I’m Jumpin’ Jack Flash

05/07/2014

“…It’s a gas-gas-gas” as The Rolling Stones once told us. After attending the recent TUROGE conference in Ankara, it seems that gas is indeed one of the key talking points around the more southern regions of Europe. During the conference there were recurring themes of pipelines, reliance upon Russian gas, shale gas production and the fact that both Europe, and especially Turkey, are getting even hungrier for gas.

The neologism was BRIC (Brazil, Russia, India and China) as economies to watch, but the new MINT countries – Mexico, Indonesia, Nigeria and Turkey – form the core of growth economies over the next 20 years. Turkey’s demand for gas is growing at a rate of 8.8% per annum and this is fuelling an economic growth of 10% per annum, but the concern is more to the future – how can this be sustained?

There are various projects aimed at fuelling the demand for gas – the TAP (Trans Adriatic Pipeline), the TANAP (Trans-Anatolian Natural Gas Pipeline, which will move gas from Azerbaijani to Europe) and the proposed South Stream Pipeline, which would transport Russian gas to Europe. Construction of the TAP and TANAP projects are underway, with TANAP completion being estimated at Q4 2018 – by then having used a staggering 160,000 sections of 56-inch pipeline to create a 1,810-mile pipeline able to supply 2% of Europe’s gas needs. This provides gas through Turkey but does not address the issue of self-sufficiency. The South Stream project is allegedly another source of gas, although this project seems less clear in terms of schedule, route and ownership. These projects are using Turkey as a means of access to Europe, not as a final destination, and serve to shift reliance upon different hydrocarbon sources, but not meet the longer term energy independence.

During the conference numbers were presented regarding the effect of spot market crude oil process increases and their effect on the of Turkish current account – each dollar had a 400M$ US deficit because of the quantity and geographies from whence the Turkish energy balance is based. In 22 years, Turkey has dropped from producing 48% of its energy requirement to only producing 28% and the crude price variations are therefore becoming more critical.

Figures were also presented related to the performance of one of the drilling companies in Turkey and with the drilling rate of approximately 51 wells per annum and each well typically producing 43 bbls/day, the situation is a top priority. One of the major prospects is the Ovakoy field, located on the border between Syria, Iraq and Turkey. This has a lot of similarity to the Tawke field in the Kurdistan region of Iraq and is located geographically close to it – but the field is in a politically unstable area, with international borders being involved. Indeed, Turkey currently ranks as number 66 in the top 147 places to invest from an E&P perspective – but as was mentioned during the presentations, perhaps now is the time to get more risk accepting.

The conference continued to cover shale gas and the potential for technology adoption from learnings elsewhere in the world, which could help the Turkish need for indigenous energy. Advances in rigs, technology and modelling can all help the situation, but the question was raised – can shale gas have as extreme an effect on the energy prices in Turkey as they have had for the US economy? Incentives are there, the need is there – but can the need be realised? As Mick Jagger and Keith Richards surmised, “It's all right now, in fact, it's a gas.”

About the Author
Andy Coward is Senior Director, Business Solutions at P2 Energy Solutions.

www.p2energysolutions.com

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