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    Turkey's Coup and its Gas Supply Plans

Summary

Turkey has declared a state of emergency in the wake of last week's failed military coup and has launched a wide ranging purge of state bodies.

by: David O'Byrne

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Turkey's Coup and its Gas Supply Plans

Turkey has declared a state of emergency in the wake of last week's failed military coup and has launched a wide ranging purge of state bodies that has already seen over 60,000 employees either arrested, sacked or suspended pending criminal investigation for possible connections to the group alleged to have organised the failed coup.

Already hit have been the ministry for energy and natural resources where 300 employees, 18% of the total staff, have been suspended and placed under investigation; and Turkey's energy regulator, EPDK, where 25 staff have been suspended and with rumours circulating that state gas importer Botas, state upstream operator TPAO and state power grid operator TEIAS are also being purged and that the search for possible coup sympathisers will extend to private-sector energy companies.

News of the purges has been openly circulated with the ministry itself announcing the 300 suspensions via its own twitter account.

No details have yet been given of who the 300 staff members are or what level of seniority they enjoyed, however, with the ministry's 2015 report confirming a staff of only 1,685 direct employees.

Reports by state news agency Anatolia on the EPDK suspensions indicate that of the 25, one is a senior manager and there are several high level "experts".

While private-sector officials have confirmed to NGE that existing gas import, transit, wholesaling and distribution operations have not been affected by the coup, or the subsequent purges and state of emergency, the indications are that the sector will suffer from a general slowing down of the state bureaucracy.

With many alleging that the purges have little to do with the failed coup and are simply a means for Turkey's governing AK party to dispose of civil servants it regards as being insufficiently "onside" the effect on the morale of remaining staff cannot be discounted.

Even then procedures for recruiting new staff are lengthy and with only a limited pool of qualified people to recruit from state bodies are likely to find their operational performances affected for some time even if they are able to fill recently vacated positions.

The effect on the private sector is harder to gauge. The EPDK has announced that it plans to investigate companies it suspects of being allied to the Hizmet religious movement of US based Turkish cleric Fetullah Gulen, whom the Turkish president, Tayyip Erdogan, has blamed for being behind the coup. However it is far from clear what companies could be targeted or on what pretext.

Pipelines

What is clear so far is that there has been little or no effect on existing new gas pipeline projects. Officials from BP and the Socar led consortium in which BP is a partner, developing the 31bn m³/yr TransAnatolian Pipeline (Tanap), have confirmed to NGE that development of phase two of Azerbaijan's Shah Deniz gas field, the expansion of the existing South Caucasus gas pipeline and construction of Tanap itself are proceeding according to schedule.

First gas will be delivered to Georgia and Turkey in early 2018, with Turkish offtake rising to 6bn m³/yr, and first gas to Europe in 2020 as previously announced. However with Shah Deniz providing only 16bn m³/yr to the 31bn m³/yr Tanap line, what remains unclear is how the remaining 15bn m³/yr of capacity will be filled.

Turkey has long coveted the ample gas reserves of the Kurdistan region of northern Iraq. Late last year Kurdish officials confirmed that they had begun construction of a pipeline to the Turkish border. Botas earlier this year opened a tender for construction of a line with capacity of around 20bn m³/yr running from the border to connect to its existing east-west transit grid.

Construction of that line was already under question owing to the ongoing insurrection in southeast Turkey by the Kurdistan Workers Party (PKK) but with Ankara now apparently at war with its own military, that line must be assumed to be put on hold.

Similarly plans for transiting gas from the east Mediterranean fields of Israel and Cyprus also appear to be under risk. While Turkish officials have confirmed that a Memorandum of Understanding has been signed between Turkey and Israel which would allow for gas transit to and via Turkey, any pipeline will be dependent on a deal with Cyprus allowing for the reunification of the divided island, a third of which has been occupied by Turkish troops since 1974.

Erdogan (© REUTERS/ Umit Bektas)

Recep Tayyip Erdogan (© REUTERS/ Umit Bektas)

While officials from companies interested in transiting the gas to Turkey have previously expressed confidence that a Cyprus deal is possible, analysts now concur that the current parlous political and security situation in Turkey militates against any new agreement.

And with economists warning that the current instability will continue to seriously impact the Turkish economy for some time, it is equally unclear whether Turkey will have the necessary gas demand to ensure any new transit lines are indeed viable.

Turkish gas demand actually fell last year to 47.4bn m³ from 49.1bn m³ in 2014, far below the 57bn m³ that Botas was predicting as recently as 2007, and is not expected to rise much in the next two years thanks to official policy of encouraging diversification away from combined-cycle gas turbines burning imported gas which have been the country's main gas consumers.

Indeed reports last week indicated that the energy ministry would this week announce new tariff guarantees for new plant burning the low grade lignite of which Turkey has vast largely untapped reserves. An announcement the coup appears to have caused to be postponed.

With the current instability raising serious questions over Turkey's own gas demand and hence over possible new transit lines it's ironic that the one pipeline project that looks like it could possibly profit from the current chaos is Russia's 63bn m³/yr Turkish Stream pipeline announced in late 2014 but on hold since last year's fallout between Ankara and Moscow in the wake of the shooting down by Turkish jets of a Russian warplane that strayed into Turkish airspace.

Turkey and Russia two weeks ago formally reopened diplomatic relations and one of the more unusual news stories to emerge this week is news that the pilot who shot down the Russian plane has been implicated in the coup plot and is to be tried for downing the Russian plane.

Whatever the result of that trial, it can hardly have escaped Moscow's attention that the state of emergency allows the government to legislate without going through parliament. This allows it to rubber stamp the drafted intergovernmental agreement for Turkish Stream which was held up in the Turkish parliament prior to the fall out.

 

David O'Byrne