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21 June 2012

U.S. Interests, Regional Development, and Alternative Sources in Turkey’s Energy Sector

by Audrey Stevens, JTW

Turkey’s energy future –linked to Caspian energy development, political tumult in the region, new drives for alternative sources, and potent U.S. interests –has been placed in the spotlight of various energy discussions.

According to a recent RAND report, U.S. Naval and Air Forces have an increasing responsibility to ensure regional stability in areas with substantial energy sources. In practice, this indicates a commitment to open sea lanes in oil producing regions like the Caspian. The report also emphasized the region’s growing importance in oil supplies and Turkey’s blossoming role as an energy hub. For example, Azerbaijan will continue with the Trans-Anatolian Gas Pipeline, potentially providing an approximately $17 billion investment to Turkey. This 1 240 mile (2 000 km) pipeline would transport Azeri natural gas from the Caspian region to Turkey and Europe.

On Monday, the Department of Energy and the Energy Market Regulatory Authority in Turkey (EPDK) proposed a bill which would further facilitate Turkey’s regional role in energy security by allowing private sector importation of natural gas to Turkey. A minimum of 10 percent of natural gas imports would have to be stored in Turkey. The proposed bill would diversify Turkey’s energy sources by allowing private sector cooperation with countries that Turkey already has an energy partnership with, but also with countries with no established relationship. This diversification is also expected to reduce domestic energy prices. According to the World Bank, energy prices play a role in the recent reduction in Turkey’s predicted rate of economic expansion and pose risks for future economic development and stability.

RAND report authors also emphasized the need for Turkey to protect its domestic energy infrastructure from regional and internal instability. Major issues of concern included the safety of pipelines and energy structures from terrorist attacks, like those of the PKK.

Over the past decade, Turkey has imported 93 percent of its oil and 98 percent of its natural gas consumption. In 2011, Turkey imported 39.7 billion cubic meters of natural gas, with the most coming from Russia, Iran, and Azerbaijan. According to the Turkish Statistical Institute, Turkey’s March imports of Iranian oil flew from 100,000 barrels to 270,000 barrels, ahead of the U.S. sanctions against Iran. Though seeking a waiver, Turkey signed a recent one-million ton oil agreement with Libya and started talks with Saudi Arabia, seeking diverse –if not stable –alternatives to Iranian oil. Turkey is also exploring options in Iraq, including export agreements with the Kurdish Regional Government.

Turkish Energy Minister Taner Yýldýz also supports more diverse energy sources, including nuclear energy. A 2010 agreement with Russia pledged four reactors would be built in the next decade. While renewable and diverse energy sources are important, nuclear energy faces increased criticism and apprehension in light of the 2011 Fukushima Daiichi issues in Japan and Turkey’s own earthquake-prone geography.

In the United States, the RAND Corporation study was pessimistic about the future of alternative fuels in the Department of Defense. According to the report, the United States Department of Defense uses approximately 340,000 barrels of petroleum fuels a day. While significant, this volume has little impact on global prices and –despite discussions in the U.S. congress – there is little hope that U.S. government spending could impact the prices of renewable or traditional fuels. Without a substantial change in available technologies, petroleum fuels will continue to be less expensive than renewable alternatives, according to the RAND report. The study claims petroleum fuels will continue to be vital to the United States and foreign policy should reflect the vital energy interests in regions like the Caspian.
In the midst of U.S. energy interests, international sanctions, and regional infrastructure development, Turkey’s energy sector faces increased pressures and attention in the future.