TWO ARROWS OFTURKEY'S ENERGY VECTOR
Caspian Energy (CE): What hopes does Turkey pin on implementation of the Nabucco project? What stage is currently carried out?
Hilmi Guler, Minister of Energy and Natural Resources, Turkey: Taking a glance at the European Union, one can simply observe that it is already the world's biggest gas import market while it is also one of the world's fastest growing energy markets. Though it has a variety of import sources-notably Russia and Algeria-naturally it is seeking to diversify supplies. Recent gas deals between the Russian Federation and FSU Countries showed that, the next decade will be marked by a delicate balance in gas markets. The lesson from the Ukraine episode is that Europe needs to be wise for to start building greater diversity into the energy relationship. In this context, Caspian and Middle East Gas possesses a very strong potential in meeting the Europe's steadily increasing gas demand provided that secure transportation systems are established.
In this regard, while on one hand Turkey develops projects to meet its own gas demand on the other hand, it also envisages to serve for meeting the European Union's increasing demand by opening several other arteries to the continent via Turkey. The first of these is the Turkey-Greece Natural Gas Pipeline Project which is then planned to be extended up to Italy. The other route is the Turkey-Bulgaria-Romania-Hungary-Austria line which is so called as Nabucco Project.
In Nabucco Project, advanced studies are progressing on a good track among the respective gas companies of the countries involved. Related preparatory work for the basic and detailed engineering studies is underway. As an indication of their support the European Union has granted half of the cost of the feasibility studies from the Trans European Networks (TEN) Program. The first gas delivery is envisaged in 2012.
CE: Please tell about the energy strategy of Turkey. Will not it be changed because of the growing demand? The energy problem is the main issue that alarms Europe. What approach to the given problem would you suggest? Which role will Turkey play in settling the given problem?
Hilmi Guler: Recent surveys reveal that the world energy need will increase by 60 % up to 2030, while petroleum and natural gas are expected to remain their share. Especially in Europe which is second largest energy-consuming regions in the world and by far the second largest net energy importer, up to 2030 energy need will increase much more than world energy need increase.
Likewise, energy demand of Turkey has been growing at a rate around 6% per annum for decades in line with the economic development and rising level of welfare. At present, roughly 30 % of the total energy demand is being met by the indigenous resources, while the rest is coming from a diversified portfolio of imports.
In this regard, the main goal of our energy policies has been set as the provision of required energy in a timely, reliable, cost-effective, environmentally sound and high-quality basis so as to support the envisaged development impetus and social progress.
If we turn to the European side, as recently admitted by the European Commission, the era of cheap energy is closing to the end while the EU's energy import dependence is projected to increase from 50 % today to 65% in 2030. In particular reliance on imports of natural gas is to increase from 57% to 84 % during the same time span.
Considering regional developments specifically on gas however, as I mentioned before that the next decade will be marked by a delicate balance in which Europe remains dependent on Russian gas, but Russia's need for export revenues will also make it dependent on Europe. Regardless of the fact that Russia may partly continue to supply Europe with gas, Europe needs to start building greater diversity into its energy relationships.
In this context, Caspian, Middle East, Mid Asia, Egyptian and Iraqi gases possess a very strong potential in meeting the Europe's steadily increasing gas demand provided that secure transportation systems are established. As a net energy importer and major market for regional producers, Turkey lies adjacent to countries or regions' possessing as much as 40 per cent of world's proven gas reserves excluding the Russian Federation.
It should come as no surprise to see that Turkey would be a major hub and a transit country for gas supplies to Europe in the upcoming few years. In line with this ultimate goal, Turkey has dedicated it self to realization of the gas transit projects.
In this framework, Turkey has developed two major gas pipeline projects towards European direction. The Turkey-Greece-Italy natural gas pipeline Interconnector will be completed in the midst of 2007 and become operational with some initial deliveries. At its peak load, the volume of gas that will be transported through Turkey will reach 3 bcm for Greece and 8 bcm for Italy.
The other route is the Turkey-Bulgaria-Romania-Hungary-Austria line which is so called as Nabucco project. Advanced studies are progressing on a good track among the respective gas companies of the countries involved. Leaving aside the countries along the projected pipeline route, I would like to state with satisfaction that all other countries in the proximity of the pipeline route nonexceptionally express their strong interest to take part in the project.
With these gas pipeline projects around 40 bcm natural gas transits to Europe in short to medium term and in the long term it is estimated that as much as 100 bcm gases can be supplied through Turkey.
CE: How will the dynamics of gas consumption in Turkey change in future? How will the country, which is fully dependent upon gas import, build its gas import policy? How are the talks about expansion of the Blue Stream - 2 proceeding?
Hilmi Guler: Natural gas consumption started in the mid 1970s with utilization of the limited indigenous natural gas production in a few industrial plants. Imported natural gas sales started at 500 mcm in 1987 and reached around 29,5 Bcm in 2006. Turkish natural gas consumption is expected to reach 43 Bcm in 2010 and 53 Bcm in 2015.
Turkey is a net importer of natural gas and importing from different sources & countries based on the diversification strategy being implemented for years. At present BOTAŞ have 8 long-term sales and purchase contracts with 6 different supply sources (Russian Fed. with 3 contracts, Algeria, Nigeria, Iran, Turkmenistan, and Azerbaijan with 1 contract)
With ultimate aim of domestic supply diversification and sending certain amount of gas to Europe via Turkey, we also consider Iraqi and Egyptian gas as an important alternative for this purpose.
So far, we've not discussed the Blue Stream II Project with our Russian counterparts. We think that before proceeding with the second stage of the project, it would be much wiser to utilize the idle capacity of the existing line first.
CE: How would you evaluate the construction of the energy corridor between the energy-rich countries of the Caspian Region, Central Asia, Middle East and world markets? When will a petroleum exchange be opened in Ceyhan?
Hilmi Guler: Located at a crucial geopolitical region Turkey lies adjacent to regions possessing some 73 % of the world's proven oil reserves and 72 % of the world's proven gas reserves and thereby is expected to form a natural bridge between the energy rich countries of the Caspian Region, The Central Asia, The Middle East and the consumer markets mainly located in Europe.
With the Baku-Tbilisi-Ceyhan (BTC) Main Export Crude Oil Pipeline and the Baku-Tbilisi-Erzurum (BTE) Natural Gas Pipeline Projects, we now consider that the first phase of the East-West Energy Corridor has been completed successfully. In the next few decades, it is for sure that several other energy projects will need to be implemented out from the broader Region.
Surprisingly, Turkey's current or potential role in oil transportation is considerably less important than its current or potential role in gas transit since oil is more flexibly transported than gas. Geographically speaking, Turkey is located in an arc from the Caspian through the Middle East and the Gulf to Egypt.
The Turkey-Greece Natural Gas Interconnector Pipeline and Turkey-Bulgaria-Romania-Hungary-Austria Project or widely known as Nabucco Project will form second phase of our studies within the above mentioned East-West Energy Corridor concept.
Ceyhan port is already designed and constructed to meet joined capacity reaching to Ceyhan from Kirkuk-Ceyhan, Baku-Tbilisi-Ceyhan and Samsun-Ceyhan pipelines. Ceyhan will then become the largest oil outlet terminal in the Eastern Mediterranean in the near future.
CE: Which pipelines are projected in addition to the existing oil and gas system?
Hilmi Guler: With ultimate aim of meeting both our domestic and world market's increasing energy demand, Turkey has been extending its oil and natural gas network systems along with several international oil and gas transit projects. At present, the natural gas transmission network is composed of approximately 10 000 km of transmission/distribution lines.
As mentioned previously, while on one hand Turkey develops projects to meet its own gas demand on the other hand, it also envisages to serve for meeting the European Union's increasing demand by opening several other arteries to the continent via Turkey. The first of these is the Turkey-Greece Natural Gas Pipeline Project which is then planned to be extended up to Italy. Interconnection of the Turkish-Greek Natural Gas Pipeline grids is due to be completed in the midst 2007 with some initial deliveries. The other route is the Turkey-Bulgaria-Romania-Hungary-Austria line which is so called as Nabucco Project. It should however be noted that these two projects are not competing ones but rather complementary to each other. Additionally, extension of blue stream natural gas pipeline to Israel is under discussion as well.
In addition those, we're also negotiating on the related terms and conditions for the extension of Arab Gas Pipeline to Turkey with final destination to Europe. We believe that with this project Turkey will further have a chance to enhance its security of supply together with its partners. Intergovernmental negotiations together with the technical studies among the respective national gas companies are being continued. In the medium term, Iraqi gas possesses a great potential as well.
As for the oil pipelines, I find it necessary to mention here that the amount of transported crude oil via the Turkish Straits gradually increases. This trend seriously threatens the environment of Turkey and specifically the world heritage city of İstanbul. Just to give you some insight, in the year 2006 the amount transported crude oil was 150 million tons, it is expected to reach some 190-200 million tons in the year 2009. This natural waterway which is vital for the Black Sea Countries for transportation of important goods can no longer be used as a pipeline. A major accident could cause significant environmental damage and shipping could be suspended for a prolonged period of time.
So, bypass options are on the table and the Anatolian corridor lying along the path from Caspian sources and world markets becomes center of gravity in the discussions. In this respect, Turkish government has already expressed its full support to Samsun-Ceyhan pipeline route, which is the pioneer of the North-South Corridor. Studies are underway for the realization of the Project. Ground breaking ceremony of the pipeline is to be realized towards the end of March this year.
CE: What projects are planned to be carried out to meet growing energy demand of Turkey?
Hilmi Guler: Due to the high economic growth and the new consuming attitudes developing as a result of the rising level of welfare, primary energy consumption of Turkey is increasing rapidly at an average yearly growth rate of nearly 6%.
In this regard, Turkey has been actively pursuing a multi dimensional energy policy with ultimate aim to secure both its own and partner's energy supplies. We conceive that Turkey's importance lies in its ability and willingness to develop major transit systems for gas and oil. With this in mind, Turkey has been promoting east-west and more recently north-south axis energy corridors across the country.
In addition to above mentioned projects, and in line with government's policy on comprehensive exploration of domestic hydrocarbons, the national oil company of Turkey (TPAO) has started to conduct intense seismic program in black sea for 2 years. In 2007, new 2d and 3d seismic surveys are on the way. A western and eastern black sea oil and gas exploration study in the form foreign partnerships is being continued.
With the implementation of newly enacted petroleum law, Turkey is expected to attract more international oil companies. Especially, hydrocarbon potential of black sea will be determined in detail and hopefully the resources of Turkey will count as another contributor to the regions' supply of security.
CE: Is it possible to use Azerbaijan gas as a trump card in the talks about reduction of prices on Russian energy carriers?
Hilmi Guler: Having one of the most dynamic energy markets of the World and being one of the major economies in the region, Turkey plays an important role both in consumption of the regional energy sources and transmission of those to the World markets.
Due to the high economic growth and the new consuming attitudes developing as a result of the rising level of welfare, primary energy consumption of Turkey is increasing rapidly at an average yearly growth rate of nearly 6%. In order to meet part of this demand, Azeri gas has been paid up most importance by Turkey within the concept of East-West Energy Corridor. In the midst of this year, the pipeline will be in operation with some initial deliveries.
Especially following the Russian Federation and Ukraine gas dispute, we believe that the importance of Azeri gas both for Turkey and Europe has been highlighted once more. Therefore, BTE is expected to play a key role in further enhancing the energy security of Turkey at the same time rendering greater flexibility in natural gas supplies.
CE: Do you continue the negotiations about the price on Iranian gas? Previously you stated that the price was set too high. What are the results of the talks with Iran about transportation of Iranian gas to Europe through the territory of Turkey?
Hilmi Guler: As it is mentioned, in Turkey natural gas consumption is increasing regularly. Also, Turkey plays an important role both in consumption of the regional energy sources and transmission of those to the World markets. Therefore Iranian gas has been paid up most importance by Turkey.
However, there have been persistent problems occurred beyond our control regarding the quantity and quality of the Iranian gas. Negotiations to find the constructive solutions have been continuing between the related gas companies of the countries including the gas price.
Regarding the transportation of Iranian gas to Europe through the territory of Turkey, I would like to emphasize that following the fulfillment of the provisions of the existing contract by Iran, it would then be possible to negotiate on terms and conditions of gas to Europe. Currently negotiations are being held regarding this issue.
CE: How is the process of barter energy exchange with Georgia progressing? Is Turkey interested to continue this project?
Hilmi Guler: As for electricity, interconnection line is being utilized interchangeably depending upon the supply and demand balance of the two Countries. For natural gas however, Turkey so far has done its best for the benefit of Georgia on possible allocation of certain amount of gas from BTE pipeline. However, it should be noted that Turkey itself needs BTE gas for its own needs.
Thank you for the interview