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TURKEY - Regional P/Ls.

Turkey calls itself "Eurasian gateway" to the Turkic world. With US support but in competition with Russia and Iran, it has been promoting oil and gas pipelines from Central Asia to Western markets. It is trying to revive the old role of Anatolia as a corridor for East-West trade, an extension of the Silk Road which declined in importance after the industrial revolution in the 1800s.

Only one of the proposed oil pipelines, with a capacity of 1m b/d of Azerbaijan's crude oil from Baku to Ceyhan from late 2005, has been built as planned and this is backed by the US. One of the proposed gas pipelines, the Blue Stream, began to supply Turkey with Russian gas in April 2002. Another pipeline project to take gas from Iran to Europe through Turkey began supplying this country in December 2001; but the Iranian supplies are occasionally interrupted; Ankara and Athens are no longer interested in extending the line to Greece as Tehran has been urging. A gas pipeline from Azerbaijan's offshore field of Shah Deniz to Turkey came on stream in late 2006 (see gmt19TurkpipelinesMay5-08).

Ankara had begun promoting its territory for oil pipelines since the early 1960s, when it repeatedly urged the Pahlavi Shah of Iran to build one through Turkey and a major terminal on its Mediterranean coast. Its efforts with Baghdad bore fruit in the early 1970s: Iraq agreed to build a crude oil pipeline from Kirkuk to Ceyhan. This went on stream in 1974 with a capacity of 700,000 b/d, which affected the IPC pipelines from Kirkuk to Syria's Banias and Lebanon's port of Tripoli. The facility via Turkey was expanded in the 1980s with a parallel line to 1.6m b/d.

In early 1992, after the collapse of the Soviet Union, Turkey launched a big diplomatic offensive to extend its influences to the former Soviet republics of Central Asia and Azerbaijan, which in past centuries used to be part of a huge empire called Turkestan. Washington put its weight behind Ankara, while Moscow eventually sided with Tehran on many regional issues. All these states have since promoted different pipelines for oil and gas.

As part of Ankara's effort, successive Turkish governments organised a series of summit meetings and lower-level conferences involving these republics (the CIS), while Tehran did the same. The government has top ranking aides in Ankara specialising in promotion of pipelines from these republics (see Part 4).

Russia has wanted Azeri and Kazakh crudes to reach its Black Sea port of Novorossyisk for sale to international markets. It has managed to get the Caspian Pipeline Consortium (CPC) to have a major crude oil artery built to its Black Sea port centre and this is pumping Kazakh exports to the markets with related tankers sailing through the Bosphorus. But the line from Samsun to Ceyhan will eventually end the congestion along the strait.

Bulgaria, Greece and Russia are having a crude oil pipeline from the Black Sea to the Aegean, bypassing the Bosphorus. This is to run 320 km from Bulgaria's port of Burgas to a Greek oil terminal to be built at Alexandroupolis on the Aegean. It was to have a capacity of 35m t/y (700,000 b/d).

ExxonMobil and Chevron have studied trans-Balkan pipeline to carry Caspian crude oil from Bulgaria to Albania through the republic of Macedonia.

The Turkish state-owned E&P company TPAO is engaged in international oil business, especially in the Caspian region which has attracted the most attention with its huge hydrocarbon reserves and investment opportunities. TPAO is a shareholder in three ventures in Azerbaijan, namely AIOC's three giant oilfields (6.75%), the Shah Deniz gas consortium (9%), and the Alov oil group (10%). TPAO produces oil in Kazakhstan and has E&P activities in Libya and Algeria, as well as in Turkmenistan, Syria, Iraq, Egypt and Russia.

TPAO is a shareholder in the BP-led 1m b/d Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline company (see omt19TurkTradeMay5-08) and in the other BP-led artery, the South Caucasus Natural Gas Pipeline (SCP) venture. The first BTC oil exports from Ceyhan terminal took place in July 2006. Turkey's role as energy corridor was boosted further in early 2007 as the SCP began supplying Turkey with Shah Deniz gas, which eventually will link up with the European market through the Nabucco pipeline venture (see below).

Through Turkey, the State Oil Co. of Azerbaijan Republic (Socar) is planning to invest in new refineries and fuel distribution outlets in Turkey, Ukraine, and Central Europe. The BTC pipeline now is the main alternative to Russian domination in crude oil supplies from the Black Sea to Europe. BTC transported 20.5m tons of crude oil in 2007. Ceyhan has become a primary European centre for oil trading, and Socar plans to have a 100,000 refinery there (see down18TurkRefApr28-08). Socar has built up a strong presence in neighbouring Georgia, where it participates in the country's natural gas distribution network. Socar in mid-February inaugurated a 100,000 b/d crude oil terminal in Georgia's port of Kulevi. The Azeri crude now arrives there by train and from Kulevi is shipped to Europe.

With strong US support, Socar is to establish crude oil and natural gas outlets in Europe and is seeking to attract energy from Kazakhstan and Turkmenistan and involve them in construction of a pipeline under the Caspian Sea in a project in which interest has been expressed recently by Georgia, Ukraine, Moldova and other European companies seeking alternatives to the Russian monopoly. The latter project was discussed in Baku in August 2007 by visiting Assistant US Secretary of State Daniel Sullivan. The US is paying $1.7m to study a pipeline from Kazakhstan to Azerbaijani through the Caspian. Is a possibility that Astana and Baku have been discussing for some time (see survey of Azerbaijan and other CIS republics to be serialised in Vol. 71, from July 2008).

The state-owned Turkish Pipeline Corp (Botas) last month said the cost of theft and sabotage of crude oil pipelines during 2000-06 had reached $17.5m. Botas said it had decided to post gendarmes along the BTC pipeline to prevent further theft. Botas' 2006 drawn up by the Higher Inspection Board (YDK) of the Prime Ministry and submitted to parliament on Dec. 31, 2007 shows that 276 cases of theft and seven cases of sabotage had taken place on crude oil pipelines between Batman and Dortyol, Iraq and Turkey and Ceyhan and Kirikkale.

By March 2008, the BTC pipeline had carried 333m barrels of crude oil, out of which Turkey earned $1.5 bn. Salih Pasaoglu, general manager of Botas Int'l Ltd (BIL) - operator of the pipeline's Turkish section - on April 8 said $1.3 bn of total revenue was earned by TPAO, while $200m was shared between the Treasury and BIL. Pasaoglu said BTC carried 750,000 b/d of crude oil during the first quarter of 2008, adding that the goal is to increase this to 840,000 b/d by end-2008. About $3.4 bn were invested in the BTC project, which carries crude oil from Azerbaijan to the port in Ceyhan via Georgia and onwards to the rest of the world. The 1,778-km-long BTC, of which 1,076 km pass through Turkey, has a full transport capacity of 1m b/d (50m t/y). With its pipes having 42"-46"-34" diameters (see BTC's profile in gmt19TurkPipelinesMay8-06).

TPAO has a share of 6.53% in the BTC Co. and 9% in the South Caucasus Natural Gas Pipeline (SCP) firm, which transport Shah Deniz gas to the border between Georgia and Turkey. The SCP passes through the BTC corridor and is about 690 km in length and 42" in diameter. The pipeline has a capacity of 8.1 BCM/year of natural gas to Turkish border with one compressor station in Sangachal, in line with the terms of AGSC-Botas Sales and Purchasing Agreement (SPA). However, this capacity will be expanded to 22 BCM/year (see gmt19TurkPipelinesMay8-06 & following pages).

Turkey Offers India Crude Oil Via Israel: During a February 2008 visit to New Delhi, Turkish Foreign Minister Ali Babacan offered a project to to facilitate the supply of crude oil to India from Central Asia via Israel through a combination of overland pipelines and super-tankers. Under the plan, crude oil reaching Ceyhan would be sent across the Mediterranean Sea by tanker to Israel's port of Ashkelon. There it would be fed into the 254-km Ashkelon-Eilat pipeline. From the Eilat terminal, again by tanker, it would be sent through the Gulf of Aqaba and the Red Sea via the Gulf of Aden and the Arabian Sea to India.

Ankara says the Turkish offer holds out the promise of a well-established route by which energy-hungry India could access Central Asian oil reserves, in contrast to less-practical alternatives. India imports about 70% of its oil requirements, a dependence which may increase to over 91% by 2020. About 45% of India's present needs comes from the Gulf Co-operation Council (GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE - according to Indian Planning Commission (IPC) figures. If one includes crude oil imports from other parts of the Middle East, the region accounts for about 67% of India's oil imports.

Ashkelon-Eilat, known as the Trans-Israel Pipeline (Tipline), has been functioning for several years. Built in 1968 to transport crude oil from Iran - then under the Pahlavi Shah - to Israel, it was largely unused except to carry trans-shipments of Egyptian crude oil. In other words, it carried crude from the Red Sea to the Mediterranean. The direction of the flow was reversed a few years ago when Russia began transporting crude oil through Tipline. It was then picked up by tankers which sailed through the Gulf of Aqaba and the Red Sea to Asian markets.

Using Tipline and the Gulf of Aqaba would let India's supplies skip the Suez route, with several advantages. Israeli ports, already supplied by super-tankers, accommodate larger vessels than those which can pass through the Suez Canal, and tariffs for the Ashkelon-Eilat pipeline are lower than those charged by Egypt for shipping through the canal, itself a more congested route than the Gulf of Aqaba.

Costs could fall further if a proposed undersea pipeline connecting Ceyhan with Israel goes ahead. Babacan in Delhi said a feasibility report on this project was to be conducted in 2008. Making Ankara's offer even more attractive to India is that the pipelines involved do not run through Pakistan and are not at risk of being disrupted in the event of a souring of India-Pakistan relations. A supply deal with Turkey would extend India's links with both that country and Israel.

State-owned refiner Indian Oil Corp (IOC) has 12.5% in a pipeline being built from the Black Sea port of Samsun to Ceyhan, a JV between ENI and Celik Enerji. IOC is investing in a refining/petrochemical JV Ceyhan (see omt19TurkTradeMay5-08 & down19TurkRefApr28-080). India's ties with Israel have deepened dramatically over the past decade or so. Indian oil E&P firms are investing heavily in Central Asian republics and their crude oil production will be considerable in the next decade, with most of the output to pass through Turkey.
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Publication:APS Review Gas Market Trends
Date:May 5, 2008
Previous Article:TURKEY - The Lease.
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