WELL THOUGHT OUT

Turkey 2014 | ENERGY | INTERVIEW

TBY talks to Sinan Ak, General Manager of Zorlu Energy, on importing gas from Israel and possible new areas for exploration.

Sinan Ak
BIOGRAPHY
Sinan Ak graduated from the Department of Management Engineering at Istanbul Technical University in 1995. He began his professional career as an investment specialist at Evgin Securities. He later completed his MBA at Old Dominion University in the US. After working as a Finance Supervisor at Vestel Communications from 2000 to 2002 and as a Finance Manager at Vestel White Goods between 2002 and 2006, Ak joined Zorlu Energy Group in 2006. He has served as Assistant General Manager responsible for Financial Affairs at Zorlu Enerji Elektrik Üretim A.Ş. until 2012; in January 2012, he was appointed General Manager of Zorlu Energy.

What plans does Zorlu Energy have in relation to Israeli gas?

We signed a gas purchase agreement (GPA) with EMG during the construction of the Dorad project, which was supposed to bring gas from Egypt, and this is how we undertook the construction. Subsequently, however, the security situation in Egypt deteriorated and gas exports were limited. By that time, Israel had developed a new field, and we signed the first gas agreement with Tamar Partners. While we were in negotiations with the delegation, experts discovered Leviathan, the second major field. Once the LNG terminals are ready in the US, the initial target is to send the gas to Japan to reduce prices. As Japan shuts down its nuclear power stations, it will need a huge amount of gas and that should come from the US, where the commodity is cheap. Over the coming years, gas prices in Japan will decline because of the US and Australia. In that regard, I do perceive a market for an LNG contract.

Would you say that Turkey is the best market for Israeli gas?

Our government does not object to bringing in Israeli gas, because it will diversify risk and further liberalize the market. Currently, the market is controlled by five different companies, with which there is limited scope for negotiation. Therefore, Israeli or Iraqi gas entering Turkey would create a more competitive environment. There are some who oppose this idea, but from the commercial perspective it benefits both sides. Like others, we are in talks with Delek Group, but have yet to sign on the dotted line. Currently, there is no way we can bring the gas from Israel to Turkey because we lack an import license. Anyone with a connection to this issue will attempt to be a part of this deal. It is truly huge because Delek Group and ExxonMobil also own Cyprus Gas. It obtained all requisite licenses in that area, but only explored one site and is undertaking additional exploration. The company talked about a possible 10 bcm, but this could probably be doubled, or even rise to 30 bcm.

Which areas are ripe for hydrocarbon exploration?

We have certain licenses in this area, especially in Anatolia, and have obtained a new license in the East of Turkey. We have the potential to rise to 300 MW to 400 MW over the next three years, which is significant. Turkey's energy watchdog the Energy Market Regulatory Authority (EMRA) has also stated its target of 600 MW by 2023, the 100th anniversary of the Turkish Republic. I think this could rise to 1,000 MW over subsequent years—Turkey could consume half of this capacity itself. It is a small but niche market, and a highly technical field. Some companies make mistakes, and initial exploration bears huge risk if proven to be fruitless, although the potential to generate huge revenues is there. As of today, we hold three licenses; one is active for 100 MW, the second is in the area of exports, and the third is in the East of Turkey, where we still need to explore. We will have received the seismic results by late 1Q2014 and will then decide whether or not to sink a well. We believe that we have the know-how and would like to use it not only in Turkey, but also abroad. The regulatory framework is critical in any such undertaking.