Turkey one step closer to its energy goals in 2016

Turkey one step closer to its energy goals in 2016

Baku, Azerbaijan, Jan. 2

By Orkhan Quluzade - Trend:

Turkey for over 10 years has been confidently advancing towards its goals of the "2023 Vision" - when the country will mark its centenary.

This program envisages a lot of directions. One of those directions is to transform Turkey due to its geographical location into the logistics and energy hub. After the crisis in relations with Russia, Turkey realized the need to diversify its energy sources and intensified search in this direction.

Having signed new agreements, implementing existing projects and having planned new ones, Ankara has advanced a step closer to its energy goals in 2016.

Discount on Iranian gas

The International Court of Arbitration ruled in favor of Turkey in the long-lasting gas dispute between Ankara and Tehran on February 2, 2016. According to the court decision, Iran must provide Turkey with a 10-15 percent-discount on gas purchased in 2011-2015.

Ankara and Tehran are still negotiating on the issue. Iran is expected to supply gas free of charge instead of $2 billion, which the Islamic Republic is supposed to return to Turkey.

The agreement on the supply of Iranian gas to Turkey was signed in 1996. Turkey has contracts with Iran for the supply of 10 billion cubic meters of gas per year.

Akkuyu nuclear power plant

The normalization of the Turkey-Russia relations after the incident with the Russian Su-24 bomber, has triggered the implementation of joint energy projects. One of the most important projects is the construction of Akkuyu nuclear power plant.

The construction of Akkuyu nuclear power plant in Turkey's southern Mersin province was still under preparation in 2016.

Russia's Rosatom state nuclear energy corporation put up for sale a 49-percent share of the first nuclear power plant in Turkey in April. The Turkish Cengiz Holding A.S. showed interest in the acquisition of shares.

Initially, only Cengiz Holding participated in the talks with the Russian side. Afterwards, Kolin Group of Companies and Kalyon Group joined the talks.

It is planned to get a license in Turkish Atomic Energy Authority (TAEK) for the construction of Akkuyu nuclear power plant in 2017. The intergovernmental agreement between Russia and Turkey on cooperation in the fields of construction and operation of the country's Akkuyu nuclear power plant in Turkey was signed in 2010.

The project of the Turkish first nuclear power plant includes four water-water energetic reactors. The capacity of each energy unit of the nuclear power plant to stand at 1,200 MW. The project's cost is some $20 billion.

Turkish Stream

Of course, the normalization of the Moscow-Ankara relations allowed to move forward with the Turkish Stream gas pipeline construction project.

Russia and Turkey signed an intergovernmental agreement on the project on October 10. The document envisages the construction of two branches of the main gas pipeline through the Black Sea, the power of each branch being 15.75 billion cubic meters of gas.

One branch is to supply gas directly to the Turkish market, the other – to transit gas through Turkey to European countries. The realization of the second branch depends on Europe's interest in Russia's gas and getting necessary guarantees.

The Turkish and Russian governments have already ratified the agreement on the Turkish Stream project. The State Duma (lower house of the Russian Parliament) is expected to consider ratification of the Turkish Stream gas pipeline deal in January 2017.

South Stream Transport B.V. company, a 100-percent subsidiary of Russia’s Gazprom company, signed an agreement with Switzerland’s Allseas Group S.A. on construction of the offshore section of the Turkish Stream pipeline’s first branch.

Allseas will commence the pipelay work in the second half of 2017.

23rd World Energy Congress

The 23rd World Energy Congress was held in Istanbul on Oct. 9-13 upon the initiative of the Turkish Prime Minister Binali Yildirim and Minister of Energy and Natural Resources Berat Albayrak.

The congress was held under the auspices of Turkey’s President Recep Tayyip Erdogan. The forum was attended by heads of state, energy ministers of oil and gas producing countries, as well as heads of hi-tech companies, international financial institutions, the UN and the EU agencies, investors, etc.

Energy projects implemented by Turkey in the region, global energy security, world energy trends as well as oil prices were discussed at the congress.

Normalization of relations with Israel

Relations between Israel and Turkey deteriorated after the Freedom Flotilla incident in 2010, when a convoy of six ships, including one flying Turkey's flag, tried to approach the Gaza Strip with humanitarian aid and activists on board. The flotilla was blocked and stormed by Israeli forces, with nine Turkish citizens being killed as a result.

Turkey signed an agreement with Israel on repairing the relations June 28. The Israeli government paid a compensation of $20 million to Turkey for the Freedom Flotilla incident Sept. 30.

The normalization of relations created an opportunity for Turkey to receive gas from the Eastern Mediterranean. One of such possible projects is the construction of a pipeline that will run under the Mediterranean Sea through Cyprus.

Creation of infrastructure for liquefied natural gas terminals represents another possibility for Turkey to receive the Israeli gas. The countries are expected to hold intensive talks on this issue in 2017.

Alternative energy sources

Turkey keeps active interest in alternative energy sources. In this regard, the country built several solar and wind farms in 2016. Another similar projects is the construction of solar power plant in the Konya province. Previously, Turkey’s Energy and Natural Resources Minister Berat Albayrak said that about $1 billion will be invested in this project. Albayrak also noted that big wind parks will be built in the country in 2017.

Trans Anatolian Natural Gas Pipeline (TANAP)

TANAP project envisages the transportation of gas from Azerbaijan’s Shah Deniz (as part of Stage 2 of the field’s development) gas and condensate field from the Georgian-Turkish border to the western border of Turkey. The project’s total cost is estimated at $8.6 billion.

Initial capacity of the TANAP pipeline is expected to be 16 billion cubic meters of gas per year. The pipeline may be expanded up to 31 billion cubic meters of gas per year in the future. About six billion cubic meters of gas will be delivered to Turkey, and the remaining part – to Europe.

TANAP shareholders are: SOCAR (State Oil Company of Azerbaijan) – 58 percent, Turkey’s BOTAS (30 percent), BP – 12 percent. TANAP pipeline is planned to be put into operation in 2018.

Project status

The Asian Infrastructure Investment Bank (AIIB) approved the issuance of a loan worth $600 million, World Bank (WB) - $800 million for the TANAP project’s implementation.

Currently, shareholders of the TANAP Consortium discuss the issues of the project’s financing with the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB), which plan to allocate $2.1 billion. An additional $3 billion is planned to be attracted from other financial institutions. Moreover, the Azerbaijani government plans to additionally allocate $2.1 billion.

There is a decision on giving an 8-percent share out of the Southern Gas Corridor company’s 58-percent share in TANAP to SOCAR’s subsidiary in Turkey – SOCAR Turkey. It is expected that the deal will be concluded in the near future.

The construction work as part of the TANAP project is 55 percent complete.

Three companies - "Fernas Insaat A.S.", "Sicim-Yuksel-AKKORD Adi Ortakligi" and "TEKFEN Insaat ve Tesisat A.S." are contractors for the construction of the onshore area of TANAP with a length of 1337 kilometers. They will build a section of the gas pipeline till the Turkish city of Eskisehir.

Turkish Borusan Mannesmann, Noksel Celik Boru and Erciyas Celik Boru companies will supply the pipes for the TANAP project.

In October 2015, the consortium for the construction of the TANAP chose a company that will render services of establishing the SCADA system (supervisory control and data acquisition), as well as telecommunication system for the pipeline construction project. The winner of the tender was ABB Elektrik Sanayi A.S. A relevant contract was signed with this company.

In November 2015, the consortiums of TAP and TANAP signed an agreement on cooperation during the pipeline’s construction. The document defines obligations for the construction of an interconnector as well as technical aspects for the connection of the two pipelines.

In January 2016, the TANAP consortium defined a company that will build the 459-kilometer section of the pipeline from Turkey's Eskisehir up to the border with Greece. Punj Lloyd-Limak JV won the tender, and a corresponding contract was concluded with the company.

In February 2016, Turkish company Tekfen won a tender for construction of compressor and measuring stations for the TANAP project.

In July 2016, Malaysia’s SapuraKencana Petroleum Berhad company won the tender for the purchase of fiber optic cables and the implementation of construction works in Turkey’s Dardanelles (Canakkale) Strait within the TANAP project.

Floating LNG plant

The first floating LNG (liquefied natural gas) plant of Turkey started working on December 2016 on the peninsula of Aliaga in Izmir city of Turkey. The plant will convert 5.3 million tons of LNG into gas. The plant will be able to transfer about 20 million cubic meters of gas per day to Turkey.

Turkey’s chairmanship in SCO Energy Club

Turkey will chair the Energy Club of the Shanghai Cooperation Organization (SCO) in 2017, making it the first non-member country to do so.

SCO Energy Club was created in 2013 with the participation of China, Kazakhstan, Kyrgyzstan, Russia, Turkey, Tajikistan, Afghanistan, India, Iran, Mongolia, Pakistan, Belarus and Sri Lanka.

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Follow the author on Twitter: @o_quluzade

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