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Pipelines increase Turkey's importance for Europe http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2006-07-11T134155Z_01_L10390064_RTRUKOC_0_US-ENERGY-TURKEY-PIPELINES.xml
Tue Jul 11, 2006
By Ercan Ersoy and Orhan Coskun
ISTANBUL/ANKARA (Reuters) - Turkey's strategic importance to Europe as an energy corridor is set to grow over the next decade as it pushes ahead with plans for a series of oil and gas pipelines across the country.
Turkey will inaugurate one of the pipelines on Thursday, officially opening a $3.9-billion, BP-led oil corridor from Azerbaijan's Baku to the Turkish port Ceyhan, which is already the terminal for a pipeline from Iraq's Kirkuk fields.
This is one of several projects, devised to meet Turkish energy demand, that have drawn growing European interest as a gas supply route from the energy-rich Caspian.
Europe has been especially keen to develop alternative supply sources since a dispute between Moscow and Kiev disrupted flows of Russian gas through Ukraine in January.
Europe's anxiety over the row between its biggest gas supplier and Ukraine is part of the backdrop to this weekend's Group of Eight meeting on energy security in St Petersburg.
Among other plans for the energy corridor are an oil pipeline between Samsun on the Black Sea and Ceyhan and two gas pipelines from Russia, which wants to extend the Blue Stream pipeline to Israel.
"Turkey will earn fees and gain in strategic importance from these pipelines but the greater beneficiary will be Europe," said Fatih Birol, chief economist at the International Energy Agency. "Because Europe desperately needs energy diversification."
Turkey has attracted growing interest from foreign investors in the last couple of years as they look to benefit from its rapidly growing market, bolstered by the start of its membership talks with the European Union.
NATO-member Turkey also plays an important role in security terms because of its borders with neighbors including Iraq, Iran and Syria. Its growing role as a conduit of energy adds another dimension to its strategic importance.
The Baku-Ceyhan pipeline started pumping in late May and will deliver up to 400,000 barrels per day (bpd) to world markets by the end of this year, rising to 1 million bpd in 2008.
Turkish Energy Ministry Undersecretary Sami Demirbilek said the Baku-Ceyhan pipeline showed Turkey was a reliable route.
"Along with the new energy paths passing through Turkey, this will help global energy supply security from the point of view of accessibility," Demirbilek said.
There are plans to make Ceyhan an oil and gas hub. Turkish fuel retailer Petrol Ofisi, in which Austria's OMV has a 34 percent stake, is thinking of building a refinery there.
GLOBAL ENERGY SECURITY
Turkey also receives gas via a pipeline from Iran, while the Shakh-Deniz project will bring gas from the Caspian to Turkey from around the end of this year. In phase two of this project, this gas will also be transported to Europe.
"The Shakh-Deniz project, which will enter operation at end-2006 or by mid-2007, is important...in terms of both global and regional supply security," said Eurasian Strategic Research Center general coordinator Necdet Pamir.
Ankara is also central to the $5.8 billion Nabucco natural gas pipeline project, supported by the European Union, which will pump central Asian gas to Austria via Turkey.
Analysts said Ankara must now work on its infrastructure and tariffs to realize its potential as an energy corridor.
"Turkey must set transit tariffs which are attractive for investors and at the same time establish the infrastructure for the pipelines," said energy sector analyst Yurdakul Yigitguden, a former energy ministry undersecretary. "Turkey must have the pipelines passing through its territory operational by 2010 so that purchasing countries can test the energy supplies and make long-term agreements with traditional purchasing countries," he said.
He said the dispute between Ukraine and Russia provided Turkey with an opportunity but it must now move rapidly to take advantage of the situation, given that there were alternative routes such as the Baltic states.
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