BOTAS PETROLEUM PIPELINE CORPORATION
TURKEY'S ROLE AS A MAIN ENERGY SUPPLY CORRIDOR TO EUROPE
In an ever changing and globalizing world, our country has gained a geopolitically strategic position with all the projects it has embraced. Among all of the organizations in the energy sector, BOTAS has always held a special position. BOTAS, which operates existing crude oil and natural gas pipelines, has launched many pipeline projects that will eventually form a pipeline network throughout our Country. BOTAS continues to make a social-economic contribution to our country's welfare, and aims to continue work in this direction with all its effort.
Among BOTAS's most important targets in this new era is to combine its past experience with the latest developments of the world energy market to improve its new energy projects, thus, carrying its 'national' organizational structure and vision to a more 'international' level in order to more effectively facilitate Turkey's integration process into the European Union.
With respect to this target, it is possible to summarize BOTAS's activities under 3 main headings: Successful operation of the existing crude oil and natural gas pipelines; construction of national and international crude oil and natural gas pipeline projects; and the new Organizational Restructuring Project.
Our Business is transportation of crude oil and natural gas ...
BOTAS currently operates the 1876 km Iraq-Turkey Crude Oil Pipeline, which transports the Kerkuk oil to our Country (where 579 km is on Iraqi soil and 1297km is on Turkish soil), along with the Batman-Dortyol, Ceyhan-Karakkale and Selmo-Batman crude oil pipelines.
To the present, BOTAS has transported 6 billion barrels of oil through pipelines with various diameters and a total pipeline length of 2297 km, with a yearly transportation capacity totaling 80.2 million tons. With the completion of our Country's pride, 'The Baku-Tbilisi-Ceyhan Crude Oil Pipeline Project' in the year 2005, BOTAS shall be operating crude oil pipelines where the yearly transportation capacity is expected to reach 130.2 million tons and the total length of the crude oil pipelines shall reach approximately 3368km. To diversify our energy supply resources, the Russian Federation-Turkey Natural Gas Pipeline Project was constructed in order to transport Russian natural gas to our Country. As a result, our internal natural gas transportation system has reached 4700 km. With the completion of currently ongoing and planned future pipeline constructions, this figure will reach approximately 7500 km and all the contracted volumes will be able to be transported to the consumption points within the country. Together with that, we are working on the determination of the transit capacity of the system for planned connection to Europe through our ongoing projects.
In order to overcome the seasonal fluctuations, the offshore gas reservoir with a 1.6 BCM annual storage capacity in the Marmara Sea will be used as gas storage following the depletion. The reservoir will be the first storage facility for Turkey and expected to be taken into operation in 2005. Also, the salt caverns in the Salt Lake are planned to be used for underground storage. Following the completion of engineering studies and environmental impact evaluation report, the tender for construction is planned to be issued in mid 2003.
While the yearly consumption of natural gas in 1987 was 500 million m3; with the expansion and extension of the above mentioned pipeline the increase in the pipeline capacity has reached to some 17.6 billion m3 by the year 2002. This increase in consumption of natural gas is primarily due to its being an economically and an environmentally friendly energy resource.
The expansion of the national natural gas transmission network, taking into consideration the mid and long term projections above, is continuing at a very fast pace. In addition to increasing the transportation capabilty of our existing pipeline system, by the end of the year 2004, with the completion of the ongoing pipeline constructions and planned transmission and distribution lines, approximately 60 city centers shall have access to natural gas. With the widespread use of natural gas throughout the country, every year more citizens and industrialists will be able to take advantage of this economical, environmentally friendly and highly productive modern fuel.
Since 1987, when Turkey first introduced natural gas, BOTAS has purchased a total of 124 billion m3. 98 billion m3 of it came through pipelines and 26 billion m3 of it was Liquified Natural Gas ( LNG) delivered through maritime transport.
Today, Turkey is in a drastic industrialization process with its dynamic population about 70 million. Huge amount of additional investment is required in energy sector as a consequence of increase in energy demand.
Increase in energy demand has reached to some extend that, state-owned companies can not cover this additional investment so it has shown crucial importance to cover this increase by local and foreign private initiatives within the framework of sector policies.
When we look at the current consumption projections for natural gas, the estimated consumption levels will be approximately 43 BCM in 2005, 55 BCM in 2010, 67 BCM in 2015 and 83 BCM in 2020 in Turkey. However mainly due to the recently lived harsh economic crisis in Turkey we have made some revisions on the gas demand estimations for the coming years. We foresee that with the fast recovering economy, currently estimated demand figures for the future will be met, nevertheless at the end of last year, we initiated the new Turkish Market Research Study and with the coordination of the Middle East Technical University, 15 universities are conducting the study including the demand projects, for 45 city and 25 district all over the Country.
BOTAS has signed 8 long-term sales and purchase contracts with 6 different supply sources and the volume of 67.8 BCM gas has been contracted. One of these contracts was signed with SOCAR in 2001 to transport Azerbaijan natural gas to Turkey. Natural gas deliveries are planned to start in 2006 with 2 BCM. In order to integrate the Caspian natural gas to the national grid, BOTAS has developed a natural gas pipeline project from the Georgia-Turkey border to the junction point with the Eastern Anatolia Natural Gas Transmission Line. The engineering study for the Turkish Section of Baku-Tbilisi-Erzurum Line is about start.
Taking into consideration the market requirements and need for international integration and transparent competition, the new Natural Gas Market Law No. 4646 is enacted on May 2, 2001. This means that, like all the European markets we are also in a tight schedule of gas market liberalisation process.
The context of the Law can be summarized as follows,
* The Energy Market Regulatory Authority (EMRA) is constituted,
* Import, transmission, storage and distribution of natural gas will be unbundled,
* Legislation and its implementation will be regulated suitable to the European Union regulations.
Tariffs relating the natural gas began to be determined monthly and all actions regarding the licensing and investments have been proceeded according to the Law and Regulations by EMRA since 2nd of November 2002.
In the near future, with respect to the new natural gas law, BOTAS shall compete with other organizations under free market conditions, acting as a private company, and will aim to take advantage of the opportunities in the national and international arena.
By signing major pipeline projects, we aim to create a strong energy bridge between production centers and consumption points.
The Caspian, Middle East and Southern Mediterranean regions harbour the majority of the world's hydrocarbon reserves. Our country is seeking to use this geographical advantage by supplying the increasing need for energy though these resources and by developing pipeline projects to distribute these rich resources to the world markets.
The Baku-Tbilisi-Ceyhan Crude Oil Pipeline Project is, without doubt, one of the most important amongst these projects. This pipeline, which shall extend from Baku to Ceyhan with a total length of 1774 km (Turkish section being 1074 km), aims to transport approximately 50 million tons of crude oil produced primarily from Azerbaijan and the other areas in the region to be distributed by tanks from the Ceyhan Marine Terminal to the World Markets. With the establishment of this project, an economical and environmentally friendly transportation system shall be developed. The BTC P/L shall be completed and ready for operation by the beginning of 2005, in compliance with the project schedule and within the project budget.
As known the first phase of the BTC Project, Basic Engineering has been successfully completed in May, 2001 and subsequent to the second phase, namely the Detailed Engineering that completed in June, 2002. Main Export Pipeline (MEP) Participants has then issued the Notice to Proceed for the Land Acquisition & Construction Phase on 29th of August 2002 setting the commencement date for 32 month Phase as the 10th of September 2002. The agreements for construction and procurement were signed on the 20th of September 2002. All works regarding the construction and procurement are ongoing in line with the schedule. The first line will arrive on the 13th of February 2003 to the Iskenderun Port. As a result of the works I have mentioned above, the construction of the pipeline will be completed by the end of 2004 and the pipeline is planned to be operational in early 2005 following the necessary testing activities.
The BTC P/L, which is the most critical pillar of the East-West Energy Corridor, will not only increase Turkey's geopolitical importance but shall also contribute to political and economical stability in Turkey, Azerbaijan and Georgia along with all other Countries belonging to the region. Above all, this project shall pioneer the other natural gas and crude oil pipeline projects in this region regarding transportation to the world markets.
In addition to our crude oil transportation targets, BOTAS plans to distribute the natural gas produced in the above mentioned region both to Turkey and via Turkey to the world markets.
Turkey and Greece are working on the integration of their natural gas systems with the realization of the Southern Europe Gas Ring, in order to transport the natural gas provided from the Caspian, Middleast and Southern Mediterranean regions and from other international resources through Greece and Turkey to the European Markets.
We have signed major agreements with our neighbouring Country, Greece, within the scope of the Turkey-Greece Natural Gas Pipeline Project. Our target is to launch gas transportation to Greece by the beginning of 2005.
Meanwhile we continued to search for alternatives to transport the gas to the European markets after Greece. One alternative was an off-shore interconnection to Italy. Another one would be from Greece to follow a route along the Adriatic Sea. As a consequence, the Italian gas company Edison Gas and DEPA of Greece has signed a memorandum at the end of July 2002 and BOTAS involved to this agreement upon their invitation. The Interconnector Turkey-Greece Project will likely turn to be the Interconnector Turkey-Greece-Italy.
According to much research, it is envisaged that starting from the year 2005, an increasing amount of gas from the Caspian and Middleast regions shall be transported through Turkey to the West. This has led us to emphasize using more than one direction within our strategy of reaching European markets. Our initiatives with regard to this goal have been to commence studies regarding connecting suitable alternative routes to the Turkey-Austria gas systems within the framework of the documents signed between the Bulgarian, Romanian, Hungarian and Austrian gas companies. Our target is to launch the 4th and reliable gas supply source after Russia, North Africa and the North Sea in order to provide the European Union with a diversified gas supply by establishing complementary pipeline routes.
With the new legal arrangements and the Integrated Management System that we have initiated, we are targeting to increase the efficiency of our activities and our contribution to the national economy as an organization.
Recently in the Turkish Energy Sector, while liberalization of the legal infrastructure is being rapidly developed, works have concurrently been initiated which are rapidly continuing towards aligning our national energy legislation with that of the European Union legislation. As mentioned above, on May 2, 2001 the 'Natural Gas Market Law' number 4646, came into force by liberalizing the national natural gas market of Turkey for the purpose of creating a financially strong, stable and transparent environment and to independently regulate and supervise the market. BOTAS, conscious of its responsibilities within the framework of the new law, has initiated the necessary studies to conform to the free market conditions following the termination of its monopoly status.
BOTAS is doing its utmost to carry out its responsibilities within the timetables that are specified in the new law, and would like to transform its present national structure into a respectable and a very much sought after Company, operating in the international arena. To this end, BOTAS embarked upon the implementation of an Integrated Management System at all levels of the company. International standards that have been put into practice by the BTC Crude Oil Pipeline Project Directorate as of March 21, 2001 in the area of Quality, Environment and Occupational Health and Safety, has been implemented throughout the entire BOTAS Corporation and BOTAS was awarded three very significant international certificates namely ISO 9001, ISO 14001 and OHSAS 18001 on November 29, 2002. This is a very important stepping stone for our personnel who envisage transforming BOTAS into an internationally respected and acknowledged energy company and BOTAS become an example as an energy company working in compliance with international quality, environmental and health and safety standards.
Needless to say, BOTAS is working in compliance with all international standards in this new era. In this regard, BOTAS is in the position to establish the East-West Energy Corridor and the 21st century Silk Road which is of strategic importance for the future of Turkey.
As BOTAS, we believe that the spreading of this new concept to the Turkish private and public sectors, with the strong conviction at BOTAS and with the overall support of our dedicated personnel, shall provide enormous advantage in our integration process with the European Union.
Thanks to our international standards, our accumulation of experience over the years, our vision of being a guiding organization in the sector, as well as a leader in the region and a respectable company in the world, and above all, taking advantage of the national and international cooperation opportunities, BOTAS has created an energy corridor for natural gas and crude oil activities in Turkey. As an international pipeline transportation company accepted by the energy world, we will do whatever is necessary to bring our country a bright future