Turkey to be the energy distribution hub of Europe
The US$10 billion Trans Anatolian Natural Gas Project (TANAP) project will pipe gas from Azerbaijan to Western markets, allowing European countries to reduce their reliance on Russian energy and circumvent Ukraine, where ongoing conflict means energy supplies at risk.
Ambitious projectThe origin of the gas is Azerbaijan’s Shah Deniz II field in the Caspian Sea. Developed by a BP-led consortium, it’s one of the world’s biggest gas fields, and has the ability to supply much of Europe. The 1850 kilometre pipeline will stretch from Turkey’s Georgian border to Greece, reaching Turkey by 2018, and the rest of Europe in 2020.
Sixteen billion cubic metres (bcm) of gas will be pumped through the pipeline annually, gradually increasing to 31bcm by 2026. Of this, 6bcm will be delivered to Turkey and the rest supplied to Europe.
The government has a 30 percent stake in the project, with President Tayyip Erdogan emphasising its importance. “We plan to establish Turkey as the energy distribution hub of the region.”
“TANAP has a special importance because of its route and its goal. It is not an alternative project to others; there is no alternative to it.”
The Russian problemTurkey and wider Europe are currently heavily reliant on Russia for natural gas. Turkey is Russia’s second largest European consumer after Germany, buying 27bcm last year from Russian pipelines. The TANAP project is key to Turkey’s ambition to cut its dependence on Russian gas.
The EU is also looking further afield for its energy supplies due to tensions in the Ukraine. The EU demand is very good news for Turkey, who will receive a cut of the gas that’s piped through the country to Europe, while Europe will receive its gas supplies from a country that is not only reliable, but strong enough to withstand any pressures coming from Moscow.
Turkish StreamAfter objections from the EU, Russia abandoned its $40 billion South Stream pipeline project in December. The pipeline would have passed beneath the Black Sea to Bulgaria, carrying as many as 63 billion bcm of gas to Europe each year.
Russia is now pinning its hopes on the construction of a “Turkish Stream” pipeline. The pipeline, which would have the same capacity, would pipe gas to an as-yet unbuilt hub on the Turkish border with Greece by the end of next year.
However, the Turkish government has stated that, although Russian President Vladimir Putin and Erdogan have been discussing the project, it’s unlikely to progress quickly, due to Turkey’s hesitation to become over reliant on Russian energy.
Economic energyThe Turkish economy will undoubtedly capitalise on the fact the EU is the world’s largest consumer of energy, spending over $400 billion a year on oil and gas imports.
While growth has slowed in Turkey over the last year, Turkey is still ahead of its neighbours. Russia’s economy’s at a standstill and the Eurozone is still weathering the effects of the recession. The World Bank has forecast 3.5 percent growth this year, lower inflation, and steady levels of imports and exports. Turkey remains a target for foreign direct investment, especially in the areas of technology and construction.
Towards self sufficiencyThe TANAP project is just one of a number of energy-related initiatives in Turkey. Two weeks ago the Energy Ministry announced plans to have 30 percent of Turkish energy generated by renewable sources within eight years. Turkey’s capacity for renewable energy is enormous, and tapping into “free” fuel supplies generated by water and wind will revolutionise the country’s energy sector - and bring the country in line with EU directives, which state that all European Union countries should be aiming for the 30 percent figure by 2023.
Turkey’s energy sector has never looked better. The country is set to become an absolutely indispensable energy bridge, giving the country economic and political power, and the ability to reduce its energy costs. The TANAP pipeline will truly solidify Turkey’s status as the gateway between Europe and the Middle East.