Turkey’s offshore gas is waiting to be explored

Turkey’s offshore reserves could become a future source of oil supply, but not in the short to medium term, Mehmet Ogutcu, chairman of the Global Resources Partnership, U.K., said in an exclusive interview with Anadolu Agency.

Ogutcu, who is a former Turkish diplomat and senior executive with the International Energy Agency (IEA) and the BG Group, explained that, although having untapped hydrocarbon resources, Turkey is geographically close to 72 percent of the world’s proven oil and gas resources, and thus commands major chokepoints and transit routes for energy shipments between key energy-producing areas in Russia, the Caspian Sea basin, the Middle East and high-value European consumer markets.

“Turkey has the potential to become the ‘Energy Silk Road of the 21st century’,” Ogutcu said.

“Yet, despite its prime location, this country has only drilled 4,400 wells since 1940, compared to over 1.5 million in Texas. In other words, its territory remains almost entirely untapped. Turkey’s oil reserves right now are estimated to be around 40-45 million tons,” he explained.

With current consumption as it is, those reserves will not last longer than 20 years, according to Ogutcu.

“Even though Saudi Arabia and Turkey have an equal number of operating wells, the former produces nine million barrels per day (bpd) of oil, while Turkey produces 45,000 bpd, necessitating imports for 93 percent of its oil requirements. There is a strong need to produce more and competitively from its own acreages as well as import at the most favorable cost from global markets, ideally from its nearby oil-rich neighbors,” he suggests.

However, he underlined that Turkey should not persist in producing domestically from its on shore or offshore fields at any cost, particularly at a time when oil prices are low and supplies are abundant.

“Self-sufficiency and geopolitical realities are important, but let’s not forget that oil is a fungible commodity and can be sourced globally from anywhere so long as you have a deep sea port to receive oil tankers. Turkey has no doubt some internationally recognized offshore potential. The question is whether it is worth exploring and extracting in the current juncture. If oil prices, now hovering around $50, go above $100 a barrel, then it is justifiable to step up domestic exploration,” Ogutcu explained.

Despite the steady continuation of Turkey’s Black Sea operations, which reportedly contains up to 10 billion barrels of oil, Ogutcu said that Turkey’s priority has been focused on the transportation and trading of oil and gas with the aim of becoming an energy hub, rather than extracting domestic resources.

“Turkey tried to do the same [exploration and drilling] in the Mediterranean, especially after Israel, Egypt and Greek Cyprus found the gas in East Med, especially off Northern Cyprus and between the Cypriot island and the mainland. There could also be significant reserves beneath the Aegean Sea, although this has not been confirmed because of ongoing territorial disputes with Greece,” he noted.

Emphasizing the hefty expense in offshore oil extraction, he argued that many big majors are avoiding or postponing new investments in the current low price environment. Furthermore, he expects oil companies in the short term to be more selective with projects and drilling schedules.

“New projects may be suspended simply because, with such low oil prices, they are not worth it,” he underlined.

In such circumstances, he suggests that Turkey focus on importing oil from its neighbors at discounted prices and invest in domestic onshore and offshore fields but only if it is financially viable.

Additionally, he recommended that Turkey explore opportunities to acquire distressed oil and gas assets and companies in producing countries where extraction costs are relatively low and access to high value international markets is possible such as in Iraq, Libya, Russia, Kazakhstan, Iran, Egypt, Azerbaijan and East Africa.

“It [Turkey] can also work towards becoming a regional hub which combines transportation as well as legal, institutional and financial infrastructure,” he added.

– “Turkey remains under-explored, with only one percent offshore exploration conducted”

Dr Sohbet Karbuz, director of hydrocarbons at the Observation for Mediterranean Energy said that despite the negative drilling results in both the Black Sea and the Mediterranean so far, seismic studies however insufficient, reveal good potential for Turkey.

“However, the current market environment and low energy prices put a constraint in exploration activities which is very costly. Today to drill a deep offshore well costs over $100 million. This is why companies generally prefer to intensify their efforts in hotter spots where they can get bigger rewards. Therefore we need to be more proactive in attracting foreign investors,” he explained.

Karbuz also said although Turkey is not endowed with oil and gas like some of its neighbors, insufficient exploration to date raises hopes for future discoveries.

“Exploration activities in Turkey have never been sufficient, especially offshore. Today the country remains largely under-explored and under-exploited with regards to both conventional and unconventional prospects. So far 20 percent of land areas and one percent of water areas have been explored in terms of both seismic surveys and drilling,” he noted.

There is a great opportunity to deploy modern technology for oil and gas exploration, especially deep offshore areas, as well as in using advanced technologies in areas that previously have not been considered prospective, according to Karbuz.

“Contrary to common clichés, I do not believe that we know the geology of Turkey well enough. If a considerable amount of oil and/or gas is found offshore Turkey, it would surely be a game changer both for Turkey and for the region,” he said.

The advantages of such an oil and natural gas discovery in offshore Turkey would act as a catalyst to directly improve the country’s energy supply security and reduce the economic burden of oil and gas imports, according to Karbuz.

“It would contribute towards Turkey’s ambition of becoming an oil and gas trading hub. It would also help develop and attract oil and gas export infrastructure projects. Finally, it would have significant geopolitical implications, most probably reshaping Turkey’s role, power and position on the international scene,” he concluded.