At this point, it is important for Turkey to continue to develop and improve investor-friendly strategies, energy prof. says
The discovery of 320 billion cubic meters (bcm) of natural gas in Black Sea, will be crucial for Turkey towards decreasing its energy import dependency, Professor Mehmet Efe Biresselioglu, the Head of Sustainable Energy Division and Faculty member of Political Science and International Relations Department of the Izmir University of Economics, told Anadolu Agency on Friday.
“Turkey’s annual natural gas consumption was 44.9 billion cubic meters in 2019 and 99% of this consumption was met by imports,” he said, adding that Turkey’s total energy imports correspond to more than $41 billion.
Biresselioglu noted that this high import bill and dependency were the starting points of Turkey’s National Energy and Mining Policy which started implementation back in 2017.
“Under this policy, the first results of oil and gas exploration activities in Black Sea and the Eastern Mediterranean, with Turkey’s national fleet consisting of drilling vessels Yavuz, Fatih and Kanuni, and seismic vessels Barbaros Hayrettin Pasa and Oruc Reis, are received. The 320 bcm of gas reserves in Black Sea can create a vital economic opportunity for Turkey,” he noted.
President Recep Tayyip Erdogan on Friday announced the discovery of 320 bcm of natural gas reserves in the Black Sea, near the Turkish coast, hailing the find as the “biggest gas discovery” in Turkey’s history.
The discovery in the Tuna 1 well at Sakarya Gas Field, which is around 170 kilometers offshore Black Sea, is the result of Turkey’s insistent efforts for finding domestic hydrocarbon resources.
Fatih drill ship, which started drilling in the area on July 20, 2020, discovered the well after a month of drilling.
“This discovery can contribute critically to increasing Turkey’s energy security, as well as decreasing energy import dependency and the levels of current account deficit,” Biresselioglu said.
He stressed that at this point, it is important for Turkey to continue to develop and improve investor-friendly strategies that include legal framework and market structuring.
In addition to this, with a competitive tax regime, liberalized market and stabilized political structure, it can be foreseen that Turkey will not have problems in developing the natural gas resources in Black Sea,” Biresselioglu asserted.
He added that the discovery can also strengthen Turkey’s position in the global energy sector for possible future international cooperations and contribute to its active foreign policy.
“Several factors affect investment in Black Sea gas sources”
In terms of the perception that developing gas sources is at a high cost in Black Sea, Biresselioglu said that structural changes and regulations, as well as investment-friendly legal framework need to be put in place in Maritime Law for the realization of investments in the region.
“In the Romania example, there were failures in these areas,” Biresselioglu noted, adding that Romania remained incapable to develop Black Sea gas due to the export restrictions and high taxes that the country was applying.
He reminded that in January, Exxon Mobil confirmed its decision to exit from the long-stalled Neptun Deep offshore project, in which it partnered with Romania’s OMV Petrom. In April, Petrom announced that it remains committed to the project, however expressed the need for tax changes, also for the smaller project on Black Sea Oil and Gas, controlled by the private equity firm Carlyle Group LP.
“The taxes that Romania applied to natural sources in offshore Black Sea ranged from 15% to 50%. In addition to that, there is a royalty tax of 3% to 13.5% of production value. Behind these high tax and royalty applications, there was the government’s intention to receive high revenues from these productions in the short-run and the desire to recover the country’s economic outlook,” he explained.
Accordingly, Biresselioglu stressed that the operational framework that includes the structure of the natural gas market, including price limitations, tax policies and export restrictions are determinant factors that affect the interest and investment appetite of potential investors to offshore projects.
- “This discovery is a big success”
Department Chair of Energy Systems Engineering at Gazi University Professor Mustafa Ilbas also said that Turkey’s seismic studies have yielded results, which has been conducted for a long time at a distance of approximately 150 kilometers to the shores of Eregli district of Zonguldak province near the Black Sea in Turkey’s Exclusive Economic Zone.
“Turkey’s drillship Fatih, which intensified its latest studies since July, discovered a considerable amount of natural gas. It is a high possibility that Tuna-1 well at Sakarya Gas Field will be developed considering the closeness of the current study area of Fatih to Turkey’s previous discoveries in the region and Romania’s discoveries in the XIX 2 Neptun Deep gas block,” he explained.
Noting that the cost of developing hydrocarbon resources changes from field to field and region to region, he exemplified Israel’s Leviathan basin where it was possible to develop sources in some fields but difficult or impossible in others in the same basin.
“Similarly, the fields in Neptun block do not hold the same geological characteristics everywhere,” he said and added that nearly $2-3 billion investment will be required for the development of this amount gas find, which can be compensated in 7 years.
Ilbas stressed that Turkey has explored and discovered these resources through its own technical capacity and experience and has the capabilities to develop these sources through its own means, such as developing the necessary platforms and pipelines.
“The discovery of these resources in Tuna-1 location through our own means is a big success and has the potential to affect Turkey’s and its citizens’ future deeply,” he said.
Having a yearly natural gas consumption of nearly 50 billion cubic meters and importing 99% of this amount, Turkey is affected negatively economically and politically from this energy import dependency, according to Ilbas.
“Through this way, it will provide an important economic revenue while eliminating energy import dependency at a considerable amount,” he said.