CaucasCaucasiian Energy Securan Energy Securiity ty & & TurkeyTurkey

Necdet PAMİRNecdet PAMİRBoard Member, World Energy Council Turkish National Board Member, World Energy Council Turkish National

CommitteeCommittee26-27 June 2009, İstanbul26-27 June 2009, İstanbul

The geopolitics of Energy The geopolitics of Energy in the contexts of Caucasus and in the contexts of Caucasus and

Caspian basin: Caspian basin:

IInternal and international implicationsnternal and international implications

World Primary Energy ConsumptionWorld Primary Energy Consumption

by Sourcesby Sources (%), (%), endend 2008

Coal 29.3 %

Oil34.8 %

Gas 24.1 %

Hydro, other

renewables 6.4 %

Nuclear5.4 %

Source: BP Statistical World Review of Energy, June 2009

World Primary Energy ConsumptionWorld Primary Energy Consumption(Ref. Sen.)(Ref. Sen.)((by Sourcesby Sources (%), million tons oil equivalent (%), million tons oil equivalent))

Petrol

Kömür

Gaz

Biyokütle

NükleerHidro

Diğer Yenilenebilirler

Kaynak: WEO 2008, IEA

Between 2006 and 2030, energy consumption will increase by 45%(yearly increase: 1.6 %); less than 2007 forecast by 0.2 %

% 26

% 29% 34

% 30

% 22

% 6% 5

% 9.8% 10.1

% 20.5

% 2.2% 2.4

% 2.1

World Recoverable Reserves, end 2008World Recoverable Reserves, end 2008

Africa125.6 billion

barrels

South, Central America

123.2 billion barrels

Asya Pasifik42 billion barrels

N. America 70.9 billion barrels 18.4 billion bbl

FSU127.8 billion

barrels

Reserve/Production: 42 years

EU6.3 billion

barrels

M. East754 billion barrels

Source: BP Statistical Review of World Energy, June 2009

End 2005

Canada oil sands:151 billion bbls

% 60

Recoverable Gas ReservesRecoverable Gas Reserves (end 2008)(end 2008)

Reserve/Production: 60,4 years

7.31

8.87EU

2.87

75.91

% 41.0

14.6615.39

57.0

% 30.8

Source: BP

Source: BP Statistical Review of World Energy, June 2009

N. Caucasus and oilN. Caucasus and oil North Caucasus North Caucasus geographygeography is within the is within the

boundaries of the Russian Federation. boundaries of the Russian Federation. – Dagestan, Ingushetia, Chechnya, N. Osetia, Dagestan, Ingushetia, Chechnya, N. Osetia,

Kabardyn-Balkar, Karatai-Circassia & Adıgey Kabardyn-Balkar, Karatai-Circassia & Adıgey Autonomous Republics, Rostov region, Autonomous Republics, Rostov region, Krasnodar and Stavropol provincesKrasnodar and Stavropol provinces

Chechnya Chechnya is an important oil region both is an important oil region both for its oil production and as a transit point for its oil production and as a transit point on the Baku – Novorossisk oil pipeline on the Baku – Novorossisk oil pipeline

DagestanDagestan is also a transit point on the is also a transit point on the Baku - Dagestan - Novorossisk pipelineBaku - Dagestan - Novorossisk pipeline

““Caucasia”Caucasia” in the EIA website in the EIA website

In this website, when you In this website, when you look for look for CaucasiaCaucasia, you end , you end up with three countries: up with three countries: Azerbaijan, Georgia and Azerbaijan, Georgia and Armenia; which is: Armenia; which is: South CaucasusSouth Caucasus

http://www.eia.doe.govhttp://www.eia.doe.gov

(South) Caucasus & Energy(South) Caucasus & Energy

Azerbaijan:Azerbaijan: the most important the most important country with its rich oil and gas country with its rich oil and gas reserves. In addition, a transit country reserves. In addition, a transit country for the C. Asian oil and gas pipelines.for the C. Asian oil and gas pipelines.

Georgia:Georgia: Transit country. Potential oil Transit country. Potential oil and gas reserves, mainly in the B. Sea and gas reserves, mainly in the B. Sea off-shore off-shore

Armenia:Armenia: No proven reserves. Not a No proven reserves. Not a transit country. Has potential as a transit country. Has potential as a transit countrytransit country

G. Kafkasya Hidrokarbon G. Kafkasya Hidrokarbon RezervleriRezervleri(BP, 2007 sonu)(BP, 2007 sonu)

AzerbaycanAzerbaycan– Petrol rezervi: 7 milyar varilPetrol rezervi: 7 milyar varil– Gaz rezervi: 1.28 trilyon metre küp Gaz rezervi: 1.28 trilyon metre küp

Gürcistan:Gürcistan:– Petrol rezervi: 300 milyon varil Petrol rezervi: 300 milyon varil (ABD Enerji Bakanlığı)(ABD Enerji Bakanlığı) – Gaz rezervi: (Tüketimde gazın payı: % 24; elektrik Gaz rezervi: (Tüketimde gazın payı: % 24; elektrik

tüketiminin % 80’i hidroelektrik, gaz tüketiminin tüketiminin % 80’i hidroelektrik, gaz tüketiminin tamamı Rusya’dan ithalatla)tamamı Rusya’dan ithalatla)

Ermenistan:Ermenistan:– Petrol ve Gaz rezervi: -Petrol ve Gaz rezervi: -– Enerji tüketiminin yarısı doğal gaz. Tamamına yakını Enerji tüketiminin yarısı doğal gaz. Tamamına yakını

Rusya’dan. ERusya’dan. Elektrik üretiminin % 30’u nükleer, % lektrik üretiminin % 30’u nükleer, % 30’u da hidroelektrik kaynaklardan30’u da hidroelektrik kaynaklardan

The newly inaugurated Armenian-Iranian gas pipeline has boosted bilateral cooperation

RFERL, April 15, 2009

Azerbaijan and EnergyAzerbaijan and Energy

Azerbaijan: Oil and Gas Azerbaijan: Oil and Gas ReservesReserves

(end of 2008)(end of 2008)

Rec. Oil reserves: 7 billion barrels (0.6 %)Rec. Oil reserves: 7 billion barrels (0.6 %) Rec. Gas reserves: 1.2 trillion m3 (0.6 %)Rec. Gas reserves: 1.2 trillion m3 (0.6 %)

Source: BP Statistical World Review of Energy, June 2009

Azerbaijan Oil Data Azerbaijan Oil Data (1000 barrels)(1000 barrels) 20082008

Total Oil productionTotal Oil production 875 875

Oil consumptionOil consumption 126 126

Oil exportsOil exports 749 749

Refining capacityRefining capacity 399 399

Proven reserves Proven reserves (billion (billion barrels)barrels)

77

Azerbaijan Oil Production, Consumption, Azerbaijan Oil Production, Consumption, ExportsExports

Th

ou

san

d b

arr

els

per

day

Major Projects, AzerbaijanMajor Projects, Azerbaijan

Caucasus and EnergyCaucasus and Energy At the very outset, the region offers At the very outset, the region offers

means of diversification and has a means of diversification and has a strategic importancestrategic importance

Sovyetler döneminde, petrol ve doğal Sovyetler döneminde, petrol ve doğal gazın tüm ihraç yolları, münhasıran gazın tüm ihraç yolları, münhasıran Rusya Federasyonu topraklarından Rusya Federasyonu topraklarından geçecek biçimde oluşturulmuştu (Boru geçecek biçimde oluşturulmuştu (Boru hatları, Volga Don Kanalı, demiryolları)hatları, Volga Don Kanalı, demiryolları)

Bu tekelin devamı, Sovyetler’in Bu tekelin devamı, Sovyetler’in dağılmasından sonra bağımsızlığını ilan dağılmasından sonra bağımsızlığını ilan eden devletlerin ekonomik ve eden devletlerin ekonomik ve dolayısıyla siyasi bağımsızlıklarına engeldolayısıyla siyasi bağımsızlıklarına engel

EnerEnergygy is the essential input of the is the essential input of the

economic and social economic and social development for every country. development for every country.

Energy security is an integral part Energy security is an integral part of both the economic security of both the economic security

and national security.and national security.

Energy security Energy security needs needs multidimensional multidimensional approach and approach and

international cooperationinternational cooperation……

Energy security does not stop at national borders Energy security does not stop at national borders and goes all the way to the final consumer and goes all the way to the final consumer (from the (from the suppliersupplier, through , through transiter(s)transiter(s) to the to the consumerconsumer))

The external (geopolitics), internal (operations and The external (geopolitics), internal (operations and investment) and temporal (short and long term) investment) and temporal (short and long term) components of energy security calls for a components of energy security calls for a multidimensional (and international) multidimensional (and international) policy approach policy approach to protect against energy system disruptionsto protect against energy system disruptions

EIA, “Energy Security”

Turkey-Azerbaijan Turkey-Azerbaijan (Georgia)(Georgia)

Joint ProjectsJoint Projects

Turkey-Azerbaijan Joint ProjectsTurkey-Azerbaijan Joint Projects

Exploration and Development ProjectsExploration and Development Projects– Azeri-Chiraq-Guneshli (Oil)Azeri-Chiraq-Guneshli (Oil)– ShahDeniz (Gas and condensate)ShahDeniz (Gas and condensate)– KurdashiKurdashi– AlovAlov

PipelinesPipelines– Baku – Tblisi – Ceyhan (Oil)Baku – Tblisi – Ceyhan (Oil)– South Caucasus Gas Pipeline/Turkey-Greece-Italy South Caucasus Gas Pipeline/Turkey-Greece-Italy

InterconnectorInterconnector– Proposed Pipelines Proposed Pipelines

(Turkmen gas, Kazakh oil and gas)(Turkmen gas, Kazakh oil and gas) NABUCCONABUCCO

Azeri – Chiraq – Güneshli Fields Azeri – Chiraq – Güneshli Fields

Source Field for BTCSource Field for BTC Source: The Implications of BTC; Thomas J Dimitroff, 14 April 2003

TPAO

Azerbaycan Projeleri

ŞAH DENIZ

ACGACG

ALOVALOV

KÜRDAŞI

BP15%

Statoil15%

SOA40%

ExxonMobil15%

AEC5%

ALOV

Agip25%

SOA50%

Repsol5%

Mitsui15%

KÜRDAŞI

TPAO5%

TPAO10%

ACG

Lukoil10.00%

SOCAR10.00%

Delta Hess2.72%

Pennzoil5.63%

Statoil8.56%

ExxonMobil8.00%

bp34.14%

Unocal10.28%

TPAO6.75%

Itochu3.92%

bp25.5%

Statoil25.5%

TotalFinaElf10%

Lukagip10%

OIEC10%

TPAO9%

ŞAH DENİZ

SCA10%

Tahmini Rezerv : 490 Milyar M3 Doğal Gaz

700 Milyon varil kondensat

Tahmini Üretilebilir Rezerv :5,4 Milyar varil petrol

TTÜÜRKRKİİYE YE PETROLLERPETROLLERİİ

1774 kilometers1074 km in Turkey

BTC

Baku - Novorossisk

Baku-Tblisi-Ceyhan Baku-Tblisi-Ceyhan Crude Oil Pipeline ProjectCrude Oil Pipeline Project

Max. capacity: 50 mt/year (1 million Max. capacity: 50 mt/year (1 million barrels/day)barrels/day)

Planned capacity: 1.2 million barrels/dayPlanned capacity: 1.2 million barrels/day Total length: 1774 kmTotal length: 1774 km

– Azerbaijan section: 440 kmAzerbaijan section: 440 km– Georgian section: 260 kmGeorgian section: 260 km– Turkey: 1074 kmTurkey: 1074 km– Pipe diameter: 42-34 inchPipe diameter: 42-34 inch– Total Pump Stations: 10 (Turkey: 4)Total Pump Stations: 10 (Turkey: 4)

Some Advantages of the BTC Some Advantages of the BTC ProjectProject

Major step for the realisation of the “East West Energy Major step for the realisation of the “East West Energy Corridor” thus increasing the strategic importance of Corridor” thus increasing the strategic importance of Azerbaijan, Georgia and Turkey Azerbaijan, Georgia and Turkey

Investments, economic benefits, employement for these 3 Investments, economic benefits, employement for these 3 countriescountries

Increasing the importance of Turkey for the EUIncreasing the importance of Turkey for the EU Increasing the importance and the potential of Ceyhan Increasing the importance and the potential of Ceyhan

terminal to become a “hub” terminal to become a “hub” Decreasing the oil tanker transportation through the Decreasing the oil tanker transportation through the

Turkish StraitsTurkish Straits Regional cooperationRegional cooperation Insreasing the potential of the “East – West Corridor” with Insreasing the potential of the “East – West Corridor” with

complementary projects (Kazakh oil and gas, Turkmen complementary projects (Kazakh oil and gas, Turkmen gas, etc..)gas, etc..)

ShahDeniz & S.Caucasus Gas PL ShahDeniz & S.Caucasus Gas PL ProjectsProjects

Capacity: 8.1 milyar metre küpTurkey 6.6 bcm Max. capacity: 23.5 bcmPhase: 8.5, Ph-2: 15 bcm

625 billion cubic meters gas (+)750 million barrels condensate

S. Caucasus Gas PLS. Caucasus Gas PL

http://www.eia.doe.gov/emeu/cabs/Azerbaijan/images/GastoEurope_2007.pdf

Operational since July 2007

Türkiye – Yunanistan Gaz Boru HattıTürkiye – Yunanistan Gaz Boru Hattı

0.75 + 3.6 bcm

Azerbaycan Gazı Türkiye üzerinden Yunanistan’a

Turkey: Energy Consumption Turkey: Energy Consumption (2007)(2007)

Oil 31%Wood

5%

Coal 29%

Hydro&

Renewables4%

Gas 31%

Source: World Energy Council Turkish N. C. 2007-2008 Turkey Energy Report

Turkey: Primary Energy Balance and Turkey: Primary Energy Balance and Forecast Forecast

(million tonnes oil equivalent)(million tonnes oil equivalent)

20062006 20102010 20202020

Energy Energy DemandDemand

99.899.8 126126 222222

Indegenous Indegenous ProductionProduction

26.826.8 37.5 37.5 6666

Energy Self Energy Self SufficiencySufficiency

27 %27 % 29 %29 % 30 %30 %

Source: Ministry of Energy and Mineral Resources, Turkey

Crude Oil Imports by Refineries Crude Oil Imports by Refineries (2008)(2008) (EMRA) (EMRA)

CountryCountry Amount (1000 Tons)Amount (1000 Tons) (%)(%)

IranIran 7.8007.800 3636

Russian FederationRussian Federation 7.1377.137 3333

S. ArabiaS. Arabia 3.0733.073 1414

IraqIraq 1.8741.874 99

KazakhstanKazakhstan 636636 33

SyriaSyria 515515 22

ItalyItaly 447447 22

U.K.U.K. 184184 11

AzerbaijanAzerbaijan 7777 < 1< 1

LibyaLibya -- --

TOTALTOTAL 21.74321.743 100100

Turkey: Oil and Gas Import BillTurkey: Oil and Gas Import Bill

(Oil, products, gas, LPG), billion (Oil, products, gas, LPG), billion $ $

20052005 19.5519.55

20062006 26.7926.79

20072007 31.2031.20

20082008 44.7844.78

Turkey: Oil and Gas Import BillTurkey: Oil and Gas Import Bill

(Oil, products, gas, LPG), (Oil, products, gas, LPG), billion billion $$Oil and Oil and

productsproductsGas and LPGGas and LPG

20052005 12.4112.41 7.147.14

20062006 16.6116.61 10.1810.18

20072007 19.3419.34 11.8611.86

20082008 26.9826.98 17.8017.80

Turkey: Gas Imports (2007)Turkey: Gas Imports (2007)(billion cubic meters) (billion cubic meters) (%)(%)

Russian Russian FederationFederation

23.2023.20 63.5 %63.5 %

IranIran 6.166.16 17.0 %17.0 %

AlgeriaAlgeria 4.284.28 11.9 %11.9 %

NigeriaNigeria 1.421.42 4.0 %4.0 %

AzerbaijanAzerbaijan 1.281.28 3.6 %3.6 %

TOTALTOTAL 36.3436.34 100 %100 %

Source: BOTAŞ, 2009

Proposed Pipeline: Proposed Pipeline: NABUCCONABUCCO

Availability and reliability of Availability and reliability of alternative sourcesalternative sources– Azerbaijan, Iran, Iraq, EgyptAzerbaijan, Iran, Iraq, Egypt

Economical considerationsEconomical considerations Energy security concernsEnergy security concerns Transit issuesTransit issues Geopolitical dimensionGeopolitical dimension

The Geopolitical DimensionThe Geopolitical Dimensionof the “Energy Games”of the “Energy Games”

US Policies/StrategiesUS Policies/Strategies Russian Policies/StrategiesRussian Policies/Strategies EU policies/StrategiesEU policies/Strategies Turkey’s Policies/StrategiesTurkey’s Policies/Strategies

The U.S.The U.S. After the dissolution of the Soviet Union:After the dissolution of the Soviet Union:

– Multiple pipelines: “East – West Corridor”Multiple pipelines: “East – West Corridor”– ““Russia first”Russia first”

Rhetoric and realityRhetoric and reality– New pipelines still through the Russian territory New pipelines still through the Russian territory

(Baku-Novo early oil pipeline)(Baku-Novo early oil pipeline) Baku – Dagestan PLBaku – Dagestan PL Caspian Pipeline Consortium (to Novorossisk)Caspian Pipeline Consortium (to Novorossisk)

Antagonising Russia: Black Sea matters to Antagonising Russia: Black Sea matters to include Georgiainclude Georgia

Containing IranContaining Iran Invasion and instability: IraqInvasion and instability: Iraq

The Russian FederationThe Russian Federation

http://www.russiablog.org/RussianBearGasEU.jpgCartoon from the May 4, 2006 issue of The Economist

Russian Policies/StrategiesRussian Policies/Strategies

Create gas import dependencyCreate gas import dependency Control the alternative sources Control the alternative sources

(Turkmenistan, Kazakhstan, Uzbakistan, (Turkmenistan, Kazakhstan, Uzbakistan, Azerbaijan?, Iran)Azerbaijan?, Iran)

Increase the gas priceIncrease the gas price Negotiate the price and other critical Negotiate the price and other critical

issues for increasing RF presence (stake) issues for increasing RF presence (stake) in those countries’ gas and electricity in those countries’ gas and electricity sectorssectors

For Azerbaijan and Georgia: from $110 to For Azerbaijan and Georgia: from $110 to $230 since January 2007$230 since January 2007

RF StrategyRF StrategyA typical example: ArmeniaA typical example: Armenia

ARMROSGAZ: Gazprom’s stake: from 45 % to ARMROSGAZ: Gazprom’s stake: from 45 % to 58%58%

Russian share in INTERUES: 80 %Russian share in INTERUES: 80 % Gazprom, took over the operation rights of Gazprom, took over the operation rights of

Iran-Armenian gas pipelineIran-Armenian gas pipeline RF, owns 100% of Armenian Telecom RF, owns 100% of Armenian Telecom Russian UES, owns 100% of the Metsamor Russian UES, owns 100% of the Metsamor

Nuclear Plant Nuclear Plant RF; controls the Iran’s and Turkmenistan’s RF; controls the Iran’s and Turkmenistan’s

gas export routesgas export routes

EU Policies/StrategiesEU Policies/Strategies

Propose multiple solutions to limit Propose multiple solutions to limit Turkey’s negotiating positionTurkey’s negotiating position

Use “Energy Charter Treaty” to cut Use “Energy Charter Treaty” to cut Turkey’s aspirations for being a hubTurkey’s aspirations for being a hub

Jean-Arnold VINOISHead of Unit Energy Policy & Security of SupplyTUROGE, Ankara, 12/03/2009

NABUCCO Partners:

Import Dependency to Russian Gas (billion cubic meters, %)

Austria: Imports: 8.73 - from Russia: 6.85 Austria: Imports: 8.73 - from Russia: 6.85 (78.5 %)(78.5 %) Hungary: Imports : 10.95 - from Russia : 8.32 Hungary: Imports : 10.95 - from Russia : 8.32 (75.9 (75.9

%)%) Romania: Imports : 6.25 - from Russia : 3.95 Romania: Imports : 6.25 - from Russia : 3.95 (63.2 (63.2

%)%) Bulgaria: Imports : 2.85 - from Russia : 2.85 Bulgaria: Imports : 2.85 - from Russia : 2.85

(100%)(100%) Turkey: Imports : 30.50 - from Russia : 19.65 Turkey: Imports : 30.50 - from Russia : 19.65 (64 (64

%)%)

Source: BP Statistical Review of World Energy, June 2007

Note: Recently RWE (Germany also joined)

Construction already delayed for 3 Construction already delayed for 3 yearsyears

(from 2008 to 2011)(from 2008 to 2011)

2005 October report 2009 March report

Source: Reinhard Mitschek, Managing Director, Nabucco Gas Pipeline International GmbH; 8th Turkish Int‘l Oil&Gas Conference, Ankara,

March 12, 2009

Seems tough without Russia…Seems tough without Russia…

5 Feb. 20083 Oct. 2005

Copyright: OMV

Unresolved issuesUnresolved issues

Price of Azerbaijani (Shah Deniz) gasPrice of Azerbaijani (Shah Deniz) gas Transit issuesTransit issues Amount to be taken by TurkeyAmount to be taken by Turkey Problems with the other alternativesProblems with the other alternatives

– IranIran– IraqIraq– EgyptEgypt

Russia’s position is stregtheningRussia’s position is stregthening

TARGETS IN INTERNATIONAL PROJECTS

ENHANCED

SECURITY OF SUPPLY

ACCESS

TO

CHEAPER GAS

TRADE

AND

TRANSIT

Some kind of netback price mechanism for domestic consumption

Cost-based transmission tariffs

Partial exemption from TPA for trading of excess volumes

Removal of final destination clauses

Balanced diversification of supplies

Underground storage capacities to serve both domestic market and end consumers in Euope

Use of existing infrastructure and idle capacities to the extent possible

Sorce: Emre Engür, BOTAŞ

Trans-Caspian

Turkmenian Gas

Egyptian Gas

Arab Gas PL

Iraqi Gas

Shah Deniz

Nabucco

ITGIArab Gas

PL

Blue Stream

Russian Gas-West

Nabucco

Trans-Caspian

Kazakh Gas

ITG

Iranian Gas

Bosnia Herzegovina

Austria

İzmir

Ceyhan LNG

TAP

Turkey as an East-West Energy Corridor, East-West Energy Terminal

ENHANCED

SECURITY OF SUPPLY

ACCESS

TO

CHEAPER GAS

TRADE

AND

TRANSIT

SUPPLY !!!

Ahiboz Hub

Turkey’s ConcernsTurkey’s Concerns

Diversifying gas importsDiversifying gas imports Securing it’s energy needSecuring it’s energy need Decreasing the energy import billDecreasing the energy import bill Commercial benefits Commercial benefits

Announcement before take-offAnnouncement before take-off

““If you are travelling with If you are travelling with children, or are seated next to children, or are seated next to

someone who needs someone who needs assistance, assistance,

place the mask on yourself first, place the mask on yourself first, then offer assistance”then offer assistance”

CaucasCaucasiian Energy Securan Energy Securiity ty & & TurkeyTurkey

Necdet PAMİRNecdet PAMİRBoard Member, World Energy Council Turkish National Board Member, World Energy Council Turkish National

CommitteeCommittee26-27 June 2009, İstanbul26-27 June 2009, İstanbul

OutlineOutline

World energy consumption: Today and World energy consumption: Today and 2030 (Dominance of fossil fuels)2030 (Dominance of fossil fuels)

Distribution of oil and gas reservesDistribution of oil and gas reserves How important is Caucasus for energy How important is Caucasus for energy

security?security? US, Russian, EU policies/strategiesUS, Russian, EU policies/strategies Turkey’s concernsTurkey’s concerns Operational and proposed projectsOperational and proposed projects NABUCCO: An excellent example to the NABUCCO: An excellent example to the

struggle of global and regional powersstruggle of global and regional powers