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Residuum Upgrade Project Investment


Annual contribution to decreasing the current account deficit

During the second half of the year, when there was an oil price slump, product prices demonstrated a positive performance while the Mediterranean refinery margin increased compared to 2013.

Developments in the fuel oil sector in 2014

Starting 2014 at US$ 108 per barrel, the oil prices closed the year at US$ 55 per barrel due to: i) the slowdown in the world economy during the second half of the year, ii) strong dollar and iii) continuing oil supply surplus due to OPEC not reducing its production. In line with the 3.3% growth in the world economy, the daily average of world oil consumption reached the level of 92.5 million bbl/day, a limited increase of 0.7% YoY.

During the second half of the year, when there was an oil price slump, narrowing impact of the global maintenance shutdowns on product supply in spite of the high oil demand in the USA and developing markets, and relatively declining price of heavy oil caused product price ratios in the Mediterranean region to demonstrate a more positive performance especially in the second half of the year while the Mediterranean refinery margin showed a limited increase compared to 2013.

2014 was a year where there was a significant slump in fuel oil prices together with crude oil prices. The slump in product prices in international markets in second half of the year had a positive impact on pump prices for Turkish customers.

2014 was an active year also for the fuel oil distribution sector in Turkey. In March 2014, the Energy Market Regulatory Authority (EMRA) implemented a price ceiling on gasoline and diesel products for two months when profit margins were fixed. Moreover, EMRA issued a new regulation in November stipulating the determination of the pricing mechanism in our country by taking the margins in various European countries as a reference.

In terms of volume, there was a growth of 4.8% in white products (gasoline and diesel) and a decline of 9.8% in black products (fuel oil and heating oil) in 2014 compared to those of 2013.

LPG sector developments in 2014

Internationally, the LPG sector grew in 2013, with consumption rising by 2.8% to 265 million tons, outpacing the growth of global energy consumption of 2% and of natural gas consumption of 1.1%. Natural gas production increased 1.1% in the year and LPG production rose 2.1% to 280 million tons globally.

While household consumption that constitutes 45% of the world’s LPG consumption maintains its characteristic to be the largest area of utilization, autogas use that has a big share in Turkey reached 26 million tons, increasing 8%.

Turkey’s LPG consumption, which ranked 15th in the world and 2nd in Europe after Russia, was 3.7 million tons in 2014.

In the consumption breakdown of our country; while autogas has the biggest share with 76%, the share of cyclinder gas used in about 7.5 million houses and workplaces was 22%. Although cylinder gas market in Turkey has contracted in 10 years due to widespread use of natural gas, today it is still the 5th largest market in Europe.

As the 3rd largest autogas market in the world and the 2nd largest in Europe, Turkey’s autogas consumption reached 2.8 million tons increasing by 4% compared to 2013. The autogas market in Turkey ranked 1st in the world in terms of the number of vehicles and ranked 3rd in terms of consumption. In more than 4 million vehicles that constitute 42% of the total number of automobiles, autogas is preferred.

Electricity sector developments in 2014

Parallel with economic growth, Turkey’s consumption of electricity increased 4.1% YoY and reached 255.5 TWh in 2014.

Due to drought in the 2013-14 winter period, hydro-based production decreased by 32% compared to 2013 and its share in the total production went down from 24.7% to 16.1%.

The eligible customer limit, which gives electricity consumers the right to choose providers, was set at 4,500 kWh/year in 2014.

Privatizations of the distribution asset were completed with all distribution regions being transferred to the private sector. Production plants by the Electricity Generation Company (EÜAŞ) continued to be privatized. Yatağan, Yeniköy, Kemerköy and Çatalağazı thermal power plants were transferred to the private sector.

The Energy Market Regulatory Authority (EMRA) continues to restructure regulations. The Electricity Market Law No. 6446 calls for the establishment of a company, Enerji Piyasaları İşletme A.Ş. (EPIAŞ), to operate the Energy Exchange with the intent of creating a more liberal and transparent electricity market.

Koç Holding Energy Group

In the oil industry where competition continuously intensifies, Tüpraş’s investment expenditure in the 2006-2014 period reached US$ 5.2 billion. Processing heavy petroleum products that had a slump in consumption in recent years, the US$ 3 billion Residuum Upgrade Project which will convert fuel oil products into high-value, environment friendly white products at Euro V-Standard, was completed and operations were launched. It is anticipated that the current deficit of Turkey will decrease by US$ 1 billion with this project. In this project, 8,000 persons were employed during construction and installation phases while employment opportunity was created for additional 500 persons after the operations were launched.

Opet maintained its 2nd position while registering the highest market share gain in the sector. The Company aims to be the first choice of consumers in its sector with its excellent service approach. As an indicator of reaching this target, the Company achieved to be the sector leader for 9 consecutive years according to the results of the Customer Satisfaction Index survey organized by the Turkish Quality Association (KALDER). With these results, Opet achieved to be the permanent leader with the importance it gives to its customers.

According to EMRA data, Aygaz maintained a clear lead in the LPG sector with a 28.6% market share. Aygaz has a market share of 42.7% in the cylinder gas and 24.2% in the auto gas market. While reaching the record market share in LPG, the highest market share was also accomplished in autogas since 2006 - the date EMRA began to publish the sector report.

With its total installed capacity of 364 MW, Entek increased sales revenue by 16% in 2014.