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Turkey: Egypt Joins Race To Sell Energy

Turkish President Suleyman Demirel's signing of an accord (July 26) providing for the import of Egyptian natural gas has brought yet another player into a regional race to provide Turkey with energy for its growing economy. Yet it also raises the danger that Turkey now has more would-be energy suppliers than it really needs. An RFE/RL correspondent spoke with an analyst who says that means any windfalls to be made in selling energy to Turkey now will go only to the swiftest, while the last to arrive could receive nothing.

Prague, 28 July 1999 (RFE/RL) -- Ankara's agreement to import Egyptian natural gas could have considerable impact on the fortunes of Turkey's other would-be energy suppliers around the Caspian Sea and in Central Asia.

The protocol -- signed (July 26) by Turkish President Suleyman Demirel and Egyptian President Hosni Mubarak in Alexandria -- commits the two countries to finding ways to bring some 10 billion cubic meters of Egyptian natural gas to the Turkish market. The signing comes as part of a package of accords between Ankara and Cairo aimed at boosting their economic and political ties, which have grown increasingly strong over recent years.

The accord, which might best be termed a statement of intent, is unlikely to lead to Egyptian natural gas arriving in Turkey anytime soon. Transporting Egyptian natural gas to Turkey would require constructing a pipeline along the Mediterranean coast through Israel, Lebanon, Syria, and eastern Turkey before reaching users in Turkey's industrialized western area. And Egypt lacks facilities for liquifying natural gas for transport by ship, the only other alternative.

But the protocol does open the way for both governments to conduct feasibility studies on how to get Egyptian gas to Turkey and how to find investors to cover the costs. More important, it also expresses both governments' conviction that solving the considerable logistical problems involved is of political significance to them.

That, analysts say, makes the agreement quite interesting to Turkey's other would-be energy suppliers, including Azerbaijan, Turkmenistan, Kazakhstan, and Iran. It also makes the accord important to transit states along proposed pipeline routes from the Caspian Basin and Central Asia, such as Georgia.

Manouchehr Takin is an oil and gas industry expert at the Center for Global Energy Studies in London. He told RFE/RL that Turkey's accord with Egypt signals not only Ankara's desire to build better relations in the Middle East but also to diversify its own energy sources. Manouchehr Takin says:

"Turkey is in a very enviable position because there are so many potential gas exporters in its neighborhood and from across the world, like Nigeria and Algeria, who want to export gas to Turkey. So it has a good choice in trying to create a competition (among) all these potential exporters, (who are) against each other, and is benefiting from this."

Takin says that Turkey currently imports most of its natural gas from Moscow though Russian pipelines, which run through the Balkans and then on to Western Europe. But in recent years, the growth in Turkey's energy needs -- and it own lack of domestic energy resources -- has made it a major regional consumer, which dozens of other regional energy producers are also hopefully viewing as a customer.

The analyst says Iran has already signed a protocol with Ankara to export some 10 billion cubic meters a year to Turkey via a pipeline, which he expects will soon be connected between the two countries. The pipeline will likely begin with smaller volumes that could be increased over time.

Turkmenistan also hopes to export small quantities of natural gas by pipeline via Iran. Iran, Turkey and Turkmenistan reached an agreement-in-principle to that effect several years ago, and European oil companies are currently investigating the investment costs involved.

At the same time, Turkmenistan, Kazakhstan, and Azerbaijan would all like to send large volumes of natural gas to Turkey via the Caucasus by pipelines still in the discussion stage.

And Russia, too, is keen to export more gas to Turkey. It is considering building a direct north-to-south pipeline under the Black Sea, which would be a major engineering project.

But energy analyst Takin says that so many would-be suppliers raise the danger that Turkey's economy ultimately might not be able to accommodate all of them, increasingly forcing suppliers into a race in which the last to arrive may receive nothing. That, he says, makes every new entry into the race -- such as Egypt -- a threat to those already running. Takin adds:

"Some people are skeptical about the actual magnitude of Turkish demand in 10 years' time, or 15 years' time. Turkey is a growing economy, and it does require energy and does not have domestic energy and has to import it, particularly oil and gas. (But) figures have been varying by a factor of two or so as to the demand forecasts for the year 2010 and even...the Turkish gas company has been revising down some its (consumption) forecasts."

Takin says that when analysts add up all the energy that regional producers hope to market in Turkey, the total sum risks exceeding the more conservative estimates of Turkey's needs:

"It is possible that if one adds up all these potential exports, or exporters, to Turkey...they might add up to be more than the actual demand which might be needed in 2010, 2015...If that's the case, it would mean that if one or two of these projects are really finalized or implemented, then the others might not be needed."

The analyst says that, at the moment, it is difficult to say which of the many projects to supply energy to Turkey will first become a reality. He observes that many of those projects, which today remain at the level of political leaders signing protocols, still face the hard test of finding thousands of millions of dollars worth of financial backing from the world's oil industry investors. And investors are far less moved by the political ends the protocols serve than by their economic prospects.

Takin says that means the real importance of Turkey's signing yet another energy deal may be to provide a warning signal that there now may be more projects on paper than Turkey's market can bear. He says that should serve as a reminder to all those wanting to sell energy to Turkey that this race -- like all races -- is constantly picking up speed and the prizes will go only to the swiftest.