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Message from the General Manager

Dear Stakeholders, 

We are leaving behind a year that has been dominated by global uncertainties, the economic slowdown in emerging economies along with sharp falls in their value of currencies and sectoral volatilities. The year 2018 was a year marked by rising crude oil prices, mainly due to supply-driven factors and buoyant global demand in the first half of the year, adding the impact of the depreciation of currencies in developing countries. 

 

Profitability of oil products is significantly impacted by shifts in crude oil supply in 2018

In 2018, the increase in the share of light crude oil with high gasoline yield, rising production in the US along with the introduction of new refining capacity, and the significant increase in Chinese exports all had a decisive role on the global refining sector. Positive sentiment in the global economy continued until the last quarter of the year despite the loss of momentum, and supported the aviation sector and, in particular, middle distillate products. On the other hand, margins of all light distillates, including gasoline, slumped to record low levels in the last quarter as a result of China and the US continuing to strengthen their position as net exporters of gasoline, the increase in ethanol usage due to high gasoline prices, the pressure brought about by ethane-based capacity and low LPG prices on naphtha margins. As a consequence of these factors, the Mediterranean refining margin, which had stood at USD 5.34/barrel in 2017, declined by USD 0.78/barrel to USD 4.56/barrel in 2018. 

 

Continued growth in gas and diesel consumption in our country

In common with the measures brought in place in some other developing countries, the amount of consumption tax on petroleum products was reduced to offset the increase in prices. As a result, the decline in consumption of gasoline, diesel and auto-LPG was relatively limited. However, despite these precautions, there was a decline in the consumption of petroleum products due to the slowdown in economic growth since August. The annual average growth of gasoline and diesel consumption, which had stood at 4.5% and 9.0% respectively in the last five-year period was 3.7% and 7.8% in the first six months of 2018. However as the economic slowdown began starting from August, the growth rates in consumption of gasoline and diesel for the first 11 months of the year had been scaled back to 1.7% and 4.2%, respectively. 

 

Tüpraş procured 24.5 million tons of crude oil from 12 countries

In 2018, our company procured a total of 24.5 million tons of crude oil, in 20 different types, from 12 countries – including domestic crude oil – to create the most cost-effective feedstock composition. Despite the periodic planned maintenance and investment shutdowns in our 3 large refineries, 27.0 million tons of raw materials were put into charge in 2018 with an optimal capacity utilization; 77.4% of white product yield was achieved with 25.7 million tons of production. With the support of commercial sales, a total of 29.8 million tons of product sales, of which 25.6 million tons is domestic sales, was realized in 2018. 

 

Making a difference with our financial management

The year 2018, which was marked by a very volatile course in crude oil prices, was not a particularly positive year for the sector due to the decline in refining profitability. On the other hand, the unpredictable and sharp fluctuations in exchange rates rendered it very difficult to manage stock and exchange rate risks in 2018.

 

Adopting a forward looking approach, Tüpraş renewed a USD 700 million Eurobond issuance at the end of 2017 at very reasonable costs (before the maturity of its 2018 term) against the risk of a contraction in fund inflows to emerging markets. This Eurobond issuance helped us emerge through this challenging year with a strong debt structure and balance sheet. We managed our operational and financial risks successfully by using all kinds of financial instruments. Tüpraş wrote a net profit of TL 3.8 billion in 2018, achieved as a result of its success in managing risks, its experience in crude oil procurement, its strong production power and its effective financial management. 
 

A world first with the “Online Spalling” project

In 2018, Tüpraş began to use digital technologies and data analytics more intensively in refinery operations. To this end, we have implemented a project that includes end-to-end maintenance management in order to plan, optimize and follow-up all maintenance activities in the field and we started to implemented wireless technologies in the refinery area. With the strategy of transforming all kinds of data into value, Tüpraş established the Analytical Centers working for a wide range of projects in METU and ITU in 2018. We achieved a global first by establishing a system that predicts the maintenance time of furnaces, with the Online Spalling project supported by machine learning.

 

Our London office opens for business

While continuing to focus on refining activities, Tüpraş took concrete strategic steps in 2018 as part of its business diversification strategy in the sector, by closely following the potential investment opportunities in domestic and foreign areas. As a result of the evaluation of similar practices in the sector, a “trading office” was opened in London in order to follow the international market opportunities closely and support our import and export operations, while seeking to capture additional value from the supply and sales chain. Our London office, the organizational structure of which has been completed, started its operations by the end of 2018. 

 

Working to the priority of “my future my safety” in all business processes

As a company that places human and occupational safety at the heart of what it does, we continue our activities in line with our goal of defining and eliminating risks in all of our operations and reducing them to acceptable levels within the framework of national and international standards. In this context, we expect our solution partners to follow the Health, Safety, Environment (SEC) Process Safety Standards together with all our employees without compromise. We started to implement a wide range of projects on this subject this year. We have determined a way of working that complies with our responsibility of ensuring all our workers return to their loved ones safe and sound at the end of each day, as our goal.

 

“Our Energy for Equality Never Ends”

As our country’s largest industrial company, we also bear the responsibility of providing leadership in change and transformation in the community. In this context, we have realized an array of projects in a wide range of areas from education, health, culture and the arts to sports and we will continue to do so. Since 2015, we have been focusing on gender equality. We strive to raise awareness within the scope of the “I Support Social Gender Equality for My Country” project being undertaken by the Koç Group we are affiliated with. By signing the United Nations Women’s Empowerment Principles in 2017, we have announced our goal to become an inclusive workplace. As a supporter of the HeForShe movement carried out by the United Nations Women’s Unit (UN Women), we signed a global cooperation agreement with the UN Women and Fenerbahçe at the end of 2018 to raise awareness on behalf of equality in a broader field. As such, as we seek to bring gender equality to the agenda of society, we reiterate that “Our Energy for Equality Never Ends”.

 

Tüpraş will maintain its work aimed at producing the greatest added value for its partners, stakeholders and Turkey’s economy with determination, in the future as it did in the past. 

 

I would like to thank all of our colleagues who contributed to our 2018 performance, and all of our stakeholders for their encouragement.

Sincerely,

 

İbrahim Yelmenoğlu 

General Manager

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