Turkey’s economy is one of the most booming of the Middle East, with a growth rate, despite the ongoing economic recession over the past decade, of an average 5.5 percent since Prime Minister Recep Tayyip Erdogan’s Adalet ve Kalk?nma Partisi (Justice and Development Party, or AKP) party came to power in 2002.
But the Achilles heel of the Turkish economic renaissance remains its dependence on foreign energy imports, as the republic still imports roughly 90 percent of its energy needs, blowing a substantial hole in its treasury earnings, and leaving it beholden to politically contentious neighbors such as the Russian Federation and Iran.
Turkey’s attempts to solve this conundrum have been threefold.
First, to boost indigenous production of energy, though searches for local sources of oil and natural gas have been largely unsuccessful up to now.
According to the U.S. government’s Energy Information Administration, in January 2011 Turkey's proven oil reserves stood “at 270 million barrels, located mostly in the south-east region. Turkey's oil production peaked in 1991 at 85,000 barrels per day, but then declined each year and bottomed out in 2006 at 44,000 bpd. Turkey's oil production has seen a slight increase since then, reaching nearly 53,000 bpd in 2009.”
Secondly, to embrace any and all technologies that might help to reduce the country’s dependency on foreign energy, from renewables to nuclear.
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Third, to position Turkey as a major transit country, allowing it to both collect transit revenues and insist on diverting a portion of oil and natural gas crossing its territory to national needs.
Of the three possibilities, the third is the most fully developed, but it comes with problems of its own.
Turkey’s largest energy corridor is also one that not only generates no revenue, but makes Ankara deeply unhappy the Bosporus and Dardanelles channels, collectively known as the Turkish Straits, which allow tankers to transit between the Mediterranean and Black Seas, to Russian Federation ports exporting Russian, Azeri and Kazakh crude to foreign consumers. The Turkish government is deeply concerned that the Bosporus, which bisects Istanbul, will eventually suffer a major maritime disaster.
According to Turkey’s Directorate of Environment and Urbanization, in 2001 the number of tankers transiting the Bosporus dropped below 50,000 for the first time since 2006, with 49,798 ship passages.
But if the drop in total passage is good news, foreign tankers still carry roughly 2.4 million barrels per day of Russian, Kazakh and Azeri crude through the Turkish Straits to eager foreign consumers, roughly 2 ½ times the amount of crude carried by the $3.6 billion, one million bpd, 1,092-mile Baku-Tbilisi-Ceyhan pipeline, which traverses 669 miles of Turkish territory to ship Azeri Caspian oil to Turkey’s deepwater Mediterranean Ceyhan port. Turkey’s hands are tied in regulating the Turkish Straits maritime traffic, as under the terms of the 1936 Montreux Convention, which ensured Turkish sovereignty over the waterway, Turkey is prohibited from even collecting tolls on merchantmen transiting the Turkish Straits; commercial vessels are not even required to engage the services of a pilot to navigate the tricky passage.
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But the BTC pipeline is a major success story. BP is operator of the BTC Company, a consortium formed by the 11 energy companies that invested in the BTC pipeline project. BTC now not only transports Azeri crude, but Kazakh and Turkmen as well. In its first two years of operation, according to the Turkish Energy and Natural Resources Minister Hilmi Guler, Turkey earned $2 billion in BTC pipeline transit revenues.
Highlighting the BTC’s vulnerability however, on 5 August 2008, two days before a brief war broke out between Georgia and the Russian Federation, an explosion occurred on the BTC pipeline segment at Yurtbasi village; after Ankara was notified, valves 29 and 31 were closed as officials waited for the oil contained in the 4-mile segment of No. 30 terminal to burn out. The separatist Partiya Karkeren Kurdistan (Kurdistan Workers' Party, or PKK), which has been battling the Turkish government since 1976, claimed responsibility for the attack.
In a further incident highlighting the vulnerability of Turkey’s pipeline infrastructure, on 4 October the Turkish section of the Baku-Tbilisi-Erzurum natural gas pipeline suffered an explosion, with the Turkish government claiming that it was a PKK attack, the first since 29 May, when another blast hit the pipeline.
The two incidents, added to the unrest currently roiling Turkey’s southern neighbor Syria and increasing Western pressure on its eastern neighbor Iran, from where Turkey draws more and more imports of natural gas, indicate that the only certainty for Turkey’s Energy Ministry is – there is no certainty, and that interruptions to Turkish energy imports are a necessary fact of life for Turkish governmental economic planners.
At least, until a tanker grounds in the Bosporus.
By. John C.K. Daly of Oilprice.com