“We Want To Get Into Oil Production”

Koç Holding’s energy drive, which began with Tüpraş, is continuing. It is targeting new areas. Energy Group President Erol Memioğlu says: “We want to get into oil production in order to complete our vertical integration and have a presence in every field in oil.” Memioğlu points to the Iraqi market and says that they will be able to join a consortium which includes some giant oil companies. We spoke with Koç Enerji Group President Erol Memioğlu about their new areas for investment, Tüpraş’s efforts to increase profitability and their plans for 2009.

* What is energy’s role and share in Koç Holding?
In 2007 the energy group had a turnover of US$23.6 billion. Tüpraş accounted for 66 percent of this figure, Opet 21 percent and Aygaz 10 percent. Before the acquisition of Tüpraş in 2005, energy accounted for less than 20 percent of the holding’s turnover. As of the end of 2007, its share had risen to 40-45 percent.

* What kind of medium and long-term targets do you have in energy?
We are anyway the sectoral leaders in most of our existing businesses. If we talk in company terms, Aygaz is one of our flagships. Aygaz is the leading company in the LPG sector with a market share of 30 percent and is growing rapidly in the auto-gas market. The market grew by 7 percent in 2008 and today has reached 2 million tons. We expect this growth to continue.

Opet is the fastest growing company in the sector. It now ranks third in terms of size with a market share of 16 percent. A new field that Opet will enter this year is jet fuel. We are establishing the most modern mineral fuel plant in Europe. I can say that our most important investment at Tüpraş will be the Fuel Oil Conversion Project which aims to produce higher added value products.

* In which areas do you want to grow?
We have a strong distribution network with Aygaz and Opet. We are strong in refining with Tüpraş. We want to enter oil production in order to have a presence at every stage of the oil process and complete our vertical integration. We are planning to look at various investment opportunities in this area in Turkey and abroad. Iraq is known to have around 10 percent of the world’s proven oil reserves. We want to be part of the consortiums that will be established in the country. We see participating in oil production projects as being among our medium term goals, to be realized in the next five years.

* What kinds of changes were there after Tüpraş was privatized?
As the new management, we accelerated investments and added dynamism. Between the end of 2005 and the end of 2008 our investment expenditure was about US$1 billion. We are planning to invest US$300 million in 2009. In the seven year period from 2006 to 2012 we shall invest approximately US$3.2 billion.

* What are your forecasts for this year? Will you continue to invest?
I am not pessimistic. The crisis can be easily overcome through intelligence polices and self-sacrifice. This year must not pass without measures being taken. Of course, 2009 will not be like the last 5-6 years. It will be a difficult year.

Elçin Cirik
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