Türkiye’s Black Sea Natural Gas Success: Questions

Give to Caesar what belongs to Caesar; it should be considered a world-class success as Türkiye gave the good news of the Black Sea natural gas discovery in 2020 and the first stage of delivery will be yielded before the May 14, 2023, elections, as President Recep Tayyip Erdoğan stated on April 17.

A comparable project, Zohr, the largest gas field in Egypt (and the Mediterranean), took only three years from discovery to production. There, ENI, the Italian company, started the exploration process. In 2015, British Petroleum (BP) (10 percent) was called in as a partner when ENI’s capabilities alone (50 percent) could not suffice.

Then came Rosneft (with 30 percent), one of the Russian oil and gas giants. Lastly, the United Arab Emirates company Mubadala Petroleum (10 percent), which had strong financing muscles, was included in the consortium. In other words, Zohr came to life as the joint work of four giant companies in a short space of time. It has 850 billion cubic metres of reserves. (For comparison, Russia’s gas reserves stand at 48 and Iran’s at 33 trillion cubic metres.) Zohr has a production of around 28 billion cubic metres per year.

A performance not to be underestimated

The Black Sea gas is expected to produce approximately 10 million cubic metres per day with a gradual increase until September. That amounts to the 7 percent of Türkiye’s total gas consumption, which is approximately 60 billion cubic metres. The ultimate goal is to quadruple this amount to 16 billion cubic metres by digging 30 new wells by 2028–2030, thus meeting a quarter of the country’s needs. Moreover, news of new reserve potential may come within the boundaries of Türkiye’s exclusive economic zones in both the Black Sea and the Eastern Mediterranean.

The Sakarya project, located 175 km west of Karadeniz Ereğli, was developed by TPAO with the support of Schlumberger and Subsea7 engineering firms. The credit should go to the government for achieving success in such a geologically demanding and high-cost deep-sea exploration venture that can normally be undertaken by oil and gas majors with strong capital, human resources, and technological experience such as ExxonMobil, Royal Dutch Shell, Chevron, Rosneft, CNPC and TotalEnergies.

The other side of the coin: Questions

Of course, the targets set are not to be underestimated, but the following questions continue to haunt us:

– How will additional financing be found for this investment, for which $1.8 billion has already been spent? Is this possible without ensuring transparency and accountability?

– To what extent are the allegations that Trillion Energy, a company listed on the Canadian stock exchange, with a market capitalization of 140 million Canadian dollars, whose owners appear to be Iranian, holds significant shares in the Black Sea gas projects together with TPAO, true?

– Are there really 710 billion cubic meters of reserves? Have independent experts and institutions confirmed the size of the existing reserves? How much of these reserves can be turned into production? On the evening of May 20, is the gas that will be supplied to the BOTAS pipeline network coming from under the sea and processed in Filyos, or is it being taken from the Western Black Sea pipeline?

Cost-price difference

– Will the cost of production be more affordable than our current pipeline and LNG gas? How much will it fill the hole in our $80 billion net energy imports?

– How will households, industrialists, artisans and electricity producers use natural gas more cheaply without state subsidies? Why are price and cost calculations still not disclosed?

– To what extent is TPAO’s stated goal of exporting natural gas to Europe realistic?

– How will it affect our existing natural gas contracts and connections, and what will be the foreign policy and security implications?

– How will we comply with the requirements of climate change and the Green Deal?

Similar questions can be multiplied; each deserves credible answers.

Black Sea gas and the election process

For a country that imports 98 percent of its natural gas needs every year from different countries such as Russia, Iran and Azerbaijan, as well as from LNG sources, and pays heavy purchase bills and political costs for this, every molecule of gas to be produced with its own resources is of course valuable. Let us not forget that security of supply is also a matter of national security.

There are criticisms that this success is being used as political material by President Tayyip Erdoğan in the elections. Just like TOGG, the Anadolu landing ship, the commissioning of the first reactor of the Mersin Akkuyu nuclear power plant, the satellite launch with Elon Musk in California, the hint of unmanned fighter jets, the Altay tank finally seeing the light of day and so on. The fact that the political power coincides all these developments with the election propaganda period and wants to use its actions and projects in an exaggerated way for re-election should be evaluated within the flow of politics. The opposition can also try to redress the imbalance in the electoral competition by presenting what it will do in these areas then it comes to power.

As the world energy outlook changes

The process from the discovery of the Sakarya field to its production must be evaluated in the light of the new dynamics in the world energy markets. In the spirit of the times, we need a deep understanding of the changing global dynamics in the economy, the geopolitical order, the technology race and the energy game. If we do not quickly make choices in line with these dynamics – given our high dependence on the outside world in almost every field including financing, technology, trade, investment, energy, food and tourism – we will inevitably get into trouble.

The world economy and geopolitics are changing beyond recognition and have settled on new balances. Due to the sharpening of the US-China polarisation, Russia and China’s interventions in restructuring the Middle East, the rewinding and backsliding of globalisation, and the escalation of technology, trade, currency, water, food, energy, and critical minerals wars, it is now difficult to survive with the old patterns and ways of thinking. The game, the players, and the rules of the game are also being reshaped.

Russia and the European Union

We are experiencing the same process in the energy sector, but at a faster pace. The transformation process, which used to take 15-20 years, now takes place in a few years, and you can quickly reap the benefits. The clean energy economy, technology, investment, trade, finance, and geopolitics have the potential to move countries to the forefront of the global league at an unprecedented speed.

That’s why, as in other fields, in energy, there is a need for a new suprapartisan, “energetic” vision of power and competent executive cadres who are aware of the realities of the world and will maximise international cooperation and partnerships. Natural gas is the fuel of the transition to green energy and has an important place in the country’s energy economy (as of March 2023, 25 percent of Türkiye’s installed electrical power consists of natural gas; it is also used extensively in residences, industry, and agriculture).

The halting of Russian gas in Europe due to politically motivated sanctions increased the demand for natural gas, accelerated the greening, and even changed the energy supply architecture of the European Union altogether. On the one hand, it is getting harder to find money for new natural gas development investments, as fossil fuels have been declared “tukaka” in the fight against climate change; on the other hand, new natural gas producers and their markets are multiplying like mushrooms all over the world. Thanks to shale gas, the US is about to dethrone Russia in world natural gas production.

May 15 morning

Continuing the success of gas exploration and production efforts in the Black Sea region and meeting at least 25 percent of the country’s natural gas needs by 2030 from domestic sources in an affordable and sustainable way, as targeted, are really important in terms of energy security. It should not be interrupted by political competition or other reasons, but a transparent and accountable process must be set in motion.

Whether Tayyip Erdoğan or Kemal Kılıçdaroğlu is to emerge as a winner in the forthcoming elections, a new vision, a competent executive team, and a credible engagement with the outside world will be needed on the morning of May 15.

Undoubtedly, this is also true for energy, the backbone of our economy.