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Ahmet Erdem

TURKEY - Energy & Mining

Bridging the Gap

Country Chairman, Shell Turkey

Bio

Ahmet Erdem joined Shell in 1990, and has served in various roles in Turkey, Saudi Arabia, Greece, and Kenya. He had previously worked as the Retail General Manager in the formation and integration of the Shell & Turcas joint venture.

Ahmet Erdem, Country Chairman of Shell Turkey, comments on the global energy future and the role of Turkey.

Five babies are born every second around the world. By 2050 there will be 9 billion people on the earth, up from almost 7 billion today. Emerging markets are entering the most energy-intensive phase of development. Everyday more people are enjoying the benefits of a modern lifestyle, buying their first fridges, air conditioners, computers or cars—things their grandparents could see only in their dreams. Underlying global demand for energy by 2050 is likely to triple from its 2000 level if emerging economies follow historical patterns of development.

How are we going to meet this demand? Innovation for sure will improve efficiency, and could moderate growth by around 20%. Energy supplies might also grow by 50%, taking geological, competitive, financial, and political realities into account. But this still leaves a big gap between supply and demand, as big as the whole industry in 2000. This gap will have to be bridged by an extraordinary moderation of demand, a significant jump in energy supply, or a combination of both. This is what our scenario planners call the “Zone Of Uncertainty”. A zone of misery or opportunities for the globe will depend on how the world responds to this.

Increased consumption will also impact the environment. There is clearly an interlinked challenge between the economy, energy, and the environment. This leads us to the second challenge, as the energy sources to meet demand need to be available, accessible, and acceptable.

Take natural gas, for example. It is by far the cleanest burning fossil fuel, emitting half or less CO2 than coal-fired plants. Power plants fired by natural gas also cost less and can be built faster, and can be switched on and off more easily, complementing the intermittent power needs of wind and solar.

The supply picture for natural gas has improved spectacularly in the past few years, driven by the boom in tight and shale gas in North America and coal-bed methane in Australia. These have freed up supplies of liquefied natural gas (LNG) destined for the US from other parts of the world, and it has inspired nations to search for new gas resources themselves. Natural gas’s abundance and affordability, and crucially its lower CO2 footprint, should ensure an increasingly prominent role for this resource in the future.

International Energy Agency forecasts suggest that almost 50% of primary demand in 2030 will still be met by oil and gas. Turkey’s central and strategic location straddling Europe, Central Asia, and the Middle East, adjacent to more than 70% of the world’s proven oil and gas reserves, makes the country a vital transit route and a potential hub. Additionally, its importance is set to grow as new fields in the Caspian, Central Asia, and Iraq come on stream.

As one of the world’s fastest growing economies, Turkey has also experienced a rapid increase in its own energy needs. This trend will continue, and is projected to reach 220 million TOE (tons of oil equivalent) in 2020, more than a 100% increase in current consumption. Electricity demand has also significantly increased in recent years and has quadrupled since 1990. On the fuels side, diesel and AutoLPG are growing faster than gasoline due to the tax regime. One downside to this is that only around 30% of Turkey’s energy needs are met by domestic resources, while the rest originate from a diversified portfolio of imports.

It is in this context that Shell considers Turkey a key country. We have been active in Turkey since 1923 across a range of businesses including the exploration, supply, distribution, and marketing of fuels and LPG, chemicals, natural gas, and the manufacturing and marketing of lubricants. Shell has been since then the forerunner of the Turkish oil industry, raising the standards of the market and increasing health, safety, and environmental awareness and performance amongst its employees, suppliers, and contractors. For over 88 years Shell has continued its investments in Turkey, creating a state of the art supply and distribution infrastructure, increasing storage capacity to 12 depots and terminals, and introducing many technological and operational developments.

In 2006, in line with the growth aspiration of the country, we established a joint venture with Turcas Petrol. Doubling the Shell-branded retail network to more than 1,000 stations, the joint venture has maintained consistent growth and remarkable operational results. Currently it is Turkey’s sixth largest private company. Its lubricants and grease production plant exports to 44 countries. Shell and Turcas have also been recognized globally as a world-class model for merger and integration. This venture is a strong example of a successful downstream partnership between a Turkish and a multinational company that has contributed to the growth of the economy and industry.

The success of this merger is also testament to the fact that Turkey’s location as well as energy demands create significant opportunities. Now Turkey must focus on meeting its growing demand for gas and oil from its own resources through exploration and production. These factors, in concert with Turkey’s dynamic economy and highly capable workforce, make it clear that this is a country that no serious business can ignore.

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