| BMI View: Turkey will remain heavily dependent upon oil and gas imports for the foreseeable future.However, its role as a critical energy transit hub between Western and Emerging Europe, the MiddleEast, the Caspian and Russia provides it with a unique form of leverage and makes it indispensable as akey player in the global energy market. There is also upside potential to the country's domestic energyoutlook in the form of Black Sea reserves and unconventionals, including shale, although it istoo early for either to be factored into our forecasts.
The main trends and developments we highlight for Turkey’s oil and gas sector are:
Turkish domestic energy production is in imminent decline, with our forecasts suggesting thattotal oil and natural gas production will peak in 2013 and 2015, respectively. At the same time,demand for both oil and gas will continue rising steadily and weighing further on the country'simport bill. We forecast that oil production will fall from just under 62,000 barrels per day (b/d)in 2012 to 56,440b/d in 2016, representing a decline of approximately 9.0%. Production willdecline another 32% between 2016 and the end of our forecast period in 2021. In terms ofnatural gas production, we forecast that it will double from 1bn cubic metres (bcm) to 2bcmbetween 2012 and 2015, before falling to 1.8bcm in 2016 and entering into a steady declinethereafter, returning to 1bcm by 2021.
Turkish energy consumption will increase steadily throughout the forecast period, with bothdemand for oil and natural gas increasing by an average of 2.9% per year through 2021. Thiswill lead to a steady increase in imports, particularly of natural gas. We forecast that 2012 netnatural gas imports of 39.7bcm will increase to 44.4bcm by 2016, and then hit 51.6bcm by 2021.
Turkish unconventional production creates upside risk for the energy sector, although theprospects are too preliminary to take into account in our forecasts at this time. One such region isthe Dadas Shale play, where Anatolia Energy will conduct drilling campaigns across severallicences through 2013. In September, Royal Dutch Shell also announced that it would proceedwith shale gas exploration in Diyarbakir's Saribugday-1 field, where potential is estimated at13trn cubic meters (tcm) of shale gas reserves, 1.8tcm of which is recoverable. Similarly,ExxonMobil is currently in discussions with Turkish state-owned oil and gas company TPAO,in order to explore the country's shale potential in a licence adjacent to Shell's Saribugday-1field.
Due to its strategic location, Turkey acts as a critical energy hub for global energy supplies, and is theconduit through which oil and gas flow from the Middle East, the Caspian and Russia to Europe.
This role brings with it a number of different politically sensitive problems, with direct implicationsfor its own energy security. Examples include:
Turkey has yet to formally reach an agreement over the sovereignty and maritime borders ofCyprus and has threatened to place military vessels in the Mediterranean Sea to impede what itconsiders to be provocative hydrocarbons exploration. Ankara also approved in May 2012TPAO’s plans to explore six offshore areas to the north, west and east of Cyprus and the nationaloil company (NOC) started drilling an onshore site near the town of Trikomo in April 2012. Thelong feud between Greece and Turkey over maritime borders could exacerbate diplomatictensions in the region in case of exploration in the Aegean.
The Turkish port of Ceyhan remains one of the primary centres for the export of Iraqi crude,including the crude produced in the semi-autonomous Kurdistan region. However, due to anumber of different dynamics, including intra-Iraqi politics, as well as Turkish relations with aviolent separatist Kurdish movement known as the PKK, much of this pipeline infrastructureremains under threat. Indeed, there were two explosions which disrupted Iraq-Turkey oil flowsin August alone. Similarly, the recent warming of relations between Turkey and the IraqiKurdish Regional Government (KRG) has seen a souring of Ankara's relations with Baghdad,not helped by Iraqi Prime Minister Nouri al-Maliki's declaration of Turkey as a 'hostile state' inthe wake of negotiations between Ankara and Erbil over a new 1mn b/d pipeline that will runbetween Kurdish oil fields and Ceyhan.
Turkey also remains a critical link in the plans to carry natural gas from the highly prospectiveShah Deniz gas field in the Azerbaijani Caspian Sea to Europe. Due to the number of countriesinvolved, the plans for the pipeline have become highly politicised, with the Nabucco pipelinehaving been shelved after years of delays and political wrangling. For Turkey's part, thegovernment has recently signed an agreement directly with the Azerbaijani government to buildthe Trans-Anatolian Pipeline (TANAP), which will carry the gas from Azerbaijan throughTurkey, stopping at its border with Greece and Bulgaria. The format of the rest of the project isyet to be determined, with Nabucco West and TAP both vying to complete the route to Europe.Until those decisions are made and the pipeline is built, however, Turkey will be unable to takeadvantage of the inherent opportunities that come from transporting highly prospectiveAzerbaijani gas to Europe. |