STRENGTH IN DIVERSITY

Turkey 2013 | ENERGY & MINING | REVIEW: ENERGY

Rising demand for energy is costing Turkey billions per year. The authorities are seeking ways to capitalize on local resources and sustainable alternatives to stem the trend.

With local estimates suggesting that Turkey's demand for energy will increase at an average annual rate of 6% between 2013 and 2023, the country is actively seeking ways to both reduce imported resources and focus on underdeveloped potential in coal, nuclear, and renewable generation. Developments in terms of the energy corridor stretching from the Caspian Sea to Europe may also support Turkey as it plays a central role in the construction of a major pipeline.

Turkey's installed energy capacity has reached 56,132 MW, providing 270 billion kWh of energy generated on an annual basis. While in 2010 Turkey consumed 213 billion kWh, this figure had increased to 228 billion kWh by 2011. Over 2012, 238 billion kWh was consumed by users. “Turkey has shown an annual increase of between 8% and 8.5%," Mustafa Aktaş General Manager and Chairman of the Board at Turkish Coal Enterprises (TKİ), explained to TBY. “The level of development of a country is directly proportionate to its level of energy consumption," he added.

At the same time, 60% of Turkey's production relies on imported energy, an amount that cost the country $60.1 billion in 2012. According to national statistics office TurkStat, this marked an 11% increase in energy expenditures compared to 2011, and nearly one-quarter of Turkey's $237 billion spent on imports that year. The IMF has forecast that by 2017, Turkey's annual energy imports will cost more than $70 billion.

Elevating pressure to find alternative sources of energy has sparked new exploration initiatives as analysts survey the country for shale gas and oil. Upfront costs of exploring for and potentially developing these resources are currently being weighed against the fact that Turkey's energy sector activity and consumption levels at large are dramatically outpacing the local economy. While exploration continues in the Southeast and Central parts of the country, coastal regions are being targeted as possible locations for nuclear power plants, set to come onstream prior to 2023. Facing little domestic resistance, Turkey has signed deals with Russian and Japanese consortiums to construct nuclear facilities with the capacity to add a combined 10 GW to the energy mix.

Foreign partnerships and investment has proven to be a significant contributor to the development of Turkey's domestic energy potential. Minister of Energy and Natural Resources, Taner Yıldız, explained to the media that government policies implemented over the past 10 years have increased private sector investment. Currently, the share of private sector involvement in electricity production is 32%, which comes to about TL10 billion annually. In 2011, $4.2 billion of FDI was contributed to the energy sector. The World Bank alone has committed more than $1 billion for renewable energy and efficiency projects in Turkey, an area that would prove lucrative and potentially exportable if fully developed.

HYDROCARBON DREAM

As a country dependent on energy imports, 60% of Turkey's power comes from fossil fuels. In 2012, Turkey consumed 685,000 barrels per day (bbl/d) of oil, up 2.3% from the 673,000 bbl/d used in 2011. Natural gas consumption also saw a 0.9% increase over 2011-2012, from 39 billion cubic meters (bcm) in 2011 to 45.7 bcm in 2012. Of that total, 34.9 bcm was imported via pipelines from Russia, Iran, and a number of post-Soviet nations. In addition, 7.7 bcm of LNG was imported in 2012.

One of the main suppliers of natural gas is Azerbaijan, which has delivered 6.6 bcm of gas to Turkey annually since 2007, comprising 15% of its total gas consumption. “With upcoming projects, such as Shah Deniz Phase II, this has the potential to go up to 25%," Bud Fackrell, President of BP Turkey, told TBY. He also noted that Turkey's geopolitical influence in the region is expected to increase further as the Southern Gas Corridor opens up and Turkey becomes a major route of energy supplies to Europe. The $40 billion Shah Deniz project will produce an additional 16 bcm, and more than $10 billion of this investment will be made for transport infrastructure through Turkey. In addition, 6 bcm will be allocated for Turkey, and the remaining 10 bcm will be available for onward transmission to European markets. Pledging faith in its neighbor, Azerbaijan has established itself as an actor in the Turkish energy sector. The State Oil Company of Azerbaijan Republic (SOCAR) has initiated the Petkim Star Refinery, the Petkim Container Port, the Step Power Plant, and the Trans-Anatolian Pipeline (TANAP) project, culminating in $17 billion of investment over a 10-year period between 2008 and 2018.

Nevertheless, with a distinct lack of proven domestic oil or gas reserves, Turkey is turning to its substantial coal supplies and potential shale gas fields as the next steps for development. Currently, the country has 2.3 billion tons and 1.8 billion tons of sub-bituminious and lignite coal, respectively. Turkey produced 16.3 million tons of oil equivalent coal in 2011, but output declined by 5.6% in 2012, when a quantity of 15.4 million tons was recorded.

PIPELINE POWER

With plans for Nabucco-West on hold, the Trans-Adriatic Pipeline (TAP) proposed by Statoil, Axpo, and E.ON was approved in June 2013 to carry gas from Shah Deniz II when it comes onstream during 2017-2018. However, to get from Azerbaijan to Greece, the resources will be transported through the vital TANAP link, which is projected to span across Turkey. The construction of TANAP is planned to begin in 2014, with initial investment estimates reaching the neighborhood of $7 billion. SOCAR has an 80% stake in the project.

Through an agreement signed in 2002, the Baku-Tbilisi-Ceyhan (BTC) pipeline is currently operated by BOTAŞ International Limited at an efficiency rate of more than 99%. The BTC pipeline carries crude oil from the Caspian Sea to world markets, and although it does not produce the resource, Turkish state-owned company TPAO has a 6.5% share of the oil passing through the pipeline. Its daily capacity reaches 1 million barrels and makes up more than 1% of the world's daily crude oil consumption. “The importance of the pipeline for Turkey is immense—geopolitically, strategically, politically, and economically," Mehmet Atıf Çay, President and Chairman of BOTAŞ International Limited, said to TBY. “The BTC pipeline is part of a vision to create a coordinated project with regional countries to not only bring important energy resources to world markets, but to also foster cooperation and integration." BOTAŞ International Limited has a 40-year contract for the operation of the pipeline.

SUSTAINABLE LIFE

Speaking on the topic of renewable energy's role in the Turkish energy sector, Minister Yıldız remarked that the authorities are aiming to cut $12 billion from the energy bill by 2023 by using local resources and renewables to generate savings. Rich in renewable resources, Turkey's installed capacity for sustainable energy has grown over the past decade. Geothermal generation rose from 20 MW in 2002 to 162 MW in 2012. Meanwhile, the energy produced using solar energy grew from 1,490 GWh in 2002 to 13,773 GWh by the beginning of 2011. Regarding wind energy, a rapid increase in terms of installed capacity—from 20 MW in 2002 to 2,337 MW today—has taken place. In 2002, the installed capacity of hydroelectricity was 12,241 MW, a figure that reached 19,874 MW in 2012.

Furthermore, new license applications to the Energy Market Regulatory Authority (EMRA) will start being issued in June 2013. The authorities aim to have installed capacity become 20,000 MW for wind, 3,000 MW for solar energy, 20,000 MW for hydroelectricity, and 600 MW for geothermal. By 2023, the Ministry of Energy and Natural Resources is targeting to increase the portion of renewables in the energy mix to 30%. Turkey is already a significant consumer of renewable energy. Sustainable methods accounted for 2% of total energy generation in 2012, or 1.6 million tons of oil equivalent. This figure grew a remarkable 21.6% compared to the 1.3 million tons consumed in 2011. Of that total, 13.1 million tons of oil equivalent was sourced from hydroelectric power stations in 2012, up 10.3% on the figure of 11.8 million tons in 2012. However, there is still plenty of room for growth in the renewables arena, with just 15% of Turkey's total wind power potential being used, and rivers and lakes with approximately 36,000 MW of energy available to be developed.