The Pipeline Game and Ceyhan

Can Turkey help stem Europe’s dependence on Russian energy supply? No link for this WSJ article from earlier this month, but worth reading:

The Pipeline Game
Ceyhan, Turkey—The jetty that juts into the shimmering Gulf of Iskenderun here is the end of the line for crude oil pumped 1,100 miles from the Caspian Sea. This oil is most notable for where it doesn’t come from: Russia. Yet this pipeline, and the many others planned for the east-west corridor of Anatolia, can play only a small part in easing Europe’s energy dependence on Russia.

“Supply security” has been the buzzphrase on the Continent ever since New Year’s Day 2006, when Russia turned off natural gas taps to Ukraine and customers much farther west felt the impact. The term covers several issues, but suffice it to say that Europe is scared to death of leaning too heavily on Russian energy sources and Russia-owned pipelines.

Europe’s dependence will likely get worse before it gets better. North Sea supplies are beginning to fall off; North African routes require a strong stomach for political instability; abundant liquefied natural gas still lies over the horizon. That leaves Russia as not only the biggest exporter of oil and gas to Europe in the future, but the main thoroughfare for non-Russian sources such as Kazakhstan and Turkmenistan.

The solution to this problem?

Enter Turkey. It’s the only other country that connects Eastern Europe with Central Asia by land, and its outlet to the Mediterranean at Ceyhan offers stability and proximity to still more producing regions other than Russia.

Turkey it will struggle to find different sources of oil and gas. Several producing nations are lining up to supply Turkey: Azerbaijan, Iran, Iraq, Kazakhstan, Turkmenistan, even Egypt. Yet most of these plans present their own problems. It’s unknown, for instance, whether Azerbaijan’s Shah Deniz fields in the Caspian Sea can provide substantial gas supplies, at least in the near to medium term. Iraqi oil flowed through Turkey from 1976 until 1990, and then from 1996 to 2003 under the U.N.’s Oil for Food program. But today only about one tanker’s worth of oil makes it from Kirkuk to Ceyhan each month. Turkish officials say they don’t expect security conditions to allow a more consistent flow for a few more years.

What’s more, Russia already has deals to provide transit for Kazakh and Turkmen supplies, meaning there will be less gas for a planned line to cross the Caspian and end in Turkey. Then there’s the question about how badly sanctions or possible military action against Iran for its nuclear program could disrupt that supply. (At an EU-Turkey energy conference in Istanbul this summer not a single speaker raised this issue—a sign of the head-in-the-sand approach Europeans are taking to that crisis.)

When reminded of these hurdles, the Turks point to Ceyhan [map taken from here]. Back in the 1990s, many doubted that the pipeline that ends here—from Baku via Tbilisi—would ever be built. But the BTC pipeline, named for those three cities, moved 143 million barrels of crude in its first year of operations that ended in June. This success proves Turkey can overcome obstacles, Energy Minister Hilmi Guler said at the Istanbul energy conference, but the country needs the EU’s help in dealing with third countries. “There is gas under the ground [that is] not being operated” in Caspian rim countries like Azerbaijan, Mr. Guler said. “You have to force them to invest.”

That being said, the article concludes as follows: Counting on European energy cooperation isn’t a safe play. That’s one of the main reasons the Continent finds itself in its Russian predicament and why Turkey—or any other country—can’t seriously challenge its dominance.