Nabucco versus South Stream

Dear Colleagues, Dear Energy Professional,

It is your writer’s sincere feeling that we have to re-evaluate Nabucco pipeline project all alone once again. Nabucco is a long term global project to cover periods of generations. Nabucco will deliver gas from the Caspian region to markets in Europe.

On 6th July 2009, Azerbaijani President Ilham Aliyev said “Azerbaijan does not plan to initiate or finance construction of the Nabucco pipeline but is ready to provide gas for shipment on the pipeline depending on the commercial terms” to InterFax News Agency.

"If the Nabucco pipeline is built and the commercial terms are good, we will definitely use it. But we will not initiate the process or finance it," Aliyev said on the television program News on Saturday with Sergei Brilev.

Aliyev recalled that Azerbaijan wasn't even considered a gas exporter when the Nabucco pipeline project was first conceived. But its rising production has since attracted interest.

"Naturally we are interested in seeing our gas potential fully realized. But we have already created our gas infrastructure: part was left over from the Soviet era in the form of a pipeline linking us with Russia and part was built. Therefore we have no need to invest in construction of new gas pipelines," he said.

But Azerbaijan stands to gain if additional gas transportation capacity is built, he said. The president of State Oil Company of the Azerbaijani Republic (SOCAR), Rovnag Abdullayev, told journalists the deal to sell gas to Russia will not hinder implementation of Nabucco.

"This agreement does not contain anything that would limit Azerbaijan's participation in Nabucco. It's an ordinary gas purchase agreement," Abdullayev said.
Russia is just one of the countries with which Azerbaijan cooperates on gas sales, he said. "It's a normal agreement that's beneficial for us," Abdullayev said.

Azerbaijan and Russia signed the agreement on June 28,2009 during President Dmitry Medvedev's working visit to Baku. Under the deal, Azerbaijan will sell 500 million cubic meters of gas to Gazprom, with volumes to be increased subsequently.

At upstream potential gas supplier countries, Syria, Iraq, Iran, Azerbaijan and Egypt should have sufficient infrastructure and necessary financing to feed available surplus naturals gas to Turkey.

That will certainly need sufficient time for political stability in the most volatile region of the world.

Turkey will then pump the available gas first to her domestic consumption after that to Europe from AhiBoz major center.

Today only Azeri SahDeniz gas reserves are available. All other potential reserves are at a far future distance to realise exploitation.

Due to Obama’s unfortunate speech on 24th April, plus our mismanagement of Armenian so-called genocide fear, we had created unnecessary difficulties with our Azeri brothers.

We were having Azeri gas at 120 USD/million cubicmeter whereby Azeris want us to pay in prevailing market figures 240 USD which is more than double of the early price.

However it is still cheaper than the Russian price which is floating at 280-300 USD range as of July 2009.

We should not deceive ourselves, nor mislead our expectations.

Azerbaijan is a different country; they have their own national interests, their own priorities.

Nobody asks Azerbaijan to accept so-called genocide. On the other hand one quarter of Azeri land is occupied by Armenians.

Avaliable Azeri ShahDeniz gas fields are now contracted long term to Russian operators at reasonable prices for reselling at high prices to European markets. New potential ShahDeniz fields are not tapped yet.

ShahDeniz underwater gas fields are also in dispute with Turkmenistan. However with Russian support, Azeris will have sovereignty, practical control over the fields.

Russians are good chess players- They offer Turkey to participate into South Stream gas pipeline in order to please us. That means postponement of Nabucco in realisation. When you look at the BlackSea map, there is no South Stream pipeline passing over Turkey. So Turkey may join the project as sole partner in project finance, or contruction subcontractor for BlackSea underwater passing.

Let us get realistic, and face the hard facts. At this end, we have no capacity to play the game, nor any control over the both projects. Our geographical advantage is bypassed. All we can do is to wait and evaluate the offers.

Whatever agreement we shall sign with downstream consumer countries of Europe is nothing of worth to consider, without having first to secure gas to pump into the pipeline.



We all know that there is no gas secured for the pipeline at this time. Salvation is not in Nabucco, nor in South Stream pipeline.

Salvation is in the local resources.

Your writer sincerely advocates ratification of Kyoto protocol,

more utilization of local coal/ wind/ hydro sources,

more thermal power plants with clean coal technologies
i.e. Circulating Fluid Bed (CFB), Integrated Gasification Combined Cycle (IGCC),

firing local low quality lignite,

more emphasis on national energy supply security,

more professional education and creation of engineering backbone in nuclear technology,

more green employment in green technology.

Your comments are always welcome

Haluk Direskeneli, Ankara based Energy Analysts

Coal dispute sheds light on shock raid in Kangal Sivas Thermal Power Plant coal mines

ISTANBUL - Nine people were arrested on charges of fraud after the June 4 gendarmerie raid on the Kangal Coal Basin in central Anatolia. Now, it has been revealed that the raid coincides with a legal dispute between a private company and state-owned Electricity Generation Co.

The June 4 gendarmerie raid on Demir Export, a Koç Group company, coincided with a dispute between the firm and state-owned Electricity Generation Co., or EÜAŞ, it has been revealed.

The raid came as the company was preparing to take EÜAŞ to court, and the gendarmerie operation against the firm’s facilities in the Kangal district of Sivas, in central Anatolia, came as a shock to the company. After the raid, nine Demir Export executives were arrested.

The dispute between the parties is related to a 20-year operating rights contract awarded to Demir Export last year.

The right to operate the Kangal Coal Basin was given to Demir Export in 1989, for a period of two decades. As the deal expires this October, Demir requested last year to extend the agreement for another 20 years, exercising its right to request such an extension, which was stipulated in the original agreement.

As EÜAŞ approved the request, a new agreement was signed last year. But this year, EÜAŞ demanded to scrap the new accord, claiming that the High Planning Board, or YPK, objected to it. Demir Export replied that the deal was valid, adding that the company may take EÜAŞ to court if it decides to annul the agreement one-sidedly.

"We are trying to convince Demir Export not to go to court," said Mehmet Biçer, deputy managing director of EÜAŞ. "We will continue negotiations."

Grand Energy operation

In an interesting coincidence, the Gendarmerie Command of Sivas Province raided Kangal Thermal Power Plant, operated by EÜAŞ, and Demir Export facilities, which operated the coal basin and sold the coal to the plant. The shock raid rested upon the allegation that Demir Export was unlawfully selling low-calorie coal to the plant, which resulted in millions of dollars of losses for the state company. The raid, named "Grand Energy Operation" by law enforcement officials, ended as 22 people were taken into custody, including the operations director at Kangal Thermal Power Plant.

After questioning, nine of the accused were sent to jail, including Nizamettin İnsal, Demir Export’s Kangal Coal Facility deputy director, and Ahmet Suat Üstün, director of the EÜAŞ Kangal Thermal Power Plant.

Seven of the arrested are Demir Export employees, while two work at EÜAŞ.

"The YPK objection [in signing another 20-year deal] was about updating some articles of the 1989 agreement," Biçer said. "We evaluated the situation and accepted the YPK position. Then, Demir Export said it would file a lawsuit against EÜAŞ. We have been trying to convince them not to. On Monday, we met with [Demir Export executives]. We told them that even if the deal is canceled and the tender is renewed, EÜAŞ needed at least two years to prepare [for the bidding process], a period in which we will strive to make sure Demir Export uses the license. The issue is complicated and will take time to resolve. Even coal mining in the facility might stop. In case of a new tender, costs might also rise, as this will be an investment from scratch."

11 June 2009 Hurriyet Daily

Turkey’s nuclear dreams face uncertain future

Turkey's long-running dream of having a nuclear power plant is surrounded by uncertainty despite the fact that a recently concluded tender on the construction of the country's first nuclear power plant is about to be finalized.

Energy and Natural Resources Minister Taner Yıldız said the final decision on the tender would be made in June, but it seems that incertitude about the matter will not be cleard up easily even if the tender is discussed at a Cabinet meeting. As only one company entered the tender and the price offered is considerably high, the Cabinet will not be able to make an easy decision. Moreover, the global economic crisis has taken its toll on funds that were to be allocated to the nuclear power plant contract.

Yıldız told Today's Zaman that they will take the matter to the Cabinet after the Turkish Electricity Trading and Contracting Company (TETAŞ) sends its assessment report on the tender to them. "It is likely that the report will be sent in the coming week. We will then brief the Cabinet about the commission's decision on the issue. Afterwards, the Cabinet will make its assessment and issue the final decision," he said.

The Cabinet is expected to debate this matter during its meeting scheduled for next Monday. If the Cabinet approves the bid, the consortium will sign the contract and proceed with the construction of the plant.

On Sept. 24, 2008, TETAŞ accepted bids and opened the first envelopes. However, despite the passage of nine months, the tender has yet to be finalized. Thirteen companies had requested specifications for the tender, but only one, the Turkish-Russian joint venture AtomStroyExport-Inter Rao-Park Teknik (AIRPT), actually filed a bid.

Taner Yıldız

On Dec. 19, 2008, the Turkish Atomic Energy Agency (TAEK) found the reactor proposed in the bid compatible and sent its letter of technological approval to TETAŞ. During the final stage of the tender, TETAŞ opened the last envelope containing the price offered by the successful bidder, but found it too high.

The consortium offered 21.16 kuruş for each kilowatt-hour (kWh) of electricity it will sell, but this figure is 170 percent higher than the average price TETAŞ charged during 2008: 12.82 kuruş.

Realizing that the Energy Ministry viewed their price as too high, AIRPT revised it, but the commission did not approve the price revision.

Nominal power for each unit offered by the consortium is 1,200 megawatts. The consortium also offered to use Russian-type pressurized water reactors traditionally known as VVER. Four units of VVER-120 (AES-2006) are planned to be mounted in the Akkuyu nuclear power plant. Thus, the total electricity power capacity of the nuclear power plant is 4,800 megawatts. VVER-1200-type reactors are state-of-the-art nuclear reactors and are considered extremely safe because they can even withstand plane crashes.

Russians sure to win
Although TETAŞ considers the offered price high, Russian officials are sure they will be awarded the contract. In particular, Russian Prime Minister Vladimir Putin is exerting great effort to make this happen. Putin reportedly discussed the issue during his meeting with Prime Minister Recep Tayyip Erdoğan in Sochi.

Turgay Ciner, chairman of Park Holding, the Turkish partner of the consortium, has reportedly been lobbying the government about the tender. However, Russian Federal Atomic Energy Agency (Rosatom) President Sergey Kiriyenko recently told a Russian TV station that they are sure Russia will win the Turkish tender, a statement that considerably offended the energy ministry. "All of our offers were accepted. We won the tender," Kiriyenko reportedly said. No Turkish government official has said the tender was finalized.

French expect cancellation
Meanwhile, some of the 13 companies that did not submit a bid, though they had requested the tender's specifications, are expecting the tender to be cancelled. France's Vinci Construction Grand Projects is one such company.

French Ambassador to Turkey Bernard Emie confirmed their interest and stated that they are closely monitoring developments concerning the nuclear tender. The French ambassador noted that French President Nicolas Sarkozy is particularly interested in the issue. However, given his harsh opposition to Turkey's EU membership, it is unlikely for a French company to have any chance in the tender.

AtomStroyExport is the only Russian company specialized in the provision of nuclear power plant equipment and services. A total of 49.8 percent of its shares are owned by Gazprombank, which is 69 percent owned by Gazprom, a major Russian natural gas provider to Turkey. Energy specialists are worried by the fact that awarding the nuclear contract to the current consortium will further increase Turkey's reliance on Gazprom with respect to energy. Their concerns are further boosted given the fact that Turkey offers to give a guarantee to purchase the energy it will sell for a period of 15 years.

Legal challenges
Some nongovernmental organizations, in particular the Electricity Producers' Association (EÜD), claim the whole tender process has been incorrectly carried out, putting emphasis on the high price offered by the consortium. They have even legally challenged the tender process. While the high price offered by the Russian-Turkish consortium is attributed to the fact that it was the sole bidder, the government may lower the price through heavy bargaining. However, the government may not be eager to engage in bargaining as it has already rejected the consortium's offer to revise its price.

The Chamber of Electrical Engineers (EMO) and the Anti-Nuclear Platform have challenged the tender legally, and this may serve as a complicating factor in the Cabinet's decision-making process for the tender.

Another factor is the global financial crisis. Before the tender was made, many companies had complained about the crisis and demanded the tender be postponed. The crisis is also listed as a factor that pushed up the figure of the price offered.

10.June.2009 News ERCAN YAVUZ TodaysZaman