“Turkey as an Energy Transit State”.doc

“Turkey as an Energy Transit State” Presentation by Gareth M. Winrow at the Conference titled: “Black Sea: Energy and the Environment” Organised by Istanbul Bilgi University, Marine Law and Policy Research Center, 15 May 2003 As the previous speaker (Cenk Pala of BOTA?) has focused on oil pipelines, in this presentation I shall focus on the transportation of natural gas through Turkey. My use of the term Black Sea is very broadly defined. I shall include references to markets in Austria and Italy, and natural gas producers from as far afield as Iraq, Syria and Egypt. Natural gas is becoming an increasingly significant source of energy. The share of natural gas of total world energy consumption is forecast to rise from the current 23% to 28% by 2025. Natural gas is generally regarded as a low cost, clean form of energy. It is being used more and more for electricity generation through efficient and inexpensive gas turbine systems. One can not completely separate crude oil and natural gas. Long-term take-or-pay contracts for natural gas are indexed to the price of crude. In crude oil production significant amounts of “associated” gas may also be produced at the same field. Because of geographical and environmental reasons and the need to save on construction costs and security expenses, oil and gas pipelines may be built parallel. A case in point is the planned routes through Azerbaijan and Georgia of the Baku-Tbilisi Ceyhan main export crude oil pipeline and the Baku-Erzurum pipeline to carry gas from Azerbaijan’s Shah Deniz field. However, there are also key differences between crude oil and natural gas with regard to modes of transportation and the nature of markets. Pipeline, railway, truck and tanker may carry crude oil, It is usually piped to terminals at ports from where it is shipped overseas. There is a global market for oil. Natural gas is more difficult to transport. Pipelines are used that connect at regional “hubs” near demand centres. It is also