotes interests in this sector of the Turkish economy. Turkey is of strategic importance for LUKOIL,” Vorobyov said.

Turkey’s fuel market is based on imports of petrol, or gasoline, for automobiles; diesel fuel; liquefied natural gas (LNG) and compressed natural gas (CNG). Total liquid fuels consumption in the country reached around 860,000 barrels per day in 2015, 90 percent of which came from imports.

Fuel stations in Turkey sell gasoline, diesel fuel, euro-diesel, LNG and CNG. Diesel, alongside gasoline, is sold at most fuel stations for use in diesel-engine cars, trucks and buses. Euro-diesel is an ultra-low sulfur fuel known for its cleaner composition than that of the traditional diesel. Cars, particularly taxis in Istanbul city, use mostly LNG and CNG due to the higher price of gasoline ($1.44 per liter) and diesel ($1.26 per liter).  

LUKOIL has had a presence in Turkey since 1998, and has been involved in the wholesale and retail marketing of petroleum and gas products, jet fuel, lubes and petrochemicals. It made inroads into Turkey’s fuel retail market when it opened its first gas station in 2006. By the end of 2015 that number reached 610, at which time the company had taken control of five percent of the country’s automobile fuel retail market.