Azerbaijan’s state-owned energy group SOCAR is committing about 6 billion Turkish liras, reported at approximately $120 million, to a new jet-fuel processing unit at its STAR refinery in İzmir. The project is designed to release existing equipment for an additional 600,000 tonnes of annual diesel production while preserving the refinery’s ability to respond to aviation-fuel demand. Scheduled to enter service in the first quarter of 2029, the investment is modest beside the multibillion-dollar refinery itself, but strategically important for Türkiye. It targets one of the country’s largest import dependencies, supports a rapidly expanding aviation market and demonstrates how established foreign investors are using brownfield expansion to deepen their position in Turkish industry.
How the STAR Investment Changes the Product Mix
SOCAR Türkiye said it has started the engineering, procurement and construction process for a new Jet Fuel, or Kero-Merox, unit. The company identified KT Kinetics as the EPC contractor and said construction and procurement activities would begin shortly.
The project is less a simple capacity addition than a reconfiguration of refinery operations. STAR currently uses its kerosene hydrotreating, or KHT, unit in the jet-fuel production chain. Once the new unit takes over that function, the KHT facility can operate in diesel mode, creating approximately 600,000 tonnes of additional annual diesel capacity.
Kero-Merox technology is generally used to treat kerosene streams and remove or convert sulfur-containing mercaptans so that the product meets aviation-fuel specifications. Moving this processing step to a dedicated unit gives STAR more freedom to optimize the refinery according to relative jet-fuel and diesel margins. SOCAR also says the KHT unit could switch back to jet-fuel service when market conditions justify it.
Kanan Mirzayev, general manager of Petkim and head of SOCAR Türkiye’s refinery and petrochemicals business, described the project as a “strategic transformation investment” intended to improve production flexibility and energy efficiency. He said it would contribute to reducing Türkiye’s diesel imports and current-account deficit.
Capacity, however, should not be confused with guaranteed production. Actual output after 2029 will depend on refinery utilization, the crude slate, maintenance schedules, domestic demand and the price differential between middle distillates. The commercial value lies partly in optionality. STAR will be able to direct more intermediate material toward whichever product offers the stronger market or supply-security case.
A Targeted Response to Türkiye’s Diesel Deficit
Türkiye Today, citing Energy Market Regulatory Authority data, reported that STAR increased diesel production by 31 percent to about 6.8 million tonnes in 2025. National diesel production rose 7.4 percent to 16.9 million tonnes, while imports were broadly unchanged at approximately 13.6 million tonnes.
Interfax, also drawing on EMRA figures, reported that Türkiye imported 13.66 million tonnes of diesel in 2025. Russia supplied 11.59 million tonnes, or about 85 percent of that total, followed by Egypt with 748,000 tonnes and India with 562,000 tonnes. The new STAR capacity is equivalent to roughly 4.4 percent of the country’s 2025 diesel imports.
That percentage is large enough to improve the domestic supply balance, but not sufficient to eliminate the structural deficit. Türkiye’s economy remains heavily reliant on road freight, buses, agricultural machinery and diesel-powered commercial vehicles. Tüpraş, the country’s other major refiner, said in its 2025 integrated report that diesel demand increased by 3.7 percent during the year, while overall petroleum-product demand rose 5.4 percent.
The refinery investment therefore addresses two related exposures. The first is the direct cost of importing refined diesel rather than crude oil. The second is supplier concentration. Domestic refining cannot remove Türkiye’s underlying dependence on imported crude, but it can reduce reliance on finished-product markets during shortages, shipping disruptions or sudden changes in regional refining margins.
The macroeconomic argument is also significant. The International Monetary Fund’s 2026 Article IV report estimated Türkiye’s fuel imports at about $64.3 billion in 2025. Every additional tonne produced domestically does not translate into an equal reduction in the energy bill, because the refinery still needs imported feedstock. Nevertheless, replacing imported finished fuel with locally refined product retains more processing value in Türkiye and can reduce the premium paid for diesel during tight markets.
Aviation Growth Strengthens the Jet-Fuel Case
The project also reflects the continued expansion of Turkish aviation. Tüpraş’s 2025 report, based on EMRA data, said jet-fuel demand grew by 16 percent and exceeded its pre-pandemic level for the first time. Türkiye’s airport operator DHMİ reported that Istanbul Airport handled approximately 84.5 million passengers in 2025, making it Europe’s second-largest airport by passenger volume, while the national system carried about 247 million passengers.
STAR already has a direct route into this market. In January 2025, SOCAR announced that the refinery had won a three-year tender to supply Istanbul Airport with 700,000 tonnes of jet fuel annually. The agreement provides a substantial anchor customer while tying the refinery’s output to one of Europe’s most active aviation hubs.
This helps explain why SOCAR is not simply converting jet-fuel capacity permanently into diesel production. A dedicated unit allows the refinery to maintain aviation-fuel supply while freeing another asset for diesel. The result is a more flexible response to two products with strong but different demand drivers.
There is also a decarbonization complication. Türkiye’s Directorate General of Civil Aviation introduced a sustainable aviation fuel directive aligned with the International Civil Aviation Organization’s CORSIA framework. For 2026, the authority established a target corresponding to a 0.5 percent emissions reduction through SAF use, with a 5 percent reduction objective by 2030. Tüpraş has identified sustainable aviation fuel as an important part of its own transition strategy.
SOCAR’s new unit is primarily a conventional jet-fuel investment, not a disclosed SAF project. Its operating life will nevertheless extend well into a period of tighter carbon requirements. Future competitiveness may depend on whether the unit can be integrated with certified lower-carbon blending components, supported by appropriate storage, traceability and quality-control systems.
SOCAR Deepens an Established FDI Platform
STAR began operations in October 2018 after an investment commonly reported at approximately $7 billion. Originally designed to process 10 million tonnes of crude annually, it has expanded to more than 13 million tonnes and, according to SOCAR, now meets about 20 percent of Türkiye’s refined-product demand. Its integration with the adjacent Petkim petrochemical complex allows naphtha and other intermediate streams to move through a broader industrial value chain.
Mirzayev said the latest project would bring SOCAR’s cumulative investment in Türkiye to approximately $20 billion. That figure makes the group an unusually important example of long-term foreign direct investment from outside the European Union. Its Turkish portfolio extends beyond refining into petrochemicals, natural gas, power generation, storage, terminals and the Trans-Anatolian Natural Gas Pipeline.
The investment arrives as Türkiye seeks to attract more productive foreign capital. The Presidency’s Investment and Finance Office, citing central-bank data, said Türkiye received $13.1 billion of FDI in 2025, up 12.2 percent year on year. Manufacturing accounted for $3.02 billion, or 31 percent of reported inflows.
STAR also has institutional significance because SOCAR says it was Türkiye’s first company to receive a Strategic Investment Incentive Certificate. Such support is intended for projects that reduce import dependence and strengthen domestic industrial capacity. That history does not automatically establish which benefits will apply to the new unit. Coverage can depend on whether an existing certificate is amended, whether the expansion qualifies independently, and which expenditures, imported machinery and financing costs are accepted.
For other foreign investors, the lesson is that follow-on investment can be as important as initial market entry. A large operating platform provides established utilities, logistics, personnel and regulatory relationships, making incremental capacity faster and less risky than constructing an entirely new refinery.
Regulation, Feedstock and Sanctions Remain Material Risks
Executing a refinery expansion requires coordination well beyond the EPC contract. Investors must assess whether EMRA licensing changes are needed, manage environmental and construction approvals, document hazardous-material and occupational-safety controls, and align the installation with customs, tax and investment-incentive rules. Imported machinery may raise questions about VAT, customs exemptions, product classification and certificate coverage.
Feedstock compliance has also become a commercial issue. EMRA data reported by Interfax showed that Russia remained Türkiye’s largest crude supplier in 2025, despite a 10 percent annual decline in volume. Reuters reported in late 2025 that Turkish refiners were buying more non-Russian crude as Western restrictions tightened.
The European Union’s 18th sanctions package prohibited imports of petroleum products made from Russian crude in third countries from January 21, 2026. European Commission guidance specifically calls for enhanced due diligence on products originating in Türkiye, India and China, including evidence establishing where the underlying crude was extracted.
For STAR and prospective partners, crude segregation, mass-balance controls, contractual warranties and auditable product-origin documentation can determine access to European markets. Compliance is therefore not merely a legal function. It affects crude procurement, storage, working capital, export destinations and refinery margins.
What This Means for Foreign Investors
SOCAR’s project shows that Türkiye continues to offer investable opportunities where domestic demand, import substitution and regional logistics intersect. It also shows why headline capacity alone is an incomplete investment thesis. Foreign investors must model product demand, exchange-rate exposure, imported equipment costs, feedstock availability, carbon regulation and export-market restrictions over the full operating life of an asset.
A market-entry assessment should identify whether the opportunity is best pursued through a Turkish subsidiary, joint venture, acquisition or supply partnership. Company incorporation and corporate structuring then need to accommodate financing, EPC liabilities, transfer pricing and profit repatriation. Investment-incentive work should establish whether strategic, regional or project-specific support is available and ensure that applications are coordinated before binding procurement decisions make expenditures ineligible.
Legal and tax compliance must cover EMRA requirements, environmental permissions, customs treatment, sanctions screening and contractor taxation. Government-relations and regulatory-liaison work is particularly important where several ministries, municipalities and sector regulators have overlapping responsibilities. Import-export facilitation becomes central when equipment, catalysts or feedstocks cross multiple jurisdictions, while project management is needed to synchronize licensing, procurement, construction, commissioning and local suppliers.
For an FDI advisory firm such as fdiconsultancy.com, these are the practical areas in which market entry, incorporation, incentives, compliance, government relations, import-export support and on-the-ground project management converge. The central investment signal from STAR is positive, but disciplined execution will determine whether similar projects convert Türkiye’s demand and geographic advantages into durable returns.