Focus: Offshore drilling in Cyprus

Road to self-sufficiency

Jan. 13, 2020

Natural gas was not an everyday convenience in Turkey before the 1990s, when most heating systems relied on kerosene, firewood, or charcoal. Though wood-burning stoves are aesthetically pleasing objects and nostalgic for those who remember the golden days, they are both prone to hazards and polluting for the environment.

The transition to natural gas, both in houses and industries, began in 1988, and by the early 1990s gas was delivered to houses in Istanbul and Bursa for the first time. As of 2019, natural gas is available in all 81 provinces, and its use for heating is on the rise.
As a result of this transition, however, each year Turkey has to import roughly 50 billion cbm of natural gas to meet its consumption needs, mostly via the Blue Stream pipeline from Russia (47%), but also from Iran (16%) and Azerbaijan (15%).
Although it is believed Turkey has untapped reserves, currently the country's domestic production capacity is not even enough to cover 2% of its consumption. To move toward greater self-sufficiency, Turkey has embarked on a series of exploration activities in locations such as the Thrace Basin in the northwest and off the coast of Cyprus.
Gas exploration and production has not been unheard of in the Thrace Basin. Since 1970, natural gas has been produced in modest amounts in Kırklareli for industrial purposes, long before the first largescale imports and widespread transition to gas-based heating began. However, in early 2019, the Ministry of Energy and Natural Resources announced the discovery of more hydrocarbon reservoirs in the basin, adding that the field would be subjected to further examinations and surveys.
Weeks later, Calgary-based energy company Valeura disclosed the news that its test wells in İnanlı—and later in Yamalık—had yielded positive results, increasing its confidence in the region's potential. The company's confidence was further strengthened during drilling activities, when it came to light that an unconventional gas plate may be lying deep under the area.
Field exploration and development operations for unconventional plates, however, are not possible without deep drilling, which in turn calls for deep pockets. Although several companies were interested in the project, Valeura finally teamed up with Statoil—currently known as Equinor.
Most likely, the field's output will be earmarked for local consumption to decrease Turkey's dependence on hydrocarbon imports. However, the field is also well-positioned to export its natural gas to Europe. Sean Guest, CEO of Valeura Energy, believes that “from an engineering and infrastructural point of view, it would be natural to export our gas to Europe,” adding that “having a pipeline like TANAP that will run into Europe creates that opportunity. However, we tend to run all our economic and development scenarios assuming the gas is going into the Turkish market.”
Given Turkey's plans for turning into a natural gas trading hub, signing swap deals with Russia, Azerbaijan, or Iran is also a possibility.
Far from the Thrace Basin, similar efforts are in progress along the southern coast of Turkey, though not without diplomatic controversies. Sizable deposits of natural gas were discovered in 2011 in the Eastern Mediterranean, between the southern shores of Turkey and the northern tip of Cyprus.
Offshore exploration activities in the region led to diplomatic disputes in February 2018, when Turkey stopped the progress of an Italian drillship in the service of the Cypriot government, while dispatching a Turkish drillship to the region instead.
In June 2019, Turkey sent yet another ship—colored in red and patriotically adorned with a white crescent and star—to search for oil and gas off the coast of Cyprus. Although both attempts were opposed by the EU, Turkey has remained steadfast, insisting on the rights of Turks and Turkish Cypriots to the region's hydrocarbon reserves.
Turkey's determination to secure oil and gas resources is not difficult to explain: Europe's and Turkey's demand for natural gas has been on the rise in recent years. What's more, Turkey is eager to reduce its reliance on Russia and Iran, especially as the latter may halt the transfer of natural gas due to political developments in the region and beyond.