Turkey: Emerging energy hub?

KOSTIS GEROPOULOS | JUNE 2010 | SOURCE: New Europe

The intended signing of an Azerbaijan-Turkey natural gas agreement in a few days in Istanbul, may set the stage for Nabucco, Trans-Adriatic Pipeline (TAP) and Interconnector Turkey, Greece, Italy (ITGI) gas pipelines.

Therefore, it comes as no surprise that it was one of the topics of an international discussion during the 4th South East Europe Energy Dialogue organized by IENE on 3-4 June here in cosmopolitan Thessaloniki.

Turkey: Emerging energy hub?

The signature of the agreement, due last month, was postponed and Turkey hopes it will be inked during Azerbaijani President Ilham Aliyev visit to Istanbul on 7-8 June, Turkish energy officials confirmed to New Europe.

Notably, even though Russia is not particularly excited about the deal, Russian Prime Minister Vladimir Putin will be in Istanbul at the same time for an Asian summit that Aliyev will also attend. Moscow hopes the Turkish government will approve in November construction of the Russian-led South Stream gas pipeline in its territory.

In the sidelines of the Thessaloniki conference, Turkish officials said the Azeri-Turkey deal would not upset relations with Moscow. Russia has also reached its own commercial agreements with Baku.

Energy cooperation between Russia and Turkey, which is the backbone of their strategic partnership, has intensified and may hinder the EU’s source diversification efforts, Yurdakul Yigitguden, Member of the BOD, Borusan ENBW Energy AS, Turkey, told New Europe. If the consumers are happy and there are new projects from Russia, projects bypassing Russia will be in trouble in the long run.

Yigitguden, who is Turkey’s former Under-Secretary of Energy and Natural Resources, also told a heated panel debate during the conference that Turkey becoming a gas hub is an economic, not a political issue. “The gas arrives in Turkey not because the European Commission wants it.

The gas arrives in Turkey because of its strategic position,” he said, adding that Russian, Azeri, Egyptian, Iraqi and even Iranian gas will flow to Turkey, making it an energy hub. Turkey and the EU were previously locked in a dispute over Ankara's request for access to 15% of the Nabucco's supply for domestic use or for re-export.

That demand was dropped in return for a promise that Nabucco's supply could flow both ways, meaning that Turkey could have access to European gas stocks in case of emergency. However, now Ankara prefers dealing with Baku directly.

The Azeri-Turkish deal is expected to settle the issue of the price of gas imported to Turkey from Azerbaijan and also to set the tariffs Turkey will charge Azerbaijan for the transit of gas to Europe. The price is now expected to almost double set to be indexed to the world market price. Naturally, Turkish officials consider the world gas price inappropriate given that Turkey is closer to producer-country Azerbaijan than other European consumers like, for example, Germany.

Slav Slavov, Regional Coordinator for Europe and Central Asia at the World Energy Council (WEC), said the EU needs gas from both South Stream and Nabucco. He said there should not be competition on the demand side. There is competition upstream. “We lose momentum and the market is shifting to the East,” he told New Europe. As Manouchehr Takin, an Iranian analyst at the Centre for Global Energy Studies (CGES), pointed out: “Unfortunately, politics distorts the markets.”

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