The pillars of production

The fundamental energy input for economic development in Turkey and around the world is petroleum; petrochemical products are crucial raw materials for industry. Our need for both grows every day. The increase of the world population and the development of technology spur more energy consumption, which has made it compulsory to keep track of the changes and developments in the petroleum sector. The diffusion of petroleum foments a dependency managed within the supply-demand equilibrium. Thus, petroleum takes a much more strategic position than other energy resources. Oil prices are a pivotal factor affecting the economic performances of nations and the world as a whole. Long-lasting spikes in oil prices tend to sway macro variables tremendously. On the other hand, the petrochemicals industry, a sub-sector, occupies a key place in the world economy. This industry produces the raw materials and inputs of petroleum, kerosene, LPG, diesel, ethane, plastic, rubber, yarn and other intermediary goods consumed by the packaging, electronics, automotive, construction, textile and agriculture sectors. The two big players of the sector that represent 25 % of the production of petrochemicals in Turkey are TÜPRAŞ and PETKİM. Oil consumption varies by economy rather than population and land size. In world oil consumption, OECD countries, particularly the G-8 (the USA, Canada, France, Italy, the UK, Germany, Japan and China) lead the way. An examination of the structure of energy usage illustrates that Turkey is close to the world average in oil consumption. Manufacturing and consuming nations were quick to grasp the strategic importance of petroleum. A country's development and growth hinges on the availability of petroleum. Two thirds of the world's oil reserves are in the Middle East, and governed by OPEC members. Turkey's geographic location is on the Asian-European road in the middle of the region of rich oil producers with the reserves and industrialized Western countries with intensive energy consumption. Turkey is carrying out international energy projects that are economically momentous. At the same time, it is introducing laws to harmonize with EU regulations to become a natural bridge of energy between the Middle East, the Caspian Basin and the West.

Investments in petrochemicals grow

Turkey may not be one of the great oil producers but has critical know-how and production of petrochemicals. Starting from the 1960s, the petrochemical industry has developed rapidly in a short time, and is still one of our most strategic branches of industry. PETKİM, founded in 1965 to establish and develop the Turkish petrochemical industry, is indubitably the strongest actor in the sector. Petrochemical investments require colossal budgets everywhere in the world. The requisites for such investments are proximity to oil resources, location in an area that is logistically advantageous and the ability to maintain competitive power by investments in new technology. PETKİM satisfies these conditions, and has been investing prodigiously in the last few years. Nevertheless, much more investments are needed for Turkey to become a global power in petrochemicals. The market is thriving contemporaneous with economic growth. The Turkish market has the highest rate of growth after China in this domain. The sector's magnitude is projected to exceed $ 8.5 billion in 2012. On the other hand, the Turkish petrochemical industry is dependent on imports by 75 %. Therefore, Turkey must invest in the petrochemical sector, and reduce its import dependency. Our country registered a foreign trade deficit of $ 105 billion in 2011. Excluding the $ 54 billion paid for oil and natural gas, the actual foreign trade deficit stands at about $ 50 billion. Nearly half of this figure, $ 24 billion, is from the chemicals industry, which means that the majority (85 %) of the raw materials for the chemicals and plastic sector are imported.

The plastic sector employs 250,000

In 2011, Turkey's imports and exports of plastic and plastic products were $ 12.5 billion and $ 4.6 billion, respectively. 820,000 tons of plastic raw materials were produced domestically, and 670,000 tons were made by PETKİM. Employing about 250,000 people, the Turkish plastic sector imported 5.2 million tons of plastic raw materials paying $ 10 billion. This was 12 % higher in quantity and 30 % higher in value compared to the year before. As the sector remained dependent on foreign producers for raw materials, plastic was imported from over 100 countries. 63 % of these imports were from Saudi Arabia, Germany, Belgium, the Netherlands, South Korea, Spain, Italy, Iran, France and the USA. Also last year, Turkey's exports of plastic raw materials were 492,000 tons and $ 894.5 million. This was 12 % higher in quantity and 27 % higher in value compared to the year before. Plastic raw materials were sold to over 150 countries. The top 10 markets had shares of 52 % in quantity and 55 % in value. In spite of the bulky imports, direct and indirect exports of the Turkish plastic sector added up to $ 9.2 billion; second within the total chemical sector exports (29 %). 60 % of the domestically produced plastic raw materials were exported; 94 % of domestic sales were covered by imports. In plastic raw materials, exports' coverage of imports was 9 %. The only way to raise this number is to encourage new petrochemical investments.

Petrochemicals oblige investment

The petrochemical industry tends to be quite vulnerable to fluctuations in raw material and energy prices. Prices and profit margins oscillate in synchronization with developments in the world economy and movements in the supply-demand balance. In Turkey, the demand for petrochemical products rises faster than other developed nations and the world average. Despite high imports, the Turkish petrochemical sector is very open for development. To compete in the world (petrochemical sector), a certain technological level and size is needed. Although it does not possess natural resources like oil, Turkey is very close to petroleum-rich countries and in the heart of the world's energy hubs. This advantage must be born in mind, and a friendly environment for local and foreign investments should be created. A strong petrochemicals sector will strengthen the Turkish plastic sector, and enhance its production capacity. Evidently, the sector's 10 % growth last year gave it the largest production capacity after Germany and Italy. The same rate of growth is targeted for 2012.