BOTAS WILL PROVIDE BY GAS SUPPLIES THE EUROPEAN MARKET

When you talk about oil and gas, the very first thing that comes to mind is the Middle East and the Caspian with all their huge hydrocarbon reserves together with a number of problematic international political issues. It's widely believed that the energy richness in some regions comes with various struggles to be overcome. But in any case, no one could deny the very promising future of the countries in question with this level of energy dependence throughout the World.

Turkey being somewhat unlucky for not having rich hydrocarbon resources is now determined to benefit her very advantageous geographical location along the way from the East to the West. This would also be a very good chance, I believe, for the abovementioned countries to be integrated in the Western energy markets.

Being an importer and trader of energy for long years, Botas, the state owned oil and gas transportation and trade company of Turkey, had to be very much involved in international relations with various countries from various regions.

From the energy map of Turkey it would easily be seen that a country-wide web of gas and oil pipelines covers Turkey. In addition to the existing oil and gas pipeline system, you could easily notice the pipelines which are about to be taken into operation or under construction. Existing 4700 kms of high pressure natural gas pipeline and 2400 kms of crude oil pipeline systems will reach to a length of some 8000 kms and nearly 3500 kms respectively with the completion of the ongoing projects and construction works.

The Baku-Tbilisi-Ceyhan Oil Pipeline named after Heydar Aliyev, which is of great importance for Turkey and the countries in the Region.

After the very well known long period of international debates on the transportation of Caspian crudes, results of a feasibility study of 1998 are regarded as strong evidences for the AIOC members producing the oil in Azerbaijan, to seriously think about the Azerbaijan-Georgia-Turkey Route.

BTC is chosen as the route and following a hard working engineering phase, the land acquisition and construction is started in September 2002. The Project is no more a dream that has been very much talked about for years. All the efforts are to make the first barrel of oil to flow through the Main Export Pipeline within the first quarter of the year 2005. This pipeline will be our second leg after the Iraqi-Turkish Pipeline as a crude oil corridor between the East and the West.

Now I would like to turn to natural gas business which I believe that it will be the driving force for Turkey on the way to be an energy bridge.

Gas consumption in Turkey has expanded sharply beginning with the signing of the first Sales and Purchase Agreement in 1986 with Gazexport of the Russian Federation. Gas sales started at 500 million cubic meters in 1987 and reached to some 18 Billion Cubic Meters in 2002.

Dynamic economic growth, industrialization, population growth and rapid urbanization are the basic factors, which cause the surge in our energy consumption.

Demand for natural gas in the power generation sector is the major driving force of growth in gas consumption due to the increase of gas usage in base-load power plants. Therefore, the power sector dominates expected demand. In spite of the recent economic crisis, Turkey continues her industrialization process with its dynamic population about 70 million.

So far, BOTAS has signed 8 long-term sales and purchase contracts with 6 different supply sources. Our natural gas demand is currently provided by six contracts which are presently in effect: Three agreements with the Russian Federation for the plateau quantities of 6, 8 and 16 BCM per year respectively, one with Iran for 10 BCMA and the others in LNG form with Algeria for 4 BCMA and with Nigeria 1.2 BCMA.

A number of contracts are developed for gas supplying to whole Turkey: Together with our existing gas takings from Russia, Algeria Nigeria and Iran, the works are going fast to take gas from new sources or routes.

In this regard, another important project which will connect the Central Asian natural gas resources to Turkish natural gas grid is the Shah Deniz Pipeline Project. A Natural Gas Sales and Purchase Agreement is signed in 2001 to transport Azerbaijan natural gas to Turkey. Gas deliveries are planned to start in 2006. This project is considered as the first step of Caspian-Europe natural gas supplies.

We have also an agreement with Turkmenistan to take 16 BCM of gas to Turkey and an additional 14 BCM for European demand. Depending on some points beyond our control, this Project is postponed a little bit for the moment but we strongly believe that with the completion of the Azerbaijan Project and opening of the route from the Caspian, Turkmenistan gas will follow. A Natural Gas Sales and Purchase Contract for the delivery of 4 BCM/year Egyptian natural gas to Turkey by an offshore pipeline is initialled with Egypt.

Also we have a Project to take 10 BCM gas from Iraq but the development of this project is going in line with the UN sanctions imposed on this country.

Besides all these Projects regarding the supply and transmission of the natural gas, the Turkey-Greece Natural Gas Pipeline Project has been developed to meet the European gas demand. Within the framework of the studies conducted, the first step will be the connection of natural gas networks of both countries by a pipeline, in order to form the South European Gas Ring.

This Project has begun with the meeting held by Botas, Greek gas company DEPA and the European Union itself. The Memorandum of Understanding between Botas and DEPA is signed on the 28th of March 2002. Following the construction phase, the gas is planned to be given to Greece by the year 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 studies began in September 2002 and with the finalization of the pre-feasibility report, the application is made for feasibility funding from the European Union on the 25th of April 2003. With the growing intention and support of Botas, DEPA and Edison Gas, the Interconnector Turkey-Greece Project will likely turn to be the Interconnector Turkey-Greece-Italy in the near future.

As an additional corridor, DEPA and Botas together wrote a letter to the countries along the Adriatic and Balkans Area with a proposal to study the possibility to transport gas via these countries and for their domestic market needs. The positive answers from the related gas companies are taken and on the 8th of April 2003, Botas and DEPA signed a protocol with the respective gas companies of Bosnia-Herzegovina, Croatia, Slovenia, Serbia-Montenegro, Macedonia and Albania.

Results of the studies, performed by various research institutions and energy companies, as well as the European Union itself, are giving the signals of significant amounts to be transported via Turkey to the European countries in the near future.

In February 2002 we had a tour including the Bulgarian, Romanian and Austrian gas companies. We talked about our strategy to reach European gas markets. Here the most important issue about Austria is its being a hub for gas distribution in Central Europe. Now we developed a really fruitful ground of cooperation with OMV Erdgas of Austria, MOL of Hungary, Transgaz of Romania and Bulgargaz of Bulgaria.

These meetings strongly show the Parties' mutual interest in investigating the forming of a new gas transportation route through Central and Eastern Europe. The news coming from the Austrian side was the insertion of our Project by the European Union, to the "Projects of Common Interest" section of Trans European Networks (TEN) Programme.

On the 28th of April 2003, the application for the feasibility funding from the TEN.

Botas carries on all the investment works related to the development of the gas transmission system within the country, to provide the best grounds to serve as the completely new gas source for the European continent. As Botas, we may supply gas depending on our contracts or we may serve as the transmission leg for the companies and countries desiring to sell their gas.

We are glad to see the positive approach by the energy companies and supply countries giving all kinds of support. Our western neighbours, the transit countries, have already given their hands to us. And the European Union… With their support to all the European oriented projects that I've mentioned above, we feel ourselves much more confidant in our steps towards the target.