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Tuesday, 15 August 2017 15:30

Heads of 7 states highlight key points at WPC Featured

 

Amid the first profits of majors gained over the last two years and declared by them in the reports dedicated to the results of the second quarter of 2017, this summer the 22nd World Petroleum Congress, hosted in Istanbul in July, gained the attention of the politicians and the oil-gas community.  The heads of 7 states and governments spoke about how important the energy security is for peace and stability maintenance. According to WPC participants, the development of the energy industry has reached the transition period when gas and renewable energy sources, as environmentally friendly energy resources, start taking over positions of conventional coal and oil in the world energy balance. Aggravation of competition and presence of big energy resources mean a big geopolitical advantage for resource regions, as well as a tool to strengthen a political authority and economic influence in the region. Apart from this, it will help to give an impulse to solution of such old problems as the legal status of the Caspian Sea, which nowadays hinders a full-scale investment flow into the upstream sector. New E&P projects in the Mediterranean Sea region will promote the reaching of agreement over the Cyprus problem between Turkey and Greece, as well as stabilize the Middle East region and lay the basis for settlement of hard conflicts.

On the other hand, the current regional political risks make it difficult to invest, which together with high volatility of prices on the world market undermines the economic efficiency of offshore upstream projects mainly.  Thus, Brent oil price averaged $111.85 in June 2014, $31.96 per barrel in January 2016, $54.88 per barrel in December 2016 and $48.23 per barrel in June 2017, which caused the decline of E&P expenditures by 46% during 2014-2016. Exploration expenditures fell almost from $95bln fixed in 2014 down to $40bln in 2016. And no project will make it without application of new technical-economical schemes such as CAPEX and OPEX, as well as use of new technologies. According to the forecast of Global date, the world CAPEX will reduce from $410 bln fixed in 2017 down to $350bln in 2021. Nevertheless, implementation and approval of FID projects is ongoing -Shah Deniz Phase2, Mad Dog Phase2(BP),  Kaikias (Shell), Leviathan (Noble Energy), KG-DWN (ONGC).

The temptation of excessive state regulation, legislative restrictions, fiscal instability, new climate obligations, can adversely affect market pricing mechanisms, their competitiveness, and cause new investment risks. Therefore, as the forum participants emphasized, projects possessing flexible financing schemes and an absolutely new creative approach will be effective. It will help to promptly respond to market volatility, low demand risk and incur high expenses on ecological safety.

 

 

Southern Gas Corridor and EastMed will increase global energy security – Rex Tillerson 

Rex Tillerson, US Secretary of State, Former President of the American giant company ExxonMobil, noted some crucial elements for what has always been true to the success of the energy industry, which require a strong rule of law and international order, a respect for contract sanctity, and a level of integrity between partners and counterparties. And whenever those elements are present, investors will make the massive investments, they’ll take the risk, and they’ll persevere through the challenges in order to achieve the objective. According to the US Secretary of State, Turkey is also an important partner in our efforts to promote greater energy security because it sits at the crossroads.

The United States looks forward to engaging with Turkey on projects that will increase global energy security, such as the Southern Gas Corridor and the Eastern Mediterranean Gas (EastMed). These projects will enable Europe to diversify its energy sources, thereby improving its energy security

Minister of Energy of Turkey Berat Albayrak stressed the importance of investing in the oil and gas industry, which is an urgent global agenda, as it was noted at the end of the G20 Summit in Hamburg. Turkey will concentrate efforts on exploration of resources in the Mediterranean and Black Seas. The major task of the energy balance of Turkey is to expand gas use in the country’s energy balance and mobilize investments. Therefore, the capacity of gas storages will be increases up to 11 bcm (billion cubic meters) of gas by 2023. The energy diplomacy will still remain peace builder in the region while Turkey is a major energy partner. He emphasized an important role of Baku-Tbilici-Ceyhan, Baku-Tbilisi-Erzurum projects, construction of the Southern Gas Corridor which will be a reliable facility for transportation of energy resources to the EU and Turkey. In future energy corridors from Central Asia to Europe across the Caspian will play a big role to ensure an energy security of the region.

 

TurkStream will strengthen energy stability in the region – Binali Yildirim

Turkey’s Prime Minister Binaly Yildirim stressed the change of the consumption structure occurring in the energy industry and the market launch of new technologies and production capacities. The main volumes of consumption will be concentrated in Asia. The use of renewable sources will increase. According to him, the concept of the energy security envisages provision of peace and stability. However we observe the activation of terrorism, especially when certain groups use the others for own purposes. Baku-Tbilici-Ceyhan and Baku-Tbilisi-Erzurum pipelines demonstrated the sample of cooperation in the region. Within the framework of SGC Turkey will get additional 6 bcm, the European markets will receive additional 10 bcm.

TurkStream will also strengthen the energy security in the region. According to the project, 15.75bcm will come additionally from Russia. Besides, the second string will be built. Supply of recently explored Mediterranean resources to Europe will be also carried out via Turkey. Therefore, it is of importance to Turkey to have the political contradictions settled around the Cyprus. Its resources should belong to both sides. We should negotiate towards peace by means of gas pipelines. According to B.Yildirim, Turkey also possesses an unlimited potential for power generation out of renewable sources. Nuclear industry will have a big significance. Development of both projects (Sinop and Akkuyu) will keep developing. 

 

Safety of gas supplies is of big importance

Addressing the WPC, Serbia’s President Alexander Vucic stressed that the energy sector is political issue today, therefore the energy security, especially gas security, is of crucial importance. Energy security cannot be considered separately from the region. Serbia counts on new supplies and waits for EU’s and Turkey’s support in construction of the interconnector with Bulgaria. Serbia has an important geostrategic location and neighbors with 8 countries, A.Vucic noted.

Interconnectors will improve the work of the network. The first exchange for network gas trade should be opened in the region. The construction of the TurkStream implies the laying of one branch via Serbia and further to the West-Balkan states. The supplies are favorable and dependent on prices in the east Mediterranean.

Reliable energy supply to Serbia nowadays depends on import via Hungary. The capacity of gas storages makes about 400 mln cubic meters of gas and it is important to have it increased. Serbia is dependent on oil import because the country produces only 24% of the total consumption rate. Oil and gas are produced in 63 fields which makes about 4.8 mln tonnes per year.

Southern Gas Corridor – a successful format for cooperation

President of Azerbaijan Ilham Aliyev in his speech noted that on the global scale Turkey today is a great force on a global scale and has the key say on many issues under the leadership of President Recep Tayyip Erdogan. Cooperation between Turkey and Azerbaijan is multifaceted. A number of important joint strategic projects were implemented, including the Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Tbilisi-Erzurum gas pipeline, as well as TAP and TANAP which are currently under construction. Azerbaijan is the birthplace of oil.  Here oil has been industrially extracted onshore since 1846, and offshore since 1949. However, Azerbaijan was not an independent republic at that time and could not fully use its natural resources. In 1994, with the signing of the Contract of the Century with international oil and gas companies the situation changed and the Azerbaijani people become masters of their natural resources. The development of the large Shah Deniz gas condensate field in the Azerbaijani sector of the Caspian Sea is currently underway. Its resources amount to 1.2 trillion cubic metres and this is the main resource for filling the Southern Gas Corridor.

Baku-Tbilisi-Ceyhan was put into operation on July 13, 2006. In 2012, the signing of the agreement between Turkey and Azerbaijan on TANAP construction gave the start to the SGC implementation. Today the TANAP project is 77% completed, TAP – by 44%, the cost of the SGC project comprised about $40 billion. In the near future 2.6 trillion cubic metres of recoverable reserves will meet the demand for tens of decades ahead. Azerbaijan, Georgia, Turkey and three more Balkan states that will join the Southern Gas Corridor have created a successful format enabling to meet the common interests of both producers and consumers, President Aliyev said. Technical and economic issues on the project are being settled today and the project is progressing successfully. Azerbaijan's investments in the Turkish economy comprised $10 billion and this figure will double in the coming years

 

According to President of Turkey Recep Tayyip Erdogan, over the past 100-150 years strong states were built through the development of the energy sector. And Turkey is not an exception. Since currently we see difficulties in resource rich regions, we must work to ensure that energy resources become a source of prosperity. Turkey today is a bridge between the producer and the consumer in order to strengthen political stability and economic development, and new gas pipelines will strengthen their importance. The Baku-Tbilisi-Ceyhan oil pipeline is currently supplying oil to the world markets, gas is supplied via the Baku-Tbilisi-Erzurum and South Caucasus gas pipeline, and this is of great importance. We hope that SGC will be put into operation by 2020. In addition, by that time Turk Stream, the gas pipeline from Iraq and other regions, will ensure gas supplies. By 2050 the global energy demand will double. Innovations open up new possibilities thanks to which countries that used to be importers have become exporters. Consumers diversify energy sources. For Turkey, energy resources are very important since we are the second country after China in the world in terms of expenditures for energy imports. This figure in Turkey now comprises $55 billion.

We invested $6 billion in the development of renewable energy sources, thus increasing consumption by 6,500 MW, which reduced pressure on imports. We reduced coal consumption by 49% and ensured a 39% growth of renewable energy sources in our energy mix. Currently important work is being done in this regard.

As of 2016, total renewable energy capacity in Turkey amounted to 35 GW, while the share of renewable energy in electricity generation stood at 35%, of which 26% accounted for hydraulic energy and 9% for wind, solar, geothermal energy and energy from other sources. One of the important sources to diversify the use of energy sources is the use of atomic energy and the construction of two nuclear power plants Akkuyu and Sinop.

Speaking about the crisis with Qatar, Recep TayyipErdogan said that Turkey is interested to see all problems in the Persian Gulf settled as soon as possible, we do not want any crises in this region. We consider a dialogue as an important condition for solving problems. The conflicts in Syria, Libya, Yemen, Iraq and Ukraine pose a danger to energy security. We are concerned about the situation in Cyprus. While Cyprus took a constructive position, the southern part of Cyprus turned down this approach and the Greek side approached that issue not enough constructively. We believe that all the hydrocarbons discovered in Cyprus should be common. “One should not lose such friend as Turkey”, the President of Turkey concluded.

Rebirth of Nabucco...

Prime Minister of Bulgaria Boyko Borisov in his speech said that Bulgaria plans to increase oil and gas supplies from Russia and Azerbaijan, and also to expand the potential of gas storage facilities. About 80% of the gas compressor stations in the Balkans are concentrated in Bulgaria. It is also an important transit country that ensures transportation of about 16.7bcm per annum to Turkey.

“We will heavily work on interconnector projects along the Nabucco route, which was not implemented earlier because of the lack of financial support from the EU”. Bulgaria is also interested in connecting to the TANAP, TAP projects.

The Nabucco supply route to the countries of Southeast Europe and Austria is included in the European Commission's ‘Common Interest Projects’ list (PCI). The concept of the Nabucco West project envisaged the construction of a 1300 km pipeline (Bulgaria - 412 kilometers, Romania - 469 kilometers, Hungary - 384 kilometers, Austria-47 kilometers) from the Turkish-Bulgarian border to Austrian Baumgarten. The Nabucco project shareholders were: Austrian OMV, Hungarian FGSZ, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE.

Nabucco envisaged gas export from Azerbaijan and further from Turkmenistan to Austria and Germany along with the TAP project. The designed capacity was 26-32bcma. The estimated cost of the project was 7.9 billion euros. Initially, the plans envisaged to start construction in 2011 and complete it by 2014, then by 2017.

However, in June 2013, Azerbaijan and its partners in the Shah Deniz project opted for the TAP project. In total, 7 interstate declarations on Nabucco were signed over seven years of negotiations, the implementation of the Shah Deniz project was delayed, which led to a 30% rise in its cost, Turkey laid the blame for the project's failure on the EU

 

According to Prime Minister of Albania Edi Rama, Albania may become one of the leading countries in the development of the oil and gas sector, and the country seeks to modernize its industry today, to integrate into the regional West Balkan market, using its geographical location at the crossroads of the western and eastern Balkans. Albania is also rich in oil resources. The energy sector is strategic for Albania, Edi Rama said. The most important energy route for Albania is TAP.

It should be noted that Albania is the key country for the TAP project, because out of the 871 km of the route a 215-kilometer onshore section and a 37-kilometer offshore section will go through Albania.

The importance of Albania as a transit country for Azerbaijani gas is also in the fact that the IAP route will start here and connect the TAP gas pipeline with the gas transmission system (GTS) of Central Europe.

The Ionian Adriatic Pipeline (IAP) worth 618 million euros, which has the capacity of 5bcma and the length of 530 km, will connect Albania, Montenegro, Bosnia and Herzegovina, and Croatia. The throughput capacity of the TAP gas pipeline will be 10bcma with the possibility of a double increase

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