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Turkey

Economic News

22 Jul 2010
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With the green light now given to a project to build a new pipeline across Turkey, the country has taken a further step towards answering an environmental problem - and boosting its status as an energy hub.



Turkey's Calik Energy and the Italian state company ENI are now to conduct further studies over the next six months on the proposed construction of a pipeline between Samsun on Turkey's Black Sea coast and Ceyhan on the country's Mediterranean shores.



The decree was agreed on April 26 by the Turkish parliament, and was later that day ratified by Turkish President Ahmet Necdet Sezer.



The line would provide an alternative route for transporting Russian oil to European, Mediterranean and Asian markets, while further reducing traffic on the already heavily congested Bosphorus and Dardanelles straits.



Environmentalists complain regularly that traffic on the Bosphorus has reached its limit, and when it comes to petroleum and petroleum products passing through Istanbul, a city of perhaps 12m people, it is also highly dangerous. Oil transit on the Bosphorus reached 150m tonnes (1bn barrels) in 2004, up from 65m tonnes (476m barrels) in 1996.



Addressing the Bosphorus issue, the Turkish ambassador to Russia, Kurtulus Taskent, told the Turkish media on April 13 that, "Over-use of the straits threatens an environmental catastrophe, and alternatives must be found."



At the same time, ship owners and charterers often complain of hold ups in the narrow strait for days, according to weather conditions. The Russians in particular have also in the past claimed that these conditions have been deliberately exaggerated by the Turkish authorities, who have long been keen to open alternative pipeline routes across their territory.



The Samsun-Ceyhan pipeline is thus seen as a favourable alternative that will offer some respite to the bottleneck occurring on the waterway.



"With a projected annual capacity of around 60m tonnes [439.8m barrels], the Samsun-Ceyhan project has many advantages," Tashkent said. "Samsun is the nearest Turkish port to Russia's major Black Sea port of Novorossiysk, while Ceyhan has all the necessary infrastructure for oil refining, and is deep enough to accommodate the largest tankers."



Turkey's ambitions of Ceyhan becoming a key global oil facility are also looking closer to realisation with the latest approval of the ENI-Calik co-operation.



Ceyhan is already the terminus for a major oil pipeline from Baku, on the Caspian.



Yet questions remain over Russia' willingness to play along with the new route. At an energy conference held in Samsun in November 2005, Russian President Vladimir Putin was not exactly warm to the idea of the pipeline.



However, it seems that Turkey may have struck some concessions since with the oil and gas giant over the deal. Russia, some analysts say, wishes to extend its reach from the existing Blue Stream gas pipeline - the largest joint-energy project ever to be realised between the two countries. This $3.2bn route transported 5bn cu metres of natural gas in 2005, under the Black Sea, and is expected to transport 16bn cu metres annually by 2010.



Russia is, however, looking into other projects that might transport its oil to European markets.



The two other options most often referred to are the TransBalkan and Burgas-Alexandroupolis pipelines. The first project would cross to the Adriatic Sea through Bulgaria, Macedonia and Albania. The other would cross to the Aegean via Bulgaria and Greece. An earlier idea to construct a pipeline across Turkish Thrace to the Aegean Gulf of Saros has largely been abandoned.



On the Samsun-Ceyhan project, a number of companies were slated for co-operation with Calik, but it was announced on April 26 that ENI, which has an oil field in Kazakhstan, would be the company of choice - ENI is also participating in the Blue Stream project.



The new proposal will, if realised, increase Turkey's standing as an important oil transit route, yet there is still someway to go, with the cost likely to be a key factor in deciding which of the various routes will eventually be chosen - although geopolitical influences should not be forgotten. The route has the advantage over trans-Balkan ideas in that it limits the number of countries involved in transit arrangements to just one and takes advantage of existing port and pipeline infrastructures. Yet the route is longer and the eventual destination further from European markets - although closer to the growing markets of the east.


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