US embassy cable - 05ANKARA269

UNCLAS ANKARA 000269 
 
SIPDIS 
 
STATE FOR EUR/SE, EB/IFD, AND EB/CIP 
TREASURY FOR RADKINS AND MMILLS 
USDOC FOR 4212/ITA/MAC/CPD/DDEFALCO 
 
E.O. 12958: N/A 
TAGS: EPET, EINV, KTDB, TU 
SUBJECT:  Turkey State Refinery Company TUPRAS 
Privatization Opportunity 
 
REF: 04 Ankara 6491 
 
1.  Summary: Following failure of an initial effort in 
2004, the Government of Turkey plans to re-announce 
tenders (this time) for 51% of the state refinery company 
TUPRAS at the beginning of April 2005.  Turkish officials 
are eager for U.S. participation.  End Summary. 
 
2.  TUPRAS dominates the petroleum refining and 
downstream operations sector in Turkey.  The company has 
four main refining complexes: Batman in the Southeast, 
Aliaga near Izmir, Izmit near Istanbul (the country's 
largest refinery), and the Central Anatolian Refinery at 
Kirikkale near Ankara.  In 2002, TUPRAS' share of the 
Turkish fuels and lubricants market was around 78 %, with 
other major retailers including BP, ExxonMobil, 
TotalFinaElf, Agip, and ConocoPhillips.  TUPRAS is 
Turkey's largest company in terms of revenues. 
 
3.  A previous attempt to privatize TUPRAS via sale of a 
65 % stake was annulled last November when Turkey's top 
administrative court found that the Privatization 
Administration failed to adhere to the privatization 
process requirements.  A joint venture between Russian 
Tatneft and local group Zorlu won the tender for a $1.3 
billion sale.  The court was responding to a case brought 
by the Petroleum Labor Union representing TUPRAS 
employees. 
 
4.  According to the Turkish Privatization Authority 
(PA), the new tender will start afresh during the first 
week of April.  The tender will constitute a 51% block 
sale in combination with an IPO of 14% of TUPRAS' stock, 
potentially giving the acquiring company up to 65% 
control of the refining company.  The PA believes new 
legislation supporting the privatization process will 
reduce the potential for a legal challenge like that 
which led to the cancellation of the 2004 privatization 
of TUPRAS.  PA seeks broader interest from Western 
European and American firms to help arrive at a 
successful conclusion. 
 
5.  Russian firms, which currently provide over 60% of 
Turkey's natural gas, have shown strong interest in 
investing in Turkey's energy sector.  Russia also 
provides significant oil to Turkey's Izmit refinery, 
which probably drives Tatneft's interest in TUPRAS. 
Energy Minister Hilmi Guler and other officials have 
regularly told us that Turkey would welcome U.S. 
companies' participation in the TUPRAS privatization, as 
well as in other opportunities in the energy sector. 
 
Edelman