Russia, Turkey agree on oil refinery construction Samsun-Ceyhan pipeline

Russian Energy Minister Sergei Shmatko has announced that Russia and Turkey have agreed to build an oil refinery as part of the Samsun-Ceyhan Pipeline project.

Speaking at an international oil conference in Moscow, Shmatko said agreements with Turkey were developing their own momentum, and adding to general optimism.

"The talks with Turkey inspire us in the sense that a package of documents on Samsun-Ceyhan has been approved. We want to build a refinery in the location where we can jointly trade oil products."

Analysts believe the location in Turkey could enable Russia to export more oil products into Europe, with the Minister noting that the regional reserves added to its desirability.

"We did a good job for analyzing a long-term balance of oil reserves in the region and came to the conclusion that the Samsun-Ceyhan oil pipeline could become an attractive alternative route for oil transportation."

According to the minister, Russia will be looking to develop the plant on the basis of long term contracts to avoid volatility in the oil products market.

The $2.5 billion, 550-kilometer long pipeline connecting Samsun on the Black Sea Ceyhan on Turkey’s Mediterranean coast is expected to have an initial capacity of up to one million barrels a day cost. This will enable it to relieve congestion on the Bosporus straight, and potentially provide an outlet for oil from Kazakhstan

The agreement comes on the heels of a memorandum of understanding on the SCP signed by Russia, Italy and Turkey on October 19 which saw Russia joining the project and enabling the start of construction.