SOCAR sets year-end decision on $7bn Türkiye expansion

SOCAR plans to take a final investment decision by the end of 2026 on a petrochemical expansion in Türkiye valued at up to $7 billion, placing higher-value manufacturing at the centre of Azerbaijan’s effort to broaden its energy economy beyond crude oil and gas sales.

The State Oil Company of the Republic of Azerbaijan is assessing new production units and upgrades to existing facilities at Petkim, its petrochemical subsidiary in Aliağa, İzmir. The programme is designed to increase domestic production of products including polyolefins, cut Türkiye’s reliance on imports and deepen integration between Petkim and SOCAR’s neighbouring STAR refinery.

Fitch Ratings said this week that SOCAR management expected to make the final investment decision by year-end. The agency has not included the prospective project’s capital expenditure in its base-case forecasts because key details have yet to be finalised, underlining that the $7 billion figure remains a planned investment rather than committed spending.

The project has moved through its engineering stages during 2026. SOCAR Türkiye said in July that preliminary front-end engineering work had been completed and that preparations were under way to enter the full front-end engineering design, or FEED, phase. It signed a memorandum with engineering group Technip covering technical, engineering and economic studies intended to establish the basis for any final investment decision.

SOCAR has said the Master Plan is intended to modernise Petkim’s production technology, support the long-term sustainability of its existing infrastructure and strengthen refinery-petrochemical integration. The company has not yet published a final configuration of the new units, their individual capacities or a construction timetable.

Kanan Mirzayev, Petkim general manager and head of SOCAR Türkiye’s refining and petrochemicals business, said earlier that the investment under consideration was in the range of $5 billion to $7 billion. The eventual cost would depend on the units selected, technology choices and engineering results.

Mirzayev has said the revamped complex could reduce Türkiye’s dependence on imported polyethylene products by about $1.5 billion. He said the company is targeting products where domestic demand is substantial and Petkim can build a competitive position, rather than seeking expansion across every petrochemical category over time.

The proposed expansion would build on a large industrial base already created by SOCAR in Türkiye. The company said in June that its cumulative investment in the country had reached about $19.5 billion. Its portfolio includes Petkim, STAR Refinery, energy trading, storage, gas infrastructure and other businesses.

Petkim is Türkiye’s first and only integrated petrochemical producer. SOCAR says the complex has annual gross production capacity of about 3.6 million tonnes, produces more than 60 petrochemical products and meets roughly 9 per cent of the country’s petrochemical product demand. Its output feeds industries ranging from packaging and construction to textiles, automotive manufacturing, pharmaceuticals and agriculture.

Next door, STAR Refinery provides a central part of the integration strategy. SOCAR says the refinery can process about 13 million tonnes of crude oil a year and supplies Petkim with naphtha, a core petrochemical feedstock. The arrangement is intended to reduce feedstock procurement risks, improve production continuity and capture more value from each barrel processed within the group.

The planned investment therefore marks a further shift in SOCAR’s international model from exporting hydrocarbons towards converting them into fuels, chemicals and industrial inputs. That approach gives the company exposure to downstream margins while linking Azerbaijan’s energy resources more closely to manufacturing and trade in one of its largest overseas markets.

The strategy also carries execution risks. Petrochemical producers face volatile margins, heavy capital requirements, competition from lower-cost plants in the Middle East and Asia, and increasing pressure to reduce emissions. Large projects can also be affected by interest rates, construction costs, technology choices and changing demand for plastics and chemical feedstocks.