Evaluation of the Energy Market in Turkey
Oil & Gas Sector in Turkey:
Turkey offers great opportunities for U.S. equipment and service suppliers for pipelines to be built in Turkey and in the region as well as oil and gas exploration and production, including offshore platforms and facilities.
73% of the world’s proven oil reserves and 72% of the world’s proven gas reserves are located in the surrounding regions of Turkey: the Middle East, Caspian Region and Russia. This makes Turkey a crucial bridge between energy rich regions and Europe, which spends approximately US $300 billion annually for imported energy resources. Turkey spends over US $20 billion for oil & gas imports.
This is why Turkey is widely called as ‘The Energy Bridge between the East and the West’. While developing projects to meet her own energy demand, Turkey also desires to serve as the most feasible route to European and world markets.
Turkey’s natural energy resources are quite diversified; hard coal, lignite, asphaltite, oil, natural gas, hydro, geothermal, solar, wind, wood, animal and plant wastes and secondary energy resources such as coke and briquettes are produced and consumed. Although Turkey’s oil and natural gas reserves are limited, lignite coal reserves are quite abundant.
In Turkey, lignite has the biggest share in total primary energy production at 54 percent. The complex geology and corresponding high risks inhibited exploration, and for this reason, oil and natural gas have a share of 11 percent in primary energy production.
The annual oil consumption of Turkey is approximately 30 million tons. While 82 % of total consumption to (24.6 million tons) is supplied from imports, only 18 % is supplied from indigenous production. Major suppliers of crude to Turkey are Azerbaijan, Iraq, Saudi Arabia, Iran, the UAE, Libya, and Russia.
Ninety-nine percent of Turkey’s proven oil reserves lay under the Southeast Anatolian territories. A majority of Turkey’s proven natural gas reserves lays in Thrace and in lesser quantities in Southeastern Anatolia. In recent years, foreign and domestic companies found natural gas in the Black Sea and started some production. Explorations continue in the Black Sea for more potential reserves of oil and gas.
So far, Turkey has only explored 1% of the probable offshore oil & gas reserves and only 20% of the probable oil & gas reserves on land. In 2009, US $716 million was spent in Turkey for oil & gas exploration. US $366 million was spent by TPAO and US $350 million was spent by the private sector. In the oil and gas exploration and production sector, there are 48 companies active in Turkey, 24 of them are Turkish and the other 24 are foreign companies, and these companies hold 151 licenses. Additionally TPAO owns 415 licenses. 142 of the 747 holes drilled ended up with oil hits and 194 with gas. 8% of Turkey’s oil demand and 2 % Turkey’s natural gas demand are met domestically. Turkey has approximately 7 billion cubic meters of natural gas reserves. Turkey’s proven and remaining oil reserves are 39.4 million tons so far. According to TPAO, to date a total of US$500 million has been spent on exploration in the Black Sea. This includes an exploratory drilling program offshore Akcakoca and the acquisition of 2D and 3D seismic data. TPAO has been increasing offshore exploration following the Ayazli gas discovery in 2004, while it has also boosted activities onshore Turkey and internationally, as it seeks to diversify the county's energy supply and reduce its growing import bill.
Under Exxon's November 2008 deal with the government, the US major agreed to operate and hold a 50% stake in two concessions, the Samsun Block and the eastern section of Block 3921, covering 8,500sq km and 21,000sq km respectively. Water depths in the blocks reach approximately 2,000 meters (m). TPAO’s partners are preparing an 'aggressive' exploration program. TPAO will continue exploratory drilling in the Black Sea in 2011, while the Turkish Energy Ministry has announced that it was aiming for commercial production in either 2015 or 2016.
In September 2010, Chevron also signed a 50/50 % JV agreement with TPAO to explore oil and gas in 3 wells with over 3,000 meters depth in central-western offshore Black Sea. The potential of the Black Sea is, however, unclear, with estimates suggesting that it holds reserves of up to 10 billion barrels (bbl) of oil and 1.5 trillion cubic meters (tcm) of natural gas reserves. Turkey has only modest oil and gas reserves of 300 million barrels and 8.0 billion cubic meters (bcm) respectively at the end of 2008, according to the Oil & Gas Journal (OGJ). BMI forecasts the country's oil reserves to peak in 2011 at 250 million barrels, before declining steadily towards 200 million barrels by 2020. Gas reserves are expected to peak in 2013 at 10 bcm, before falling back towards 8 bcm by 2020, although successful exploration of the Black Sea could offer upside potential to these forecasts. Overall, however, for the foreseeable future, Turkey's main role in the global energy marketplace is likely to remain its strategic position as a transit country: transporting energy between the resource-rich Central Asia and the Middle East and the major consuming market of the EU.
Shale gas and shale oil prospects of Turkey are yet to be explored. An American company, the TransAtlantic Corporation, signed an MOU with TPAO for the potential survey of unconventional oil and gas reservoirs. TPAO is open to any proposal on this field.
Turkey’s main oil pipelines are: Iraq-Turkey Crude Oil Pipeline with a capacity of 71 million tons/year; Baku-Tbilisi-Ceyhan Pipeline with a capacity of 50 million tons/year; Batman-Dörtyol Pipeline with a capacity of 4.5 million tons/year; Yumurtalik-Kirikkale Pipeline with a capacity of 7.2 million tons/year; and Selmo-Batman Pipeline with a capacity of 0.8 million tons/year. Turkey has become a critical player in global energy security. The Baku-Tbilisi-Ceyhan (BTC) oil pipeline started operation in 2006 with a 1 million barrel per day (bpd) capacity and approximately 5% of the world's oil supply is 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 on the Mediterranean coast of Turkey will be the energy hub and in the future supply a crude oil blend of Azeri, Iraqi, Russian and Central Asian oil will be possible. Ceyhan will also have at least a couple of more new oil refineries. Calik Energy obtained a license from the regulator EMRA to build a refinery in Ceyhan. Engineering studies were awarded to Shaw Group in 2010. Potential financing are sought for the project. U.S. suppliers can have a good chance with U.S. Eximbank financing.
The Turkish Government is supporting the Samsun-Ceyhan Bosporus by-pass crude oil pipeline to be constructed. Calik Energy and Italian ENI will be 50/50 investors. Recently, Turkey and Russia signed a bilateral agreement, which also included potential supply of oil from Russia for the subject pipeline. 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 under the Adriatic Sea to Italy. Azerbaijan will supply 8 billion cubic meters per annum (bcma) of gas at the plateau period 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 investors in NABUCCO. The 3,300 Km pipeline is planned to supply 25.5-31 bcma of gas to Europe and will become operational in 2012. Route studies to Georgia and Iraq connections have already started and a Turkish Engineering firm by the name ENVY is one of the winners. Three contracts have been signed recently for this purpose.