Turkey privatisations: back on track

by David O'Byrne | Financial Times

Turkey’s ambitious privatisation programme scored another significant success Friday with the successful sale of four more of the country’s regional power distribution companies for a total of $3.46bn.

The sale of the four was completed after more than six hours of open bidding between 16 companies.

The two largest power distributor on the auction block – Toroslar EDAS which distributes in the Adana region and AY EDAS which distributes on the Asian side of Istanbul – were sold for $1.7bn and $1.2bn respectively to Enerjisa, a joint venture between Turkey’s Sabanci Holding and Germany’s E.ON.

The auction win comes just four months after E.ON bought out the 50 per cent stake in Enerjisa previously held by Austrian power group Verbund.

Speaking to reporters, Selahattin Hakman, head of Sabanci’s energy arm, said Enerjisa’s ambitions had broadened since the arrival of E.ON.

Enerjisa already owns Baskent EDAS which distributes power in Ankara and now holds close to the 30 per cent maximum share any individual company can hold in the Turkish power distribution sector.

Of the other two regional distributors that were also on auction, Dicle EDAS which distributes in the Diyarbakir region was sold to the Iskaya-Dogu consortium for $387m and Vangolu EDAS which distributes in the Van region was sold to the Turkerler construction group for $118m.

Birol: Nuclear power key to Turkish energy future

Today's Zaman

Turkey should build “as much nuclear power as possible” to help meet its growing energy needs, International Energy Agency Chief Economist Fatih Birol said in Brussels on Sunday night.

Speaking at the German Marshall Fund's Brussels Forum, the economist qualified his endorsement by saying that nuclear power should only be embraced “with attention given to seismic risks” that could unleash a Fukushima-style accident on Turkish soil.

Birol was unwavering in his endorsement however, saying that Turkey could employ the technology safely and use it to overcome its dependence on foreign fossil fuels. The argument that Germany and Japan are jettisoning the technology also didn't sway the economist, who was quoted as saying: “When we compare Turkey and Germany there are huge differences. In Germany, electricity demand won't even grow 1 percent this year. … But as for Turkey, demand is increasing very rapidly. From this perspective, Turkey must open nuclear power plants.”

His recommendation comes after Ankara's announcement this week that it will begin accepting bids for a newly proposed nuclear plant in the Black Sea province of Sinop. Birol's comments also come amid sustained criticism of Ankara's nuclear plans and a $25 billion nuclear facility planned for the southern province of Mersin, where activists say it faces an unacceptable risk of an earthquake.

European energy security is not up to Europe

      By Alexandros Petersen  | EUobserver

BRUSSELS - It is no secret that Russian dominance of European natural gas markets has splintered the Union.

 

The imperative of having enough heat or cooking fuel in the winter has put countries – especially in central and eastern Europe – in two camps: those who make bilateral deals with Russia’s energy behemoth Gazprom (Western unity be damned), and those who suffer from the disunity and call continually not just for co-ordinated policies to withstand Moscow’s pressure, but also for alternative resources from the Caspian region or elsewhere to diversify supply.

The second camp has it right, but they – as well as Euro-Atlantic institutions – have sabotaged their own efforts by seeking to dictate terms to alternative producers, such as Azerbaijan.

All the while, the pro-Russia camp has made gains.

Earlier in March, Serbia passed a constitutional amendment on land ownership to make it easier for Gazprom to buy up the land it needs for a major pipeline project aimed at increasing southeastern Europe’s dependence on Russian resources and defeating regional plans for diversification. This follows Germany’s joint development with Russia of the Nord Stream pipeline, which connects German consumers directly to Russian fields across the Baltic Sea. It bypasses and undermines the energy security of fellow Nato and European Union members, Poland and the Baltic states.

The problem with these policies is that in making a bilateral deal with Gazprom on natural gas supply, individual European countries are in fact coming in line with Kremlin policy which seeks to divide and conquer the continent.

 

Turkish energy: not enough storage

by David O'Byrne | Financial Times


There is an oft-repeated mantra used to help explain Turkey’s perennially problematic current account deficit: “A $10 rise in the oil price adds $4bn to the current account deficit and half a percentage point to the inflation rate”.

It’s a simplification but it does neatly sum up Turkey’s position as a country with few energy reserves of its own. What it doesn’t tell you is the extent of Turkey’s dependence on imported gas and, given the country’s economic growth, how it is starting to look irreversible. Now the question is whether Turkey can get enough gas at the right time to avoid shortages.

Indeed, as successive speakers at the Gas to Power 2013 conference in Istanbul this week pointed out, the main challenge facing Turky’s energy sector is not how to reduce dependence on gas but rather how to get more of the stuff.

Despite official pledges to reduce the country’s gas burn, efforts to diversify have been slow-moving. Around 40 per cent of Turkey’s power is generated by burning imported gas.

There is an official target of 20GW of wind power capacity by 2023 – but few believe that anything more than a faction of the target is attainable. Incentives to encourage development of low-grade domestic lignite coal are only now being introduced.

More worryingly, new gas-fired facilities are still being developed, with around 9GW already licensed and expected to be commissioned by 2018, for which new gas supplies will have to be found.

Gas in Cyprus – how much of a guarantee ?

by Nick Butler | Financial Times

The controversial bailout deal for Cyprus proposed by eurozone finance ministers has led President Nicos Anastasiades to promise investors who stay in the country after the compulsory forfeit of 9.9 per cent of their deposits that they will share in the country’s future wealth from natural gas.

In return for the forfeit they will be given shares in the banks and what are described in press reports as ” equity returns, guaranteed by future natural gas revenues”.

Whatever equity returns means, nothing can be guaranteed by future gas revenues at this stage. The facts are simple. Only one well has been drilled offshore Cyprus. The field identified – in Block 12 to the South East of the island – is said to contain perhaps 7 tcf of gas. But with only one well there can be no hard estimate. It could be more, but it could just as easily be less. Nor does anyone yet know what the cost of extraction will be.

The head of Cyprus’ State Hydrocarbons Company – Charles Ellinas – said last week that Cyprus could have up to 40 tcf of gas within its exclusive economic zone. He talked about Cyprus exporting gas to Europe via an LNG terminal by 2019.

Yes, and pigs might fly over Nicosia. No one will build an LNG terminal until someone drills more wells to confirm the existing find and several more successful wells on other blocks. The licensing round has barely begun, and interestingly Noble Energy, who drilled the first successful well, are not bidding for more acreage. That is a very odd decision if the company shares Mr Ellinas’ view that the area holds 40 tcf.

Turkish government committed to liberalize gas market; energy minister

Gas to Power Journal

The gas market is not yet fully liberalized and things still needs time, but as the government we are committed to duplicating the efforts made when we liberalized the power market, Turkey's deputy minister for energy and natural resources, Hasan Murat Mercan, told a conference in Istanbul organized by Gas to Power Journal.

With the electricity draft legislation being debated in parliament, the gas legislation will need to follow suit swiftly. "Parliament needs [to] get a draft legislation finalised," he said but called for patience and pointed out that proceedings had also taken a couple of month time to revise the oil legislation.

"The problem for natural gas lies within power generation. Our policy is to rely on local resources –solar, lignite –and there are incentives for investors," he stressed. In contrast, gas-fired power generation projects acquired or launched after June 2012 will no longer enjoy incentives.

Turkey aims to increase natural gas imports to cater for the country's rising gas and power demand. However, it has proven difficult to substantially increase gas supplies from Azerbaijan – let alone from Turkmenistan or the Kurdish region of northern Iraq.

Turkey aims to privatize all thermal power plants by 2015

Gas to Power Journal

Keen to fast-track the liberalisation process of the Turkish energy market, the government has set a timeline for divestment of state-owned power generation assets.

 "We hope to finish the privatization of Turkey's thermal power plants by 2015," Atif Kir, Head of Project Group, at the Turkish Ministry of Privatization Administration (OIB) told Gas to Power Journal in an interview.

To complete divestment of state-owned power plants, a total of 12,000 MW of state-owned coal- and gas-fired power plant capacity is up for auction.

"Private capital currently owns about 55 percent of power generation assets and our aims to get at least 85 percent of capacity to be run by private businesses in the near future," he said, implying that the remainder might be classified as 'strategic assets' which may remain in the hands of the state.

Turkey incentivises use of domestic lignite to ease gas import dependency

Gas to Power Journal

The hunger of Turkey's industry for natural gas is unabated, while new government incentives and tax breaks aim to put the use of domestic lignite resources at an advantage over natural gas as a fuel source for power generation.

 "We are over reliant on gas imports and this dependency is set to rise in line with GDP growth," said Levent Özcan Caner, Strategy Department, Ministry of Energy and Natural Resources, suggesting that government regulation in favour of coal would help reduce Turkey's gas import dependency.

 As project developers start to submit more licences for lignite-fired plants, "we are also putting a strategy document together for licence applications for power plants that run on imported coal," he told a conference organised by Gas to Power Journal in Istanbul.

 To incentivise investment in new coal power plants, the Turkish government has granted developers of new lignite power plant projects some form of corporate income tax allowance (investment participation rate), exemptions from customs duty and VAT and support employer's contribution to insurance premiums. Moreover, the government also helps with allocating state-owned land near domestic lignite production sites.

Analysts estimate the above measures will increase the share of coal in Turkey's energy mix rise from about 28 percent in 2011 to over 37 percent by 2020. To reap maximum benefits, developers of coal-fired power plants need obtain investment certificates by 2013, Gas to Power Journal was told.

Turkey responds to Greece's note verbale to UN by issuing its own

Ekathimerini

Turkey has forwarded a note verbale to the United Nations in response to a Greek one sent to the international organization on February 20, the Greek Foreign Ministry announced late on Tuesday.

According to the Greek Foreign Ministry, the Turkish verbal note challenges the right of the Greek islands to a continental shelf and exclusive economic zone, in violation of article 121 of the Convention on the Law of the Sea.

Athens had submitted a verbal note to the UN notifying international officials of Turkey’s granting of exploration permits for areas deemed to cover the Greek continental shelf.

At the time Turkey’s Foreign Ministry had issued a statement defending its decision, noting that the permits that had been issued since 2007 to the state-owned oil company TRAO concerned territories within boundaries of the Turkish continental shelf in the Eastern Mediterranean.

Will Turkey Benefit from its Centrality?

by Karen Ayat | Natural Gas Europe

Turkey is energy poor. The country imports the vast majority of its oil, gas and hard coal supplies to meet domestic demand. Turkey imports 58 percent of its gas from Russia, 19 percent from Iran, 9 percent from Algeria, 9 percent from Azerbaijan and 3 percent from Nigeria.

Turkey paid $60.1 billion for energy last year with an 11 percent increase from a year earlier. Turkey’s energy dependency is expected to double in the next decade due to a massive rise of energy consumption, according to a recent report by the US Energy Information Administration(EIA). Electricity needs in particular are expected to grow twice as fast as its overall energy use.

In a recent announcement, Energy Minister Taner Yıldız said that indications of possible shale gas resources had been found in the Central Anatolian provinces of Ankara, Konya and Kırşehir. The shale gas reserve is estimated at 1.8 trillion cubic meters and could satisfy 40 years of natural gas consumption with an annual production of 45 billion cubic meters. Turkey is currently employing its efforts to determine the accuracy of its shale gas potential.

Whether Turkey is blessed with shale gas remains uncertain. What is certain, is that it is blessed with centrality. It connects an energy-rich East to an energy-hungry West. Turkey could therefore play a paramount role in facilitating the transport of Israeli gas to a Europe largely dominated by Russian gas. Israel and Turkey are flirting with the idea of building a gas pipeline from Israel’s Leviathan Basin directly to Turkey to supply European markets. However, a few obstacles might stand in the way.

No Turco-Greek oil rift in Aegean: Energy minister

by Barçın Yinanç | Hurriyet Daily News

Energy Minister Yıldız seeks to put Turkey’s Aegean neighbor at ease, saying Ankara has no plans for energy exploration that would upset Greece

Energy issues will not become a subject of tension between Turkey and Greece, Turkish Energy Minister Taner Yıldız has said, adding that Ankara has told Athens it has no current intention of conducting exploration in the countries’ shared sea. 

“There is no problem in energy issues,” he told the Hürriyet Daily News despite a divergence of views on exploration rights in the eastern Mediterranean that recently droveGreece to complain to the United Nations about Turkey’s exploration efforts.

“We have the intention of using energy issues not as a reason to create tension but as a reason for growth and opening. We will see whether other countries will follow this principle,” Yıldız told the Daily News when asked about the recent initiative of Greece, which said on Feb. 22 that it had notified the U.N. of Turkey’s granting of exploration permits for areas “on the Greek continental shelf.”

Greece’s move came just days ahead of Greek Prime Minister Antonis Samaras’ visit to Turkey, which resulted in the signing of nearly two dozen agreements on March 4.

Turkey is willing to exist on whole Iraqi soil: Energy Minister

by Barçın Yinanç | Hurriyet Daily News

Turkish Energy Minister Taner Yıldız says the Kurdistan Regional Government (KRG) of northern Iraq should be more open for energy deals, linking the issue to the continued ‘normalization’ of Iraq. ‘Why is there a differentiation between the south and the north when the issue is to increase revenues?’ he asked the Daily News.

Controversial energy projects between Turkey and the Kurdistan Regional Government (KRG) are necessary for the continued “normalization” of Iraq, according to Turkish Energy Minister Taner Yıldız.

“If Iraq is to be considered as a whole … there should not be any differentiation between its south, north, east, or west,” Yıldız said in an interview with the Hürriyet Daily News. “The revenue to be obtained there [in the north] will be reflected based on the proportionality that they agreed on, which is 17 to 83 percent. Why is there a concern about this?”

The Iraqi government claimed to have received a letter from Ankara giving assurances that it would not sign any energy deals with the Kurdistan Regional Government (KRG) without the consent of Baghdad. 

We have no information about that letter. No such letter was written by the Turkish Energy Ministry. However, if Iraq is to be normalized and if we are to talk about Iraqi projects, then we need to agree on doing projects. In other words, saying “we agreed not to do any projects” can’t be a contribution to Iraq’s normalization. If Iraq is to be considered as a whole, which it should be, there should not be any differentiation between its south, north, east, or west. If you make a distinction about a certain place then it means there is a problem there. Why is it that oil or natural gas exploration becomes an issue when no such issue was raised when we undertook operations in the south? The revenue to be obtained there [in the north] will be reflected based on the proportionality that they agreed on, which is 17 to 83 percent. Why is there a concern about this?

Baghdad says: I have a problem that I need to solve with the north, don’t strike a deal with the north before I solve the problem.

Turkey: Trouble Brewing With Greece Over Maritime Territorial Claims?

by Yigal Schleifer | Eurasianet.org

Last week's visit to Turkey by Greek Prime Minister Antonis Samaras certainly hit all the right positive notes. Dozens of bilateral agreements were signed by the two countries and Samaras and his Turkish counterpart both vowed to increase trade between Turkey and Greece and to work together to solve the Cyprus problem.

The two once-bickering neighbors have certainly come a long way from decades past, when a visit like Samaras's to Turkey -- now something fairly routine -- would have been hailed as a major breakthrough. That said, it appears that some trouble might be in store for Turkey-Greece relations, particularly regarding the issue of Athens' desire to lay claim to a vast amount of potentially oil- and gas-rich maritime territory in the eastern Mediterranean. From a recent Wall Street Journal report that came out only days after Samaras left Turkey:

Greece has renewed its territorial claims over a broad swath of disputed waters in the eastern Mediterranean where the indebted country hopes to find vast oil and gas deposits—a plan that risks sparking a confrontation with Turkey.

Over the past several weeks, senior government officials have made a series of public statements—both at home and abroad—pointing to an almost two-decade-old international treaty granting those rights, one Greece hasn't asserted until now. Athens also has been building support in other European capitals and stepping up a diplomatic campaign at the United Nations….

Natural gas as the game-changer in world energy and geopolitics

by Mehmet Öğütçü | Kalem Journal

"Natural gas as the game-changer in world energy and geopolitics: Implications for, and actions from, Turkey" was prepared by Mehmet Ögütçü for the Marmara Group Foundation roundtable, conducted in cooperation with Kalem Journal, titled "Natural Gas as the Game Changer", held on January 24, 2013 in Istanbul.

Over the past twenty years we have gone through a series of fundamental “game-changing” developments in almost every domain of our lives, be in economy, geopolitics, security, technology, and values. Yet another one is now breeding and has the potential to “revolutionise” the world energy sector, generating profound implications for, and need for prompt responses from, Turkey.

The transfer of power from West to East has now become a cliché and is quickly gathering pace. As a result, not only the game itself, but also the players and rules of the game in energy have been changing. In this process, Turkey is poised to become one of the key players and influencers, particularly as far as the shaping of the Eurasian/Middle Eastern energy game is concerned.

Today, China is the most obvious power on the rise, likely to dethrone the US as the world’s economic superpower over the next two decades if things progress as widely predicted. But Beijing is not alone: India and other dynamic Asian economies now boast growth rates that could outstrip those of major Western countries for decades to come. Many in the West are already aware of Asia's growing strength. This awareness, however, has not yet been translated into preparedness in the form of either effectively challenging or accommodating it.

Let’s not forget: major shifts of power between states, not to mention regions, occur infrequently and are rarely peaceful. In the early twentieth century, the imperial order and the aspiring states of Germany and Japan failed to adjust to each other. This conflict resulted devastated large parts of the globe. Today, the transformation of the international system will be even bigger and the rising new powers are nationalistic, seek redress of past grievances, and want to claim their place in the sun.

Cyprus Conflict Prevents EU-NATO Strategic Partnership

By Remziye Yilmaz  | Atlantic Community

 

Despite all efforts to have a fully-fledged strategic partnership between the EU and NATO, such a genuine strategic partnership has still not been achieved because of various obstacles. Cyprus conflict is one of the main obstacles that have decreased EU-NATO cooperation in the context of security and defense.

 

At the political level, the conflict has caused restricted participation, narrow agenda and informal meetings between the two organizations. Since Turkey does not recognize the ‘Republic of Cyprus' officially and Cyprus has not concluded the PfP agreement with NATO, Turkey does not allow the Greek Cypriot Administration to attend the EU-NATO meetings. Because Cyprus is not at the table, the EU does not want to discuss any points outside of the ‘Berlin Plus' Agreement. This situation has blocked the EU-NATO cooperation on fundamental security issues. With the initiatives of some members of the two organizations, their officials meet informally. But these meetings do not lead to any concrete and official results.

At the military-strategic level, the conflict has decreased the dialogue between the EU and NATO. The lack of dialogue at military level has caused duplication and inefficient uses of resources. In addition, the conflict has increased institutional strictness within the EU, which has resulted in the EU-led missions without NATO support.  On the ground, Cyprus has rejected the use of the EU capabilities by NATO and Turkey also does not allow the EU to use the NATO capabilities and assets. Turkey refuses such a share because it does not have oversight or control over the EU-led missions where Turkey cannot participate in since Cyprus rejects. On the ground, difficult negotiations are taking place. This situation has caused unnecessary risks for the troops in the fields and impedes both organizations from assessing the strength and weaknesses of the operations in order to promote the best methods for future missions.

Turkey is economic winner of Iraq war

By Daniel Dombey | Financial Times

 

Istanbul — The Americans won the war, the Iranians won the peace and the Turks won the contracts.

Turkey, which blocked the deployment of U.S. troops through its territory during the 2003 invasion that toppled Saddam Hussein, is emerging 10 years on as one of the prime beneficiaries of the battle for the Iraqi market.
 

Although Turkey’s relations with Baghdad are increasingly bitter, its exports to Iraq have in the past decade soared by more than 25 percent a year, reaching $10.8 billion in 2012, making Iraq Ankara’s second-most valuable export market after Germany.

Ozgur Altug, an economist at BGC Partners in Istanbul, predicts that as Iraq grows richer because of its oil reserves, demand for Turkish goods will keep climbing — by more than $2 billion a year. Turkish contractors have also been doing rich business, working on about $3.5 billion of construction projects last year, according to businessmen and officials.

One company, Calik Energy, boasts that it is building the two biggest projects in the Iraqi power sector, two gas turbine plants in the Mosul and Karbala regions, earning more than $800 million from the Iraqi government in the process.

While Iran is seen as the most influential outside power in Iraq today, on Baghdad’s streets Turkey’s presence is more visible than that of any other country, with everything from malls to furniture stores to pavement bricks bearing a Turkish trademark.