MOSCOW (MRC) -- Azerbaijan’s state-owned SOCAR is gradually increasing production at its STAR oil refinery in Turkey and actively purchasing Russia’s Urals crude oil to supply the plant, adding to shortages of sour grades in the Mediterranean, reported Reuters with reference to traders.
The 200,000-barrel-per-day STAR refinery has reached half of its planned processing capacity, three sources familiar with the refinery launch process told Reuters.
One source with direct knowledge of the refinery plans said SOCAR expects STAR to reach full capacity as early as April.
"The test period is always tricky, but the latest tests show good results," he said.
A SOCAR spokesman told Reuters: “We plan to reach full capacity soon.” He added the company could not give an estimate of operational capacity as different units at STAR were being tested separately.
While in testing mode, SOCAR can only supply STAR with two grades - Urals and Kurdistan’s KBT Blend, sources said.
Overall supplies of Urals to STAR so far in 2019 have exceeded 500,000 tonnes compared to 270,000 tonnes for all of 2018, Refinitiv Eikon flows data shows.
SOCAR buys Urals from Russia’s Rosneft under a long-term contract as well as in the spot market.
In February Rosneft supplied SOCAR with 140,000 tonnes of Urals under the long-term agreement and supplies will continue. Rosneft has a contract to supply STAR with 1 million tonnes of Urals per year, traders said.
SOCAR also bought a February-loading 100,000-tonne Urals cargo loading from Baltic Ust-Luga port in Surgutneftegaz’s spot tender for the first time in a long while.
SOCAR also purchased several Urals cargoes loading from Novorossiisk and Baltic ports in late January and February in a secondary market from Litasco and Trafigura, traders said.
"SOCAR is set to become an active player in Urals market, change is visible. Last year they bought just a couple of cargoes and this year they’re actively monitoring and buying, it certainly adds to support for Urals prices," a trader in the Mediterranean market told Reuters.
Urals differentials in the Mediterranean have traded at a premium to dated Brent for almost two months in January-February and reached the highest premium since 2013 in January due to limited exports of the grade and a shortage of sour grades due to a lack of Iranian crude caused by sanctions.
At full capacity STAR will be able to refine a variety of crude oil grades, but its main feedstock is planned to be heavy and sour oils, Reuters sources said.
As MRC wrote before, in February 2018, Maire Tecnimont S.p.A. announced that its main subsidiaries Tecnimont S.p.A. and KT-Kinetics Technology S.p.A. - had signed with the Client SOCAR (State Oil Company of Azerbaijan Republic) Heydar Aliyev Baku Oil Refineryan EPC contract (Engineering, Procurement and Construction) as an important part of the execution of the Modernization and Reconstruction works for the Heydar Aliyev Baku Oil Refinery, in Azerbaijan.
SOCAR, which is keen on expanding operations in the retail oil products market abroad, is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan.