Nabucco Pipeline Project in METU Alumni Society

MIDDLE EAST Technical University Alumni Society Energy Commission organized a panel on Nabucco Project on March 28, 2009 in Alumni Vişnelik Premises by participation of Ministry of Energy and Natural Resources (MENR) Former Undersecretary Yurdakul Yiğitgüden and BOTAŞ Director General H. Saltuk Düzyol in the course of which the issues such as Turkey’s role as an energy corridor in transporting natural gas to Europe, Nabucco Project’s effect on Turkey’s role to this effect, the details of the project and other alternative pipeline projects were dwelt upon.

BOTAŞ Director General Saltuk Düzyol, “It is an important opportunity that Europe is in need of new suppliers other than Russia. Agencies such as EIB, ERD are expected to make contribution to the investment of the project to be financed from abroad by 70%.”

MENR former Undersecretary Yurdakul Yiğitgüden, “Turkey could not use the favorable atmosphere in 2002 towards Nabucco. It is required to maintain the security in Iraq and handle the heavy working bureaucracy in Iran for the investment as soon as possible. Turkey’s initiatives were not sufficient in respect of Turkmenistan.”

BOTAŞ Director General Düzyol, “Nabucco is a locomotive project for Europe”
BOTAŞ Director General H. Saltuk Düzyol, stated that major part of the European countries were dependent on Russia, Norway, Algeria on the natural gas and there were disputes towards covering the gradually increased supply deficit. Noting the importance of having new suppliers other than Russia of Europe, Düzyol said that Turkey was the fourth corridor having an important potential in respect of transporting the Caspian and Middle Eastern sources.

Düzyol further stated that there were many alternative projects to Nabucco however, these projects such as Blue Current, White Current could not provide the diversity required by Europe. Düzyol went on to say that Nabucco would be a locomotive project. Furthermore, through IPC Project, 750 million m3 gas was being transported to Greece and there existed a larger potential here, said Düzyol, Russia considered Turkey as a transit line and Blue Stream 2 Pipeline Project could be taken into agenda as well.

Furnishing information on the current status of Nabucco Project, Düzyol noted that signing stage was reached with the local engineering companies, HSBC acted as the financial consultant, works were being conducted in the fields of Intergovernmental Agreement, Hosting Country Agreement and Transportation Agreement. Noting the draft of the Intergovernmental Agreement Draft prepared by the Turkish Side was already forwarded to the party involved, Düzyol reported that negotiations were underway on the draft by the governments and the European Commission.

The estimated cost of the project was €7.9 billion, 70% of which would be financed by foreign sources, Düzyol said that contribution of the agencies such as EIB, ERD were awaited for the investment financing. Noting the final investment decision was planned be reached at the end of 2009 and the construction of the pipeline was planned to be started in 2011, Düzyol stated that the pipeline was expected to be commissioned in 2014 with the initial amount of 8 billion m3.

BOTAŞ Director General Düzyol, “Nabucco Project will efficiently cover the cost of main transmission pipelines of higher capacity in respect of Turkey”
Director General Düzyol who listed the advantages of Nabucco Project for European countries, stated that reliable access would be provided through cost based transportation tariffs in the Project, an investment potential would be secured in the region for European gas companies, commercial and political relations would be developed between Middle East-Caspian region and Turkey-EU and it would contribute to the supply security issue.

Düzyol further noted that Turkey would have advantages such as acquiring the costs of main transportation lines of high capacity efficiently, forming new infrastructures for acquiring additional amounts from the suppliers, decreasing the prices in the long run, acquiring gains in the transit transportation. Director General Düzyol stated that the obstacles on the way of project were the difficulties in finding supply sources, lack of legal infrastructure towards generation and transit transportation, lack of joint energy policy of the European Union (EU) and conflict of interest, uncertainty caused by the global crisis and the gas deficit experienced in the transit countries.

MENR former Undersecretary Yiğitgüden, “Europe considers the issue not only from Nabucco’s perspective but also from Southern Line”

MENR Former Undersecretary Yurdakul Yiğitgüden dwelt upon the process of Turkey’s being the energy corridor, and noted that EU approached Baku-Tbilisi -Ceyhan (BTC) Project and Turkey being the transit country negatively at that time and under the influence of German policies, the pipelines passing through Russia were preferred. However, said Yiğitgüden, as the result of non-approval of energy condition agreement in the Russian Parliament in 1999, the idea of transporting the Central Asian and Caspian sources to Europe via Russia, and then BTC became the focus of the interest and necessary agreements to this effect were signed.

As from 2000, Turkey will liberalize the markets, will constitute a transparent transit regime and will be an important actor in the field of natural gas and electricity. He stressed the importance of the agreement reached with Greece on July 7, 2000 and noted that an era started in Europe when the necessity of having Turkey beside was started to be felt. Noting the Southern Europe Gas Ring Project was started in this environment, Yiğitgüden said that Europe considered the issue not only as Nabucco but also as Southern Line.

MENR former Undersecretary Yiğitgüden, “Gas supply is not easy as it was 6-7 years earlier”

Informing on the developments of Nabucco Project, Yiğitgüden reported that first proposal of cooperation in the field of natural gas was made to Austria in 1998 as the distribution point of the gas coming from Russia and the proposal was accepted in 2001. Noting as from 2002, a positive atmosphere prevailed in EU towards Turkey, Yiğitgüden said, “unfortunately, Turkey could not take benefit of the positive atmosphere”. Dwelling upon the problems faced in respect of the gas supply, Yiğitgüden said that the gas supply was not easy as it was 6-7 years earlier, the gas sources are tied to other parties within the context of the agreements.

Mentioning various supply sources around Turkey, Yiğitgüden noted that gas could be brought at suitable prices from Iraq, for this reason, security should be maintained and investment should be started as soon as possible and the heavy working bureaucracy should be solved in Iran. Yiğitgüden stated that Turkey did not take sufficient initiatives towards Turkmenistan and for this reason directed its sources to the East.

BOTAŞ GM Düzyol: “Turkey will, for the sake of privatization, rapidly advance towards a market dominated by seller countries as long as she does not change her legal arrangements”

MENR Former Undersecretary Yiğitgüden: “Turkey should have an intelligible and applicable strategy and render her transit regime operational”

BOTAŞ General Manager Mr.Düzyol criticized the neo-liberal arrangements aiming to reduce to 20% level the market share of BOTAŞ that has created a significant market with its investments in 5-6 years in Turkey, and stated that BOTAŞ is unable to establish affiliates and encounters restrictions, that efforts are being made to surmount the problem of inability to transfer contracts by amending the Law and introducing a tender regulation, but that the seller countries have designated their own companies and that these companies would be taken over by Gazprom after a while. “Turkey will, for the sake of privatizing the market, rapidly advance towards a market dominated by seller countries as long as she does not change her legal arrangements”, he said.

BOTAŞ GM Düzyol: “Turkey cannot make such a big investment with a small company”
“Those expecting that prices will come down with privatization and liberalization and that the economy and the energy sector will develop are mistaken”, Mr. Düzyol said. Asserting that BOTAŞ has been turned into a company with a deteriorated financial condition due to the energy SEEs owing monies to it for 5-6 years and that this has been done deliberately by the government, Mr. Düzyol said: “Turkey cannot make such a big investment with a small company”.

Noting that they have very good candidate partners such as Gaz De France (France) and Total (France) for Nabucco Project, Mr. Düzyol said that merely commercial evaluation could not be made when making the preferences, and that, if BOTAŞ is given a leeway and rendered autonomous, it could be in a leader position in the Project, and went on as follows: “The Law issued in the year 2001 is the reason why Turkey does not have a strategy at present”.

MENR Former Undersecretary Yiğitgüden: “Turkey has neglected her relations with supplier countries”.

MENR Former Undersecretary Yurdakul Yiğitgüden said that a working group has been established within the body of BOTAŞ to determine Turkey’s gas strategy, and that this group should be so established within the body of MENR as to be able to implement Turkey’s strategy and to take top-level decisions.

Noting that Turkey’s strategic goal is to ensure that the pipeline passes over Turkey, Mr. Yiğitgüden said that Turkey aimed to become a transit country, not a seller country, but that her transit regime which should be encouraged by laws has not been published in a transparent fashion, that the problems related with the producer countries have become a weakness from the standpoint of Turkey, that relations with the supplier countries have been neglected, and that valid gas purchase agreements could not be made until now.

Mr. Yiğitgüden asserted that Nabucco Company structure was inadequate, that Austrian OMV was not strong enough to execute a worldwide project and did not consider the Project sufficiently strategic, that French Gaz De France, a strong candidate partner, should be designated by Turkey as a partner, and that RWE which is financially strong but not politically strong has been chosen instead.

Mr. Yiğitgüden said that it was important for the Project to be completed by the year 2010, the original completion target, and that postponement of the Project’s completion date would lead the European countries to renew their expiring contracts. Summarizing what is incumbent on Turkey to realize Nabucco Project, Mr. Yiğitgüden voiced them as follows: To have an intelligible and applicable strategy, to ensure inter-agency cooperation, to render the transit regime operational, to make periodic contacts with parties, and to sign the agreements required for the pipeline.



ODTU Alumni Energy Working Group weekly meeting on 12th May 2009