US Exim has lent US$641mn to the Turkish special vehicle company Star Refineri.

The loan will be used to purchase oil refining equipment to be used in the refinery currently being constructed in Aliaga, near Izmir.

The project sponsor is a joint venture between the Turkish subsidiary of the State Oil Company of Azerbaijan Republic (Socar – who owns 81.5% of the project) and a subsidiary of Turcas Petrol.

The total project cost is US$5.3bn, and in 2011 the sponsor announced that it wished to raise US$3.2bn of the total cost in the form of debt.

At the signing of the construction contracts in May 2013, the CEO of Socar Kenan Yavuz said that UniCredit had been mandated to arrange the debt finance and that the funding was almost finalised.

However, it’s been reported in the Azeri press that it had failed to generate the requisite interest among Turkish commercial banks. Star hoped to raise between US$3bn and US$4bn from the Turkish banking sector, but it has been reported that only five of 15 potential financiers came forward.

A banker close to the deal tells GTR that they are at a “very hot phase of the financing process”, but that the transaction has yet to be signed off.

Furthermore, Riccardo Puliti, the EBRD’s managing director of energy, tells GTR that despite reports to the contrary, it has also yet to agree finance for the project.

It had been widely-reported that the development bank had agreed to lend US$150mn and while Puliti confirms the figure quoted is accurate, he says there will be nothing closed before Christmas and that due diligence is ongoing.

The IFC has reportedly pledged to directly lend the same amount and match it with a US$150mn commercially-syndicated tranche. In June, the Black Sea Trade and Development Bank approved an 18-year loan of US$58mn for the project.

In 2012, law firm Greengate was retained to “provide advisory services to eight export credit agencies for the Star Refinery in Turkey”. It’s expected that given the nationalities of the construction firms involved, these will come from, among others, Spain, Japan, South Korea and Italy.

The refinery is expected to be online in 2017 and will process medium sour crude oil into low-sulphur transportation fuels and petrochemical feedstock. It will generate 10 million tonnes of fuel and feedstock a year, or 214,000 barrels a day.

45% of the plant’s capacity will go towards providing diesel for Turkish companies, with 15% delegated for air fuel. Combined, the offtake will significantly reduce Turkey’s reliance on fuel imports, thus helping address the country’s massive negative trade balance.

One of the other offtakers is expected to be Petkim Petrokumya, a Turkish petrochemicals firm which already has a production complex in the vicinity. Pekim is planning to double its capacity by 2018 and up to 20% of the refinery’s capacity has been allocated to the company.