Surrounding Turkey is 73% of the world’s proven oil reserves and 72% of the world’s proven gas reserves. This makes Turkey a crucial bridge between energy rich regions and Europe, which spends approximately 300 billion dollars per year for the imported energy resources. Turkey spends $35 billion for energy products imports including oil & gas.
Some companies have found natural gas offshore western Black Sea coast of Turkey and started production. Companies have explored for oil & gas in only 20% of the potential online prospects and 1% of the potential offshore prospects so far in Turkey. This means many prospects are waiting to be explored. Foreign companies can select the public company Turkish Petroleum Corporation (TPAO) as a partner for exploration and production. TPAO already has important prospect licenses for which they would not hesitate to select a foreign partner as TPAO has limited resources for investment itself.
Turkey has become a critical player in global energy security. The Baku-Tbilisi-Ceyhan (BTC) pipeline started operation in 2006 with 1 million barrel per day (bpd) oil and approximately 5% of the world's oil supply will be flowing through Turkey. The target is to increase the delivery to 1.6 million bpd of crude. Central Asian oil supply will be blended through BTC. Ceyhan, a harbor at the Mediterranean coast of Turkey will be the energy hub and in the future supply a crude oil blend of Azeri, Iraqi and Central Asian oil. Ceyhan will also have at least a couple of more new oil refineries. Several foreign and local companies have already applied to EMRA for obtaining license.
Turkish Government is supporting Samsun-Ceyhan Bosphorus by-pass crude oil pipeline to be constructed. Calik Energy and Italian ENI will be the 50/50 investors. Total cost of the project will be $2.5 billion. 6 tender packages are being prepared. U.S. companies can be competitive in pumping stations.
The Shah Deniz natural gas pipeline was completed and commenced supplying natural gas to Turkey and Greece in 2007. This pipeline will later on expand to Italy under the Adriatic Sea to Italy. Azerbaijan will supply 2-6.6 billion cubic meters per annum (bcma) of gas for 15 years to Turkey, Greece, Italy and Europe through Turkey.
Additionally another natural gas pipeline to supply natural gas to Europe from Azerbaijan, Iraq, Iran, Egypt and Turkmenistan and potentially Kazakhstan is being planned by five countries as an alternative resource to Europe. This pipeline named NABUCCO will be extended from Turkey to Austria through Bulgaria, Romania, and Hungary. These five countries and a private company will be the investor for NABUCCO. The 3,300 Km pipeline is planned to supply 25.5-31 bcma of gas to Europe and will become operational in 2012.
Turkey and Egypt signed a framework agreement to supply Egyptian natural gas to Turkey and Europe via Jordan and Syria. A pipeline has already been built from Egypt to Syria and currently a link to Turkey is under study. By the end of 2011, Turkey will receive 2-4 bcma gas from Egypt. The subject framework agreement states that Turkey would also receive 2-6 bcma of Egyptian gas to supply to Europe.
The total length of the oil pipeline operated by the Petroleum Pipeline Corporation, BOTAS, has increased to 3,374 Km from 2298 Km by the completion of 1,076 Km long BTC crude oil pipeline. With this addition, Botas’ 80 million tons of crude oil pipeline capacity increased to 130 million tons per year.
Botas also has approximately 10,000 Km of natural gas (NG) transmission pipelines within Turkey. Approximately 50 cities in Turkey received natural gas and this figure is expanding every year throughout the entire country with the private sector investments of NG distribution lines. Turkey imported over 34 billion cubic meter (bcm) of natural gas (NG) in 2007 from Russia, Iran, Azerbaijan, Algeria and Nigeria (last two LNG) and 65% of the gas comes from Russia through western pipelines and Blue Stream pipeline (under the Black Sea). Turkey’s NG demand is expected to increase to 39 bcm in 2010, 41 bcm in 2015 and 43 bcm in 2020. Currently, 47% of the gas is consumed by power plants, 28% by the industry, 24% by residential users and 1% by the fertilizer industry.
One of the major projects in this sector in 2008 will be BOTAS Petroleum Pipeline Company’s Underground Gas Storage project near Salt Lake in Turkey. The World Bank approved a loan of US $325 million to support this Gas Sector Development Project. The gas storage facility will be located in an underground salt formation close to Tuz Gölü, a salt lake in Central Turkey. The facility, upon completion, will have a storage capacity of about 960 million cubic meters of working gas and 460 million cubic meters of cushion gas (the portion of gas which is required to remain in the cavern to maintain its integrity). The facility will have the capacity to deliver 40 million cubic meters of gas per day up to 20 days and can be refilled at the rate of 30 million cubic meters per day over a period of 25 days. Opportunities exist in this project especially in the tenders to be held for surface and sub-surface facilities. U.S. firms are deemed to be rather competitive in these types of facilities. Leaching of the caves in joint venture with local firms can be another potential opportunity for U.S. firms.
Calik Energy is developing another underground gas storage project in South of Turkey. U.S. Trade Development Agency (US TDA) has provided a grant for the feasibility study of this project, which is being conducted by an American firm.
As part of the liberalization process in the natural gas (NG) market, the Energy Market Regulatory Agency (EMRA) issues licenses for natural gas distribution, storage, trading (import-export or wholesale) to the private sector.
Turkey has signed long term take or pay NG procurement contracts with Russia, Iran, Azerbaijan, Turkmenistan, Algeria (LNG) and Nigeria (LNG). The Turkish Petroleum Pipeline Corporation, BOTAS, announced a tender to transfer these contracts to the private sector. The contracts at the total amount of 16 bcm (in 64 lots) will be transferred to the private sector. BOTAS held a tender in 2006, and Turusgaz was awarded the contract for the delivery of 16 lots. Botas is expected to tender the remaining contracts in 2008.
Almost every city is building NG distribution pipelines in Turkey. These are new investments made by the Turkish private sector under a license obtained from EMRA. Other potential projects are BOTAS’ planned main NG transmission pipeline construction tenders, which will include compressor stations.