OBG talks to Rövnag Abdullayev, President, SOCAR

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Rövnag Abdullayev, President, SOCAR

Inyerview: Rövnag Abdullayev

What steps should Turkey take to ensure energy security over the long term?

ROVNAG ABDULLAYEV: It is well known that Turkey faces immense energy challenges. Over the last decade the country experienced the second-highest increase in domestic energy demand in the world, following only China. At the same time, Turkey has become severely dependent on fossil fuel imports – and natural gas in particular – because it possesses few indigenous resources. This means unit consumption costs are high for locally based businesses. In turn, this high cost structure diminishes the nation’s competitiveness and capacity for industrial development. Rising external energy dependence also puts many of the government’s long-term 2023 development targets in doubt, such as increasing the annual export volume to $500bn, or reducing the national unemployment rate to 5%.

Yet, given its strategic geographic location, Turkey has the potential to become a key energy transit point that can facilitate the flow of supplies from Russia, the Caspian Sea region and the Middle East to major markets in Europe. Turkey currently has the capacity to transport 121m tonnes of oil to world markets per annum. Once ongoing pipeline projects are completed, the nation’s annual transit capacity will grow to an estimated 221m tonnes of oil and 43bn cu metres of natural gas.

The significance of this increase in transit capacity is evident when one considers that global energy demand will be about 30% higher in 2040 than it was in 2010. Moreover, at present, European countries are dependent on imports for 66% of their natural gas consumption. To make matters worse, EU natural gas production is decreasing at a rate of 4% per year and, by the year 2030, the EU’s natural gas dependency ratio is projected to reach as high as 84%.

Aside from implementing regional pipeline projects, Turkey must place special emphasis on expanding and diversifying local production. Alongside the development of renewable sources such as wind, solar and geothermal, the government must prioritise the construction of nuclear energy facilities. In addition, Turkey’s energy distribution and production systems are relatively inefficient, which means upgrades are needed to infrastructure and technology. Of course, greater adoption of new energy technologies would also benefit the environment, thereby promoting sustainable growth.

How will the Trans-Anatolian Natural Gas Pipeline Project (TANAP) affect Turkey’s energy security?

ABDULLAYEV: The TANAP project was officially launched in December 2011, when a memorandum of understanding was signed between the governments of Turkey and Azerbaijan. This strategic partnership is a win-win for both parties – while Turkey gains access to increasingly crucial oil and natural gas reserves, Azerbaijan benefits from enhanced export security.

In its first phase, TANAP will transport 16bn cu metres (bcm) of gas from the Shah Deniz 2 region in Azerbaijan to target markets, including Turkey, which will receive 6 bcm. In later stages of construction, the pipeline’s capacity will be increased to as high as 31 bcm. The potential for long-term expansion is rooted in growth from gas fields other than Shah Deniz 2. These fields include Umid, Babek, Naxivan and Absheron.

Crucially, TANAP will meet key EU import requirements in areas such as capacity delivery, transparency, scalability and reliability. The TANAP team has been working closely with a number of highly experienced and globally recognised companies to ensure compliance with international best practices. In addition, the TANAP team has worked to ensure that it meets all of the requirements of its financial backers.

In the coming years we anticipate no major political, technical or security challenges that will stand in the way of the TANAP pipeline project being realised. We enjoy strong support from the governments of Turkey, Azerbaijan and the EU. We are working with top risk assessment experts to plan for every possible scenario and contingency. Furthermore, our pipeline development technology has previously proven its reliability.

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The Report: Turkey 2013

Energy chapter from The Report: Turkey 2013

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