Tag: natural gas

  • Turkish and Greek Cypriots mull mutual steps on drilling to restart talks

    Turkish and Greek Cypriots mull mutual steps on drilling to restart talks

    Hürriyet Daily News

    Barbaros

    Both the Turkish and Greek Cypriots are considering a halt to exploration activities for hydrocarbon reserves in the Eastern Mediterranean, in order to restart settlement talks for reunification of Cyprus.

    Turkey’s Barbaros Hayreddin Paşa seismic vessel has taken a break in its activities in the Eastern Mediterranean and anchored off the Gazimağusa harbor as a “good will sign,” Turkish Cypriot spokesperson Osman Ertuğ has said, describing it as a “good will gesture” ahead of a possible resumption of Cyprus peace talks.

    “Barbaros is waiting outside the Gazimağusa harbor as a good will gesture, despite a Turkish maritime Navigational Telex [Navtex] order that is valid until April 6,” Ertuğ told reporters on March 27.

    The move aims to support the efforts of U.N. Special Adviser on Cyprus Espen Barth Eide, Ertuğ said, adding that their hopes are fueled for the resumption of Cyprus talks.

    Espen Barth Eide
    In a recent visit to the island, Eide had signaled hope for restarting reunification talks between the two sides, telling the Turkish side that the Greek Cypriots “were obliged to give a break in drilling activities due to technical reasons, which would be an opportunity to get back to the table.”

    For his part, Ertuğ stated that if the Greek Cypriots are to demand that Turkey avoids collecting seismic data, then the Greek Cypriots should also end their unilateral drilling activities. “But if they show previously signed agreements as a reason to continue their collection, then we’ll continue our drilling too. Alternatively, let’s conduct those explorations together. At least, let’s not leave the reunification talks table,” he said.

     

    images?q=tbn:ANd9GcQw0vom2eYzkznUtcdusYtMxLxw2uix9V6kUXcj8HVBC e19KqON1gwHJE

    Osman Ertug

    Turkey’s reissuing of a new Navtex for seismic surveys of the Barbaros vessel is dependent on Greek Cyprus’s continuation of its unilateral drilling activities, Ertuğ added.

    He also claimed that the Greek Cypriots has abandoned negotiations not because of Turkey’s seismic surveys in the region, but because the talks were about to reach the “give and take” stage.

    “The Greek Cypriots are not ready for ‘give and take’ phase of the talks,” Ertuğ said.

    Greek Cypriot authorities said on Oct. 21 that the Barbaros had entered their exclusive economic zone and intended to stay in the area, according to a maritime advisory issued in early October.

    Nicosia is unhappy that Ankara is searching for oil and gas in the same area as the Cypriot government has already licensed exploratory drills, in an exclusive economic zone.

    In October 2014, Greek Cyprus suspended its participation in U.N.-led peace talks launched in February 2014, when the research vessel had entered the region that Greek Cyprus claims as its Exclusive Economic Zone.

    However, the Turkish side disputes Greek Cyprus’ rights to a swathe of sea to the island’s south and southeast that is rich in natural gas reserves, demanding an equal share of resources between the two governments of the divided island.

    March/28/2015

    Küfi Seydali

  • Natural Gas and the Cyprus Question

    Natural Gas and the Cyprus Question

    Turkeyresearch: “Natural Gas and the Cyprus Question”

    Author: Assistant Professor Tolga Demiryol, İstanbul Kemerburgaz University Date: Mar 19, 2015

    Abstract

    Can the natural gas reserves off the coast of Cyprus be a panacea to finally bring the enduring conflict on the island to a peaceful conclusion? Or will energy be yet another factor further widening the rift between the Turkish and Greek Cypriot communities? Evidence indicates that energy resources have so far aggravated rather than placated the tensions in Cyprus. The discovery of natural gas in the Aphrodite field, and the ongoing drilling efforts in adjacent blocks, have not only re-animated existing disputes like the demarcation of maritime borders but also spawned new issues including the distribution of future gas revenues between the two communities. The Turkish and Greek communities are currently caught in a deadlock, where neither party has sufficient incentives to coordinate. This article describes two scenarios in which the gas-powered conflict in Cyprus can unfold: 1) a grand consensusscenario, under which the disputing parties would insist on the resolution of all political disputes as a precondition for energy cooperation, 2) alimited bargaining scenario, where actors would choose to prioritise resource development over the settlement of political conflicts, with the expectation that the resulting energy interdependence would generate robust incentives for political settlement. While the latter scenario is achievable in principle, it would nonetheless face serious constraints in practice, including the domestic political costs of energy cooperation, volatile market conditions (discovery of additional gas reserves and the declining global energy prices), the availability of alternative markets and suppliers, as well as  potentially disruptive regional geopolitical dynamics .

    Introduction

    When significant gas reserves were finally confirmed in the Eastern Mediterranean, some analysts spotted in them a glimmer of hope for peace and prosperity in the region, particularly in Cyprus (Bryza, 2013; Grigoriadis, 2014; Gürel and Le Cornu, 2014; International Crisis Group, 2012; Khadduri, 2012; Pericleous, 2012; Van Rompuy, 2012; Wilson, 2014). The assumption underlying the proposition that energy could be a facilitator of peace in Cyprus is straightforward: the discovery of natural gas and the prospect of additional riches raise the opportunity costs of the present stalemate between the Turkish and Greek Cypriot administrations, providing “dollars-and-cents reasons for easing the estrangement or bringing it to an end” (Wilson, 2014: 105). Assuming that actors sufficiently value the absolute gains to be obtained from the monetization of natural resources, they would thus be extra-incentivised to resolve any outstanding political conflicts that stand in the way of profits.

    Natural resources, however, could be a ‘curse’ as well as a blessing, as history has revealed repeatedly. Contrary to the widespread expectations that potential energy wealth would facilitate cooperation, the prospect of natural gas bounty so far deepened and complicated the disagreements in Cyprus.

    The gradual escalation of energy-fueled tensions between the Turkish and Greek Cypriot communities over the past few years reached a critical juncture on October 7, 2014 when President Anastasiades unilaterally suspended UN-mediated peace talks. The official reason for the suspension was Turkey’s plans to search for oil and gas in waters where the Greek Cypriot-administered Republic of Cyprus (RoC) had declared its Exclusive Economic Zone (EEZ), a decision that has been disputed by both Turkey and the Turkish Republic of Northern Cyprus (TRNC). Following the collapse of talks, the National Council of Cyprus announced a series of measures against Turkey, including blocking Turkey’s bid for EU membership. The RoC took the matter to the European Council meeting on October 23-24, upon which the Council officially urged Turkey “to respect Cyprus’ sovereignty over its territorial sea and Cyprus’ sovereign rights in its EEZ” (European Council, 2014). Ankara did not budge from its firm stance. In the National Security Council meeting on October 30, Turkey re-affirmed that it would take any measures necessary to defend TRNC and its sovereign rights. On November 9, Bülent Bostanoğlu, the Commander of Turkish Naval Forces, announced that Turkey continued to monitor the activities of Cypriot and Israeli elements and, if needed, the Turkish Navy would act in accordance with the rules of engagement.

    As of February 2015, there is no indication of when, if ever, the reunification talks would resume.

    How We Arrived at the Current Deadlock

    The energy landscape of the Eastern Mediterranean changed dramatically over the past five years. Following the major gas discoveries offshore Israel (Tamar field in 2009 and Leviathan field in 2010), in December 2011 another deep water reserve was confirmed off the coast of Cyprus. The so-called Aphrodite field was initially appraised to contain more than 200 billion cubic meters (bcm) of gas, while later studies revised it down to 140 bcm. Despite the smaller than expected size of the reserves, Cyprus will have almost all of its gas available for exportation, given its limited domestic energy consumption.

    Besides the neighborhood countries like Egypt and Jordan, the two most important export destinations for the Eastern Mediterranean gas are Turkey and the European Union (EU), both of which are seeking to diversify their energy imports. Several alternative methods for gas exports are on the table, although parties are yet to agree on a solution that is both commercially and politically feasible. One option would be to construct an undersea pipeline from Israel and Cyprus to Greece. The so-called Eastern Mediterranean Gas Pipeline, however, presents a number of technical difficulties due to its length and construction depth, raising its costs considerably.[1] The other alternative that is particularly favored by the RoC is to construct a Liquefied Natural Gas (LNG) plant in Vasilikos in Southern Cyprus. The cost of the Vasilikos plant is estimated at US$10 billion but the Aphrodite gas alone will not be enough to make the plant financially viable. Unless additional reserves are discovered over the next two years, the only option for Cyprus would be to supply gas from Israel.[2] Given the high costs of Eastern Mediterranean Gas Pipeline and the Vasilikos plant, most industry experts agree that the best option to export Leviathan and Aphrodite gas would be a pipeline from Israel via Cyprus to Turkey. This route would be considerably cheaper, at approximately US$ 2.5 billion (Bryza, 2013: 39). The pipeline to Turkey would also provide Israel and Cyprus direct access to both Turkish and European markets. Once the gas reaches the port of Ceyhan in Southern Turkey, it would directly enter Turkey’s extensive pipeline system for domestic consumption as well as re-export via the planned the Trans-Anatolian Pipeline (TANAP) across Turkey and the Trans-Adriatic Pipeline (TAP) to Europe.

    Given the export options on the table, there is some validity in the proposition that the Cypriot gas offers mutual benefits to all parties involved, including the TRNC, the RoC and Turkey. The RoC and TRNC could share the revenue to be generated by the monetization of Cyprus’ gas. Turkey would not only diversify its natural gas imports but also can potentially be a part of the Eastern Mediterranean Gas Corridor to Europe, which would in turn strengthen Ankara’s claim to be a critical asset for the EU’s energy security. Despite the considerable expected benefits from cooperation, however, energy resources have only further divided the parties.

    One major source of the divide between Turkey/TRNC and the RoC is the demarcation of maritime borders and the EEZs. In preparation for oil and gas exploration, the RoC has signed the EEZ delimitation agreements with Egypt (2003) and Lebanon (2007) and then passed a law in February 2007, defining 13 offshore drilling areas. Turkey and the TRNC protested fervently, claiming that the demarcation of maritime jurisdiction areas should be managed through arrangements among all concerned parties (Eissler and Arasıl, 2014; Stocker, 2012). After the RoC signed a critical EEZ agreement with Israel in 2010, Turkey reciprocated this by completing a maritime delimitation agreement with the TRNC in September 2011. In response to what was perceived as the RoC’s unilateralism, the TRNC issued a license to Turkish state-owned Türkiye Petrolleri Anonim Ortaklığı (Turkish Petroleum Corporation) TPAO for drilling in several offshore blocks, some overlapping with those of the RoC. Turkey also threatened to blacklist energy companies that are partaking in RoC’s drilling tenders but this tactic failed to stop Italy’s Ente Nazionale Idrocarburi (Integrated Energy Company) (ENI) and South Korea’s Korea Gas Corporation (KOGAS) from obtaining new licenses for adjacent blocks in 2013.

    Turkey/TRNC and the RoC not only disagree on who can explore gas and where but also how the future revenues from gas exports will be shared by the Turkish and Greek Cypriots. Being in charge of the internationally recognised RoC, the Greek Cypriots claim that they have the sole sovereign right to develop the natural resources of the island. The RoC does not necessarily dispute that the island’s natural resources belong to both communities but maintains that revenues will be shared with the Turkish Cypriots only within the federal framework of a unified Cyprus. In contrast, Turkey and the TRNC object that the Greek Cypriots alone cannot represent the island, which they claim is against the 1960 Cyprus Accords and Constitution (Gürel and Le Cornu, 2014: 18). Turkey and the TRNC hold that the Greek Cypriots should not exploit resources before reaching a comprehensive political settlement.

    From Grand Consensus to Limited Bargaining

    The situation in Cyprus is thus currently deadlocked primarily because both Turkey/TRNC and the RoC insist on the settlement of all political and legal disputes before either party can legitimately explore for and export any natural gas. Part of the problem here stems from the fact both parties expect that the other side will make some political concessions. The underlying rationale most likely is that “each side assumes that the other has a greater need for the resolution of tensions than they do” (Gürel and Mullen, 2014). Turkey/TRNC assume that given the state of the RoC’s economy, the Greek Cypriots are in dire need of the revenue that natural gas exports would bring in. The assumption underlying Turkey’s position is that since the most feasible export routes necessitate Turkey’s cooperation, the RoC will have little choice but to eventually give in. Similarly, Greek Cypriots likely calculate that their Turkish counterparts will be inclined to compromise, if they want to receive any share of the energy bounty at all. The RoC is also aware that there are limits to Turkey’s aggressive posture. Despite all the military muscle flexing by Ankara, an open military confrontation between Turkey and the RoC would indeed be all but inconceivable, assuming Turkey prefers to retain its bid for EU membership. This strategic predicament reinforces the current deadlock by reducing the incentives for either side to assume a more cooperative stance.

    Is there a way to break the deadlock? The short answer is a qualified ‘yes.’ A pathway out of this situation can be drawn if the disputing parties manage to provisionally delink the settlement of political issues from the prospect of energy cooperation.

    Theoretically speaking, there are two alternative approaches to developing natural resources under conditions of political conflict: grand consensus and limited bargaining.[3] The grand consensus scenario postulates that parties must settle all political conflicts before they can move onto the development of natural resources (O’Sullivan, 2012). This scenario is based on the premise that political stability is a requirement for economic cooperation. In the absence of political stability it would be difficult to attract sufficient investment into the major energy projects or guarantee the security of critical energy infrastructure. Grand consensus thus requires that the actors settle their legal and political disputes before they can realistically consider an energy partnership.

    This is indeed the very scenario that has so far been played out in Cyprus, albeit with no success. The RoC insists that gas revenues are to be shared by the two communities only within the framework of a federal government, i.e. after a grand political consensus is achieved. The position of Turkey and the TRNC, while it differs from that of the RoC, also requires a political settlement before the resources can be developed. In the absence of an initial political consensus in Cyprus, this scenario has collapsed into a tug-of-war between Turkish and Greek Cypriot administrations. The RoC pushes for unilateral resource development while arguing the revenue sharing will be contingent on a final political settlement, whereas Turkey/TRNC keeps the tensions high through diplomatic pressure and military muscle flexing in order to force the RoC’s hand to accept more amenable terms of resolution.

    An alternative scenario would involve striking a limited bargain where disputing parties jointly undertake resource development instead of requiring that complex legal and political disputes be settled first. As O’Sullivan puts it, actors would “agree to disagree” (O’Sullivan, 2012) in this scenario.  This does not mean that they renounce any of their legal claims or completely drop their political agenda. Rather, they temporarily set aside or freeze any outstanding issues and set up a basic regulatory framework for limited, targeted cooperation. Such a framework would contain the necessary guidelines and guarantees under which resource exploration, development and monetization as well as revenue sharing would take place. Under the limited bargaining scenario, the final resolution of political issues remains pending until economic cooperation generates stronger incentives for the disputing parties to switch to more cooperative political strategies.

    The argument that the disputing parties should prioritise resource development over the settlement of political issues may appear infeasible at first glance. There are, however, some historical precedents where parties with outstanding political conflicts managed to cooperate. In 1979, Thailand and Malaysia struck an agreement to exploit the natural resources of the Gulf of Thailand by postponing the settlement of their outstanding disputes over the delimitation of maritime borders (O’Sullivan, 2012; Thao, 1999).  In the 1970s, Germany and the Soviet Union decided to set aside their various disputes including unresolved border issues, to establish a long-lasting gas partnership (Stern, 2005). Even in Cyprus, there have been elementary forms of ad hoc energy cooperation. Following the major explosion in the Vasilikos power station in 2011, which supplied electricity to half of the Greek Cypriot population, the Turkish Cypriot administration decided to supply electricity to the south, even in the absence of recognition (Çalık, 2014).

    Domestic Politics, Global Markets and Regional Geopolitics

    The limited bargaining scenario is eminently more preferable than the grand consensus model but one must nonetheless carefully consider the obstacles to implementing a limited bargaining strategy in Cyprus. First, the limited bargaining scenario will require a minimum level of mutual trust. In the aftermath of the collapse of the peace talks in October 2014, the basic requirements of a productive dialogue are lacking in Cyprus. Both sides will need to undertake significant confidence-building measures, if they are to start working on the terms of a limited cooperation scheme. Turkish Prime Minister Ahmet Davutoğlu’s visit to Greece in early December 2014 amidst the gas-dispute could be construed as an encouraging step in this direction but the lack of progress since then indicates that resetting the dialogue will require substantial political capital. In this regard, one obstacle to peace would be the political actors in both camps who may be risk-averse, unwilling to shoulder the political risks that a strategy of setting aside –even if temporarily– the deep-seated political divides could bring about. For instance, given the upcoming elections in Turkey, decision-makers will likely be risk averse and unwilling to appear as if they are making concessions on the Cyprus issue. Similarly, to some Greek Cypriot politicians the expected economic benefits from an energy partnership may be dwarfed by the potential political costs of cooperation with Turkey.

    Second, discovery of any new gas reserves in Cyprus –exploration continues in blocks adjacent to Aphrodite– would possibly impact the strategic calculations in both camps, albeit in complex ways. If Cyprus had more gas to sell to Turkey than it is currently estimated, this would likely incentivise Turkish policy makers to place a higher premium on absolute economic gains from cooperation, which would in turn reinforce the feasibility of the limited bargaining scenario. However, larger gas reserves would also strengthen the RoC’s hand. In this case the RoC would find it easier to finance costlier export options that do not require Turkey’s cooperation, which would in turn allow Nicosia to insist more strongly on political preconditions.

    Third, the availability of alternative markets and suppliers will shape the decision making of both Turkey and Cyprus. Ankara recently struck and agreement with Moscow to build the so-called ‘Turkish Stream,’ which will carry up to 63 bcm of Russian gas, 13 bcm of which will be retained for Turkey for domestic consumption. As part of the deal to build the Turkish Stream, Ankara is renegotiating gas prices with Moscow. The availability of larger Russian gas at a lower cost will likely dampen Turkey’s interest in Eastern Mediterranean gas for domestic consumption –even though Turkey will likely remain interested in transit opportunities. RoC, too, seems to be in search for regional alternatives to divert its gas to. On February 16th 2015 RoC signed a Memorandum of Understanding with Egypt. Egypt not only has a growing demand for natural gas but also the necessary LNG infrastructure that the RoC can use to export its gas.

    Fourth, the structural and cyclical changes in global energy markets will have critical regional repercussions. If oil prices continue to fall, then the feasibility of expensive energy projects like the East Mediterranean Gas Pipeline and the Vasilikos LNG plant will likely decline, incentivising the RoC to reconsider the pipeline to Turkey option. On the other hand, as oil remains relatively cheap, the attractiveness of the Eastern Mediterranean gas reserves could decline for investors as well as customers.

    Lastly, the geopolitical dynamics of the Eastern Mediterranean region will directly shape how the Cyprus conflict will unfold. On the one hand, new regional alliances are in the making, including the much-debated rapprochement among the RoC, Greece and Israel, where energy provides a bonding agent. How Turkey perceives of and responds to the realignment of regional interests will shape Ankara’s regional energy strategy. On the other hand, the preferences and strategies of major outside powers will be decisive for the Cyprus issue. The growing military and economic presence of Russia in the Eastern Mediterranean,[4] and the Kremlin’s unwavering support for the RoC’s right to develop the island’s natural resources, is a critical factor. The US, which is already involved in both regional energy projects and the Cyprus peace talks, can shape the strategic thinking of both Turkey/TRNC and the RoC by offering selective benefits for cooperation. The EU, which has so far been the least effective actor in the Eastern Mediterranean even though it has the largest stakes in the region, appears unlikely to play a larger role as a mediator.

    Conclusion

    After decades of constant conflict, punctuated by a few failed attempts at reconciliation, the peoples of Cyprus certainly deserve peace and prosperity. Following a mostly stagnant peace process since the failure of the Annan Plan in 2004, the discovery of natural resources had revitalised the hopes for peace in Cyprus. Indeed, the Aphrodite field, and the prospect for more energy wealth to be harvested from the region, could have very well been the push that the Cyprus peace process needed. The past few years, however, have shown that it is not a foregone conclusion that the prospect of energy wealth would inevitably incentivise the feuding parties to transcend their long-standing political quarrels in search for profits. Even the most optimistic observers would agree that energy has so far brought more conflict to Cyprus, not less.

    Yet all is not lost. While insisting on a grand political consensus as a precondition for energy cooperation has contributed to the collapse of the peace talks in Cyprus, a less ambitious but more practicable strategy of limited bargaining could help reset the peace process. If the Turkish and Greek communities find a way to provisionally and conditionally set aside their political and legal disputes for the sake of establishing a targeted, limited cooperation to develop the natural resources of the island, then it might be conceivable for the resulting economic interdependence to produce positive political externalities.

    The success of the limited bargaining strategy however depends on a number of factors, including the establishment of a minimum level of mutual trust and the political will on both parties to assume any domestic political costs associated with a more accommodating policy towards the other.  In addition, market conditions like the discovery of additional reserves in the region, the fluctuation of global energy prices as well as the availability of new regional markets and suppliers will change the costs and benefits of alternative export options. Lastly, geopolitical factors like the new regional alliances and the involvement of major extra-regional powers are among the key factors that will determine how the Cyprus peace process will unfold.

    Assistant Professor Tolga Demiryol, İstanbul Kemerburgaz University

  • Turkey increases energy presence in Kurdish regions of Iraq

    Turkey increases energy presence in Kurdish regions of Iraq

    ERBIL, Iraq, Nov. 21 (UPI) — Turkey, its eyes on becoming the pivotal energy hub between East and West, is set to increase its presence in Iraq’s semiautonomous Kurdish enclave by taking a majority stake with a British partner in a block containing an estimated 10.5 trillion cubic feet of natural gas.

    That’s likely to have considerable political ramifications that are certain to strain already awkward relations between Ankara and Baghdad, and intensify the deterioration of relations between Iraq’s central government and the independence-minded Kurds.

    The Middle East Economic Digest reports that Genel Energy, a British-Turkish joint venture, will acquire the majority stake in Kurdistan’s Miran block from the London-listed Heritage Oil which is selling off its 49 percent holding in a production-sharing deal with the Kurdistan Regional Government.

    Once the sale is approved by the KRG and Heritage’s shareholders, Genel will have complete ownership of the block and be its only operator.

    The joint venture also has nine exploration blocks across Kurdistan, one of 40-plus companies which have signed production-sharing deals with the KRG in the Kurdish capital, Erbil, since 2007.

    The Turkish involvement will be particularly galling to Baghdad because Ankara has in recent months made a high-profile move into the KRG’s energy sector in defiance of Baghdad’s insistence such deals are illegal as constitutionally only Baghdad can sanction such agreements.

    Ankara recently offered land-locked Kurdistan, which borders southern Turkey, to build oil and gas pipelines from the enclave, which spans three provinces in northern Iraq, to Turkey’s Mediterranean export terminals.

    At present, the Kurds have to pump the oil they produce through the state pipeline network controlled by Baghdad.

    That export route would free the Kurds from reliance on the Baghdad government, and undoubtedly heighten their aspirations to establish an independent state in northern Iraq.

    They’ve already risked Baghdad’s wrath by signing exploration deals with major international companies such as Exxon Mobil and Chevron of the United States and Total of France.

    All these companies had secured production-sharing contracts from Baghdad to develop major fields and their defection to the Kurds and the more lucrative contracts they are offering was a major political humiliation for the trouble-plagued government of Iraqi Prime Minister Nouri al-Maliki.

    Baghdad needs the companies to make massive investments in southern fields to boost production from the current 3 million barrels per day to 10 million-12 million bpd to challenge Saudi Arabia as the world’s leading producer.

    Baghdad’s stiff contract conditions, low financial returns, governmental ineptitude and delays in building the required infrastructure have alienated Big Oil.

    But Iraq’s entire reconstruction and economic plans depend on the large-scale — many say overly ambitious — expansion of oil production.

    Kurdistan sits on 45 billion barrels of oil. That’s a fraction of Iraq’s known reserves but it’s enough to establish a firm economic base for an independent state.

    The KRG’s current crude output is 240,000 barrels per day but it is aiming for 1 million bpd in a couple of years. Some 90 percent of Kurdish oil sales flow from the Tawke and Taq Taq fields where Genel has major interests.

    So there’s a lot riding on all this for both Baghdad and the KRG and the Kurds seem to be making all the running.

    Maliki cannot afford to let them get away with that and thumb their noses at his government’s authority. So he’ll have to take some unequivocal action on this soon, if only to stamp on the Kurds’ long-held dream of independence and to convince other regions, including the south, that have been talking of gaining more autonomy to back off.

    He may have already started.

    Earlier this month, Baghdad, in a reprisal against Ankara, booted out Turkey’s state-owned TPAO oil company from a Kuwaiti-led consortium which was about to sign a 20-year, production-sharing agreement with the Oil Ministry for Block 9 in southern Iraq. TPAO had a 30 percent interest in that contract.

    Some two-thirds of Iraq’s proven oil reserves of 143.1 billion barrels lie in the south.

    “TPAO also has stakes in the developments of another four fields in Iraq: the Badra and Missan oil fields, and the Mansouriya and Siba gas fields,” MEED reported.

    “There has been no indication whether TPAO will be removed from these.”

    via Turkey increases energy presence in Kurdish regions of Iraq – UPI.com.

  • Rising Gas Consumption Reveals Structural Problems in Turkey’s Energy Policies

    Rising Gas Consumption Reveals Structural Problems in Turkey’s Energy Policies

    Rising Gas Consumption Reveals Structural Problems in Turkey’s Energy Policies

    Publication: Eurasia Daily Monitor Volume: 9 Issue: 32
    February 15, 2012
    By: Saban Kardas
    Heavy winter conditions have strained natural gas supplies in Turkey, shedding critical light on the country’s over reliance on hydrocarbons. Due to the record increases in household consumption and electricity demand, which coincided with interruptions in gas imports from Iran and Azerbaijan, concerns were raised as to whether Ankara’s current contracts meet its actual demand, and how this will affect its future energy policies.In early February, some media reports speculated that Russian gas shipments through the Western line declined by 30 percent. However, it was later explained that the declining shipment was due to Ukraine’s tapping the gas from the same route beyond normal levels, and Russia did not officially cut its exports to Turkey (Aksam, February 4). As Turkey’s largest gas supplier, Russia has been reliable so far. In the past, Russia even stepped in to make up for deficient quantities of gas when Turkey encountered shortages with other suppliers, especially Iran. Last December, Turkey agreed to renew a supply contract with Russia, which also foresaw a partial reduction in price in return for Ankara’s support for the South Stream project. In hindsight, it appears that Ankara’s decision to renew that contract, despite its initial objections, was motivated in part by the anticipated increased demand.

    The imports from Iran, the second largest supplier, have been problematic. Upon failure to bridge the differences in negotiations that were in progress, the Energy Minister Taner Yildiz announced that Turkey had decided to take Iran to the International Court of Arbitration. The negotiations pertained to two interrelated issues. While Turkey is contracted to import 10 billion cubic meters (bcm) annually gas from Iran, it maintains that Tehran fell short of meeting that target and it imported around 7 bcm to 8 bcm per annum. Ankara wanted to import the excess amount accumulated in the last two years. Also, Turkey was demanding a discount, as it paid the highest price for Iranian gas. The law suit was lodged on the first issue, and if no agreement is reached in the price discount dispute, Turkey will also take it to arbitration in March (Radikal, February 1).

    A few days later, gas supplies from Iran fell dramatically, due to technical problems. Reportedly, the compressor stations were experiencing technical failures. As a similar problem was also encountered with gas supplies from Azerbaijan, Turkey’s third largest provider, the gas flow from the eastern pipeline declined by around 85 percent. While on average the flow was around 40 million cubic meters (mcm) per day, it fell to 6 mcm per day. Turkey’s average daily consumption also reached as high as 192 mcm per day, while last year it was around 171 mcm per day (Anadolu Ajansi, February 7).

    The technical problems were solved within a few days and the gas flow returned to normal levels, but this development underscored the fragile nature of the country’s gas supplies. To alleviate growing public concerns, Yildiz announced that there was no immediate risk to shipments from Russia, and consumers will not experience any shortages. Turkey undertook several precautions. The power stations that convert natural gas to electricity either stopped production or shifted to secondary fuels. Also, Turkey made greater utilization of LNG conversion stations and tapped the reserves in underground storage facility in Silivri. Periodically, electricity supplies were also interrupted in some areas (Zaman, February 4).

    Despite the minister’s efforts to reassure consumers, experts highlight several problems in Turkey’s natural gas supplies. Electricity producers complained that the secondary fuels are more expensive and increase the price by around 10 percent (Milliyet, February 5). Due to rising demand and declining production at natural gas-based power plants, electricity prices skyrocketed in the free market where producers and distributors meet (Zaman, February 13). Producers and distributors are concerned that electricity generation costs have exceeded the price guarantees in the contracts, forcing them into net losses. Yildiz contradicted those claims, arguing that such seasonal fluctuations need to be seen as normal developments (Anadolu Ajansi, February 14).

    Moreover, shortcomings in reserves were also revealed during this crisis. Turkey’s underground storage facilities in Silivri have a capacity of 2.6 bcm and BOTAS is expected to keep 2.1 bcm in reserves, which will be enough to meet Turkey’s needs for around two weeks. As Turkey tapped these reserves in response to declining deliveries, it has been argued that BOTAS’ failure to fill it to full capacity before the winter was a major mistake. However, BOTAS issued a statement, maintaining that it stored quantities above the minimum levels required by existing legal provisions (Zaman, February 9). Granted, this development underscores Turkey’s poor capacity in managing its strategic reserves. It also demonstrates that despite its claims to be emerging as a major energy hub Turkey’s current capacity to manage that hub still remains unsatisfactory.

    To enhance that capacity Turkey finalized a protracted tender last fall with a Chinese company that will construct storage facilities in Tuz Golu (Salt Lake) near Ankara, which will have a capacity of 1 bcm. More importantly, the electricity producers’ association painted a very grim picture of the balance between demand and contracted gas supplies. While Turkey’s current contracts enable it to import around 170 mcm daily, its average daily consumption is around 180 mcm per day.

    They maintain that the problem is not just conjectural and cannot be explained by seasonal conditions. Rather, Turkey’s excessive reliance on natural gas for electricity generation appears to be a source of the problem (www.haberturk.com, February 13). According to Energy Market Regulatory Agency, Turkey imported 40 bcm gas and consumed 43.5 bcm in 2012, its consumption is expected to reach 48.5 bcm. While around half of Turkey’s electricity is produced from natural gas, slightly over half of its gas imports are used in power plants.

    Electricity producers argue that Turkey urgently needs to reduce the share of gas in electricity generation to around 30 percent through greater use of renewables, domestic resources and nuclear power. This is a problem emphasized a long time ago and energy strategy documents have stated it as their objective to undercut dependence on gas. Yildiz also reiterated it recently. There is a broad consensus inside Turkey on the need to significantly revise its energy policies, but it seems there is less consensus on “how” and “how soon” Turkey should achieve a more balanced energy mix.

    https://jamestown.org/program/rising-gas-consumption-reveals-structural-problems-in-turkeys-energy-policies/
  • Turkey succeeds in becoming energy hub

    Turkey succeeds in becoming energy hub

    Matthew Bryza: Turkey succeeds in becoming energy hub

    Azerbaijan, Baku, Feb.11 / Trend A. Badalova /

    Matthew Bryza 290311 3Turkey succeeded in becoming an energy hub, former U.S. ambassador to Azerbaijan Matthew Bryza told in an interview with Hurriyet Daily News.

    “It [Turkey] has gas coming from Iraq, Azerbaijan and Russia, [and will] eventually [get it] from northern Iraq,” Mr Bryza said.

    Mr Bryza noted Turkey’s aspiration was to be a link for its strategic brothers in Azerbaijan and Central Asia with Europe.

    “It can be both. A hub is a link. The question is for Turkey to decide how much it wants to play a strategic role as a link or how much it wants to be at the centerpiece, he said. My hope is that Turkey will think first and foremost about the importance to Europe … to have a diversified flow of gas from Central Asia and think of its partners that look to Turkey as their strategic link to Europe …”

    Turkey is considered one of the main players in the Southern Gas Corridor projects, which aims to diversify energy supply routes and sources and, therefore, increase energy security of the European countries.

    Gas, which will be produced during the second stage of Azerbaijani Shah Deniz gas field development, is considered the main supply source for these projects.

    In October, 2011 Azerbaijan and Turkey signed a number of key gas export related agreements to enable Turkey to buy gas from Azerbaijan and to transit Azerbaijan gas through Turkey to Europe.

    The agreements provide a legal framework to regulate the sale of Shah Deniz gas to Turkey and its transportation to European markets through Turkey.

    Azerbaijan plans to export 10 billion cubic meters of gas to Europe within the Shah Deniz 2 project.

    via Matthew Bryza: Turkey succeeds in becoming energy hub – Trend.

  • Turkey increases gas exports to Greece

    Turkey increases gas exports to Greece

    Istanbul – Turkey has begun increasing the volumes of gas it is exporting to neighbouring Greece, after cutting exports by two thirds without warning last week, a spokesman for Greek state gas company DEPA told dpa Monday.

    The spokesman confirmed that the volume of gas DEPA received was expected to return to normal in coming days. They assumed that the cut was due to extremely cold weather in Turkey and much of south-eastern Europe.

    ‘With temperatures rising were expecting the flow of gas to return to normal,’ he said.

    Last week’s cut in exports, starting on February 1st, was the second time in a month that Turkey had reduced the volume of gas it exports to Greece.

    Greece annually imports up to 800 million cubic metres of Azeri gas from Turkey under a deal signed in 2002, with imports beginning in 2007 following the construction of a pipeline link between the two countries.

    via Turkey increases gas exports to Greece – Monsters and Critics.