Energy & Infrastructure Forecast for Turkey in 2011

Dear Energy Professional, Dear Colleagues,

In this article, I aim to make forecast in our local energy markets in the New Year 2011. As you know, economy and business are governed by expectations. Market expectations are important in the economic forecasts as well as investments.  At this time, there are many economic forecasts made by the newspaper columnists however as we all see there are almost none in energy markets.  So within my capacity, I tried to outline a draft forecast albeit maybe somewhat irrational/ unfair for the New Year. Here are my predictions and expectations for the New Year 2011;

1.      As year ends, experienced senior GMs of public enterprises will be promoted to upper consultancy posts, and then transferred to upper posts of private enterprise boards. New arrivals to those vacated posts will consume the remaining time rest of the year to get education necessary for the new posts they got; hence they will not take any initiative.

2.      World Bank and IMF delegations will have more visits to our Energy Ministry, Energy Regulatory Board, State Planning Organization, and Business Associations. Smiling faces will appear in the local media.

3.      Ministry of Energy will be looking for new projects to follow without considering that any initiative in energy sector gets its response in 10 year time in future. We all know that there is no fast solution.

4.      Newspaper columnists will continue to write ridiculous articles on energy business and continue to make confusions in Volt/Watt, MWe/ MegaByte.

5.      Electrical Energy Market Law Nr. 4628 will be changed again. Some Clauses will be deleted. Some new Clauses will be inserted before general elections in July 2011.

6.      Akkuyu Nuclear Power plant contract which was a sort of “I did it my way” scheme is signed with the Russians between government to government agreements. Ground breaking ceremony at site will be held soon.

7.      Location search for new nuclear power plants will be moved from hot waters of Mediterranean to Black Sea coast. New options will emerge in İğneada and Hopa since their local reactions would be expected less.

8.      In Sinop, South Koreans are out, new Japanese companies are in.

9.      Nuclear technology education in Hacettepe and Istanbul Technical University will lead the national curriculum with their new MSc and PhD programs. Middle East Technical University will stay behind and continue to say "This subject is not on our agenda".

10.  Local investors have initiated to build new thermal power plants (2x(2x660) MWe) in Amasra firing "indigenous coal" where we all know that there is no sufficient amount of local coal to run the power plants in the long term. They will soon try to switch to imported coal option. People and NGOs of Amasra reacted to thermal power plants in 2010. Amasra CED is cancelled. Project is later moved to Filyos valley which is 25 km towards west.

11.  Natural Gas bill will be completed. Pipeline public company will extend a portion of the contract. Termination of the public natural gas monopoly and market dominance is long-term wishful thinking.

12.  Black Sea offshore drilling is initiated. At least once every month, we shall read "Large quantities of Gas/Petrol found, sufficient for local consumption" in the news media.

13.  Those who know and those who do not know, those who are capable and not capable, will all apply to get investment license to construct new imported coal firing thermal power plants on the shores of Iskenderun Bay. Public will react to such excessive crowd with unconventional opposition methods.  Unconventional egg throwing will be nasty, sad but common reaction nowadays.

14.  People and NGOs of Iskenderun, Payas, Dortyol counties will stand up for serious environmental concerns on new excessive number of imported coal firing thermal power plants. Other than environmental concerns, local people will feel that they have all the legal rights to block through local courts since there will be neither participation of local employment nor any local engineering in the new investments.

15.  In early 2011, Iran will again cut-off the Natural Gas flow again due to excessive needs of her own domestic market for at least 1-month. Russians will increase capacity in the Blue Stream for a premium as usual.

16.  HEPP investments and dam construction actives will be increased on the small beautiful creeks on the highlands of Eastern Black Sea coast. Our high tempered Black Sea coast citizens will not be so pleased with the outcome.

17.  Our local NGO Do not touch my Creek will have rise in public appearance with unconventional opposition/ reaction procedures.

18.  Local TV programs will be increased over the Ilisu Dam. All these programs will have Tigris pasture image in the background accompanied with the sheep and pathetic background music. Everyone will memorize these photographs of sheep and the ruins.

19.  Afsin Elbistan A power plant Units 3-4 rehabilitation will be tendered. There will be not sufficient participation and in the end it will be cancelled again.

20.  Tender for new Afsin Elbistan C-E units will be released. Due to excessive financial risks not bankable, participation will be limited and the tender will be cancelled again because of high prices.

21.  Rapid privatization could be realized. Soma/ CAN/ Hamidabad/ SeyitOmer local lignite/ coal fired thermal power plants will be sold / privatized.

22.  Ladies of Straw Mountain will react to wind power plants in their Samandag region. No one will listen to them. EIA report will not be needed. There will be no land, slope, hill left without wind towers.

23.  Wind power plant investments in Cesme Peninsula will continue till the end of this year. Energy Transmission problems will be of high concern.

24.  Local production of Wind power plants will continue. JV news will increase, for the smallest power generation not less than 3 MW, Prototypes will be displayed with public inaugurations.

25.  Yenikoy / Kangal TPP rehabilitations will be completed. Foreign OEM companies, who got contracts without competitive tendering, will have good earnings compared to the work that they spent. "Black Coal / Black Energy" court investigations/ prosecutions may start.

26.  Antalya 1150 MWe CCPP is in operation. Feasibilities for additional 2600 MWe will be initiated. Since the plant cooling system will consume huge amount of drinking water, there will be extreme water shortage in the region in summer time. Investment expansion is foreseen to triple the capacity. People of the province will understand the seriousness of the situation soon.

27.  New 900 MW CCPP is completed in Bandirma. Preliminary design works for the new gas fired 1000 MWe additional capacity second plant is initiated. 

28.  Bandirma will have domestic / foreign investor invasion for TPP, CCPP, RES, HES, GES investments, and agricultural land will be narrowed.

29.  Local companies that sell their capital equity shares to foreigners will face excessive / unnecessary expenditures in foreign engineering/ foreign equipment. Foreign partners will purchase only from their own home countries with expensive OEM costs. Ultimately, because of excessive unnecessary costs, locals will feel the need reconsideration of the contracts with their JV foreign partners.

30.  The set up for new thermal power plants in unexploited local coal regions in auctions will result in a kind of absence. Only Adana Tufanbeyli 450 MWe TPP is contracted. The search for new solutions on this issue will be in the agenda again in the second half of the year.

31.  CCPP investments will continue in Samsun province based on Natural gas firing due to Blue Stream.

32.  Energy transmission in Samsun province will have overcapacity difficulties.

33.  Since “Each and every incentive/ every good intention are abused with extreme care”, political power is expected to be reluctant to issue incentives to renewable energy.

34.  Solar thermal power plants will appear in inland Anatolia i.e. Konya Plato where agriculture is not so profitable. Local production means will be investigated.

35.  In the end, solar panels from China will dominate the local market since they are cheaper than those that manufactured in local industrial zones.

36.  De-grading due to excessive wear and tear in Chinese made local thermal power plants will emerge. Early rehabilitation requirements will start.

37.  Cheap Chinese companies will get rehab and long-term operation contracts in the local market. Local unemployment will get increased. There will be difficulties in upcoming general election polls.

38.  Distribution Privatizations is now almost complete in 2010. Almost all public distribution systems are privatized.  Privatization Price is pass-through cost item to retail consumers.

39.  Ministry of Environment will approve incoming EIA applications with little worry over local NGO reactions or any scrutiny to the environmental hazards of the new investments due to ever increasing concern over upcoming energy shortage. However upcoming General elections may require policy change.

40.  Local energy markets regulatory agency will continue to release licenses to those who know or don’t know the technology, those who have financial capability or those who do not have, but to all those who complete the necessary forms.

41.  Agency will ask unreasonable number of more new staff due to ever getting work load.  Market scrutiny/auditing will be tendered to private / foreign audit companies.

42.  Public Agency will start to complain that the new building is too small for ever increasing staff. They will investigate new land purchase in Gölbaşı County to move.

43.  Medium age of Board members will be much more reduced in Public Agencies. New university graduates will be assigned as Board members, provided that they have taken top grades in Thermodynamics.

44.  Investors will have investment licenses all expired soon. Renewable energy entrepreneurs will not be able to sell their licenses. The negotiation traffic will get increased in the halls of the Agency.

45.  Since Ministry of Environment accepts all incoming EIA applications without serious scrutiny, local NGO reactions and court applications/ and unconventional opposition methods will be alarmingly increased.

46.  Upcoming General elections will/may require all new energy policy changes.

We were able to predict this much. We shall be too pleased to receive your comments/ contributions in the New Year. Happy and Prosperous New Year to you all !

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Haluk Direskeneli, Ankara based Energy Analyst

Need for new energy resources to rise

Betul Cal-  ANTALYA - Hürriyet Daily News- 
Monday, December 6, 2010

The Antalya Chamber of Mechanical Engineers held a panel on Friday regarding Turkey’s energy resources, current problems in the sector and possible ways of addressing Turkey’s possible future energy problems. Panelists commonly agreed that while the need for new energy resources is constantly rising all over the world, Turkey is failing to use its rich potential as a result of inaccurate policies regarding energy production

The need for more energy stems from a parallel and uncontrollable increase in the world’s population while shrinking energy resources give rise to serious price hikes, a leading Turkish energy specialist said Friday.

Approximately 35 percent of the world’s energy production is based on petroleum, while coal ranked second at almost 30 percent, Necdet Pamir, an academic at Bilkent and Kültür Universities and board member of the World Energy Council’s Turkish National Committee, said during a panel discussion at the conference “The Hard facts of Turkey’s Energy Market and Recommended Solutions” held by the Antalya Chamber of Mechanical Engineers.

Petroleum will be of paramount importance in terms of energy production, according to predictions pertaining to energy production in 2035, Pamir said.

Noting that almost 60 percent of world petroleum reserves are located in the Middle East, Pamir said although Turkey has important portions of reserves its biggest drawback is the high cost of searching for petroleum.

“This is an important drive behind super powers’ setting their eyes on Middle Eastern countries with lower energy production costs,” he said.

United States policies in the Middle East are based on an ambition to control the world’s energy resources, Pamir said, adding that the U.S. is dependent on other countries in energy production by up to 60 percent, a source of distress for the future of current reserves.

Although Turkey has not been fully searched for energy resources, the nation still imports a significant amount of the resources required to fuel production and dependency on imports is thus constantly rising.

Oğuz Türkyılmaz, head of the Energy Working Group of Antalya’s Chamber of Mechanical Engineers, agreed with Pamir. Only 20 percent of Turkish land and a mere 1 percent of its territorial seas have been searched for new petroleum or gas resources, he said.

Although discussions regarding the remaining extent of global fossil fuel resources continue, a common prediction suggests there will be enough coal for another 122 years of energy production, enough gas for 60 years and enough petroleum for 42 years, Türkyılmaz said.

“We should not forget that one day all these resources will be depleted,” he said.

Turkey is in dire need of new resources comparative to its size and increasing population, Türkyılmaz said, adding that this need increased 5-fold over the last 40 years while energy production showed a reverse trend – especially during financial crises, the latest example being the last quarter of 2008.

“Private sector owns 54 percent of electricity production”

A serious proportion of electricity production has been privatized in Turkey, leading to increased prices, Türkyılmaz said. “The drive behind electricity production by the private sector is increasing profit margins more and more, whether we like it or not.”

Haluk Direskeneli, also of the Energy Working Group, said the Turkish energy market is currently facing other problems.

Turkey urgently needs well-planned and sound energy policies instead of criticizing alternative energy production, like thermal power, Direskeneli said, adding that the biggest concern should be setting criteria determining the appropriate development of such alternatives.

Current problems facing the development of alternative energy production include the misuse of government incentives in the private sector, the demolition of agricultural land, inadequate supervision of environmental impact alternatives may cause and the failure to create jobs despite investment in the sector, Direskeneli said.

The panel also represented the interests of the private sector, with the inclusion of Gültekin Çınar from OlimposGaz and Ahmet Şahbaz from Aksa Energy.

While Şahbaz discussed the important role the private sector plays in energy production, paying particular attention to the work his company is currently doing in the sector, Çınar detailed the complexity of Turkey’s energy problem.

Ensuring “supply security” should be the priority of attracting new investments to the energy sector, Çınar said, adding that the strategy should include setting different policies for different energy resources.

The market for new energy resources would keep expanding both in Turkey and throughout the world, Çınar said.

Antalya MMO Energy panel

Panel on ‘’Hard Facts and Solutions to Current Energy Environment in Turkey'', Antalya, December 3, 2010, Friday 

Dear Colleagues

Turkish Chamber of Mechanical Engineers (MMO) Antalya branch held a panel on Friday, December 3, 2010 at the Chamber’s Headquarter Office Conference room.  The panel was presented by several energy experts and attended by over 200 energy professionals and students in and around Antalya with several attendees from Isparta and the writer from Istanbul. The subject matter was very important and the presenters highly qualified professionals in the energy sector, some traveling from Ankara for the panel.

This was a well presented conference where the state of the energy sector and proposed solution were discussed. The first presentation was by Petroleum Engineer Necdet Pamir, an energy expert and University lecturer. He spoke on ‘’Turkey’s Energy Policies Under the Influence of Global Developments’’. He stated that he wanted to share information on areas that he believes are being neglected in the official arena which may be helpful for the professionals and the general public, especially young engineers attending the conference.

Pamir first made reference to the famous Nabucco Project which was dubbed as the ‘’Project of the Century’’ in 2009 and stated that it was not so, since it will increase Turkey’s dependence on foreign sources of energy. Then he presented an interesting Table with Energy Policy at the center impacted by many other policies, from education to security to environment, nine plus in all.

The second presentation was by Oguz Türkyılmaz, Industrial Engineer and a member of the Board of Directors of Turkish National Committee of World Energy Council and a TAC graduate. He spoke on The View of Turkey’s Energy. Turkyılmaz presented many useful tables on the energy statistics, from installed capacity to yearly generation, comparing the status for 1973 and 2008, indicating the changes over the years. Referring to a Report issued by MMO, Oguz Türkyılmaz stated that many proposed solutions for the energy issues were presented, even challenged the Ministry officials to meet and discuss the issues and the solutions openly, calling it Hodri Meydan.

The third presentation was by Haluk Direskeneli, an energy consultant located in Ankara and the moderator and a frequent contributor the Energy Newsletter Turkey, and  spoke  mainly about the ‘’gas fired power plants in Antalya.’’ ‘’Realities of Turkish Energy Sector and Solutions’’ provided information, both troubling and also with solutions to correct the situation if the officials would listen to them.

The headquarter of Antalya branch of Turkish Chamber of Mechanical Engineers is located in a multi story office complex, owned by the chamber. There is also a library on the second floor where many technical books and magazines are available. The entrance to the building is adorned with a bust of Atatürk with one of his famous sayings:

‘’Calışmadan, yorulmadan, üretmeden rahat yaşamak isteyen toplumlar, önce haysiyetlerini, sonra Hurriyetlerini, daha sonrada Istiklal ve istikballerini kaybederler. Mustafa Kemal Atatürk.’’

There is more to write about the panel, but not enough time. It is hoped that the presenters will provide summaries of their excellent presentations and solutions to the issues.

Yuksel Oktay, Energy Consultant, 6 December 2010, Istanbul

Adana Tufanbeyli 3x150 MWe CFB TPP

Dear Energy Professional, Dear Colleagues,

SK Construction Company of South Korea has received a new turnkey construction contract at about 953 million U.S. dollars (approximately 1.1 trillion SouthKorean Won), to build  450 MWE total electricity generating capacity thermal power plant  firing local indigenous coal.

Scope will cover 3 each 150 MWe thermal power plant units in CFB (circulating fluid  bed)  technology by Yantai Hyundai Moon Heavy Industry Co. Ltd., China plant, each unit coupled with individual Steam turbine by Skoda/Doosan?. 

Construction will start in March 2011. Total Project duration is 47 months. The first unit is expected to be in operation in year 2015 following the other units in completion in 2 month intervals.  

The new 450 MWe coal fired thermal power plant investment in Adana Tufanbeyli was delayed for 3 years due to prevailing economic crisis.

Plant is expected to consume 7.2 million tons of nearby local lignite per year, and will generate 3 billion kilowatt - hour of electric energy. 

Plant operation will be in compliance with the latest EU environmental rules and regulations.  100 hectares of land expropriation is already completed. Investment will be in build-operate model.

The investment will create employment for approximately 400+ people during operation.

Coal mine has 214 million tons of proven lignite reserves in the region as reported in Turkish Coal Board reports. Available lignite coal has 1350 kcal per kg lower heating value with 44 percent humidity, 26 percent ash, 2.2 percent sulphur in average.

Overburden / coal ratio is 7.8. Coal price estimated to be 10.53 US Dollars per ton or 1.80 USD/ MMBTU as of year 2005.

Project Risk is in the coal. Available local coal is too difficult to fire in the steam boiler therefore special care in basic design is necessary. CFB design will be enforced in lieu of conventional pulverized coal firing.

It is our sincere feeling that basic design activity cannot be left at the mercy of the foreign designers. There is no luxury to leave the design control to the vendor. Investor Company has to have basic design programs and local engineering capability to monitor completely all phases of the project execution from their home offices.

We understand that project financing is secured by the investor partners.

Payback period is expected to be less than 3 years.

Project financing is difficult in Turkey, especially at this time of global financial turmoil. Public institutions have limited or almost no capability. 

Turkey will need more local private financing, and local contracting, local engineering. Private investors deserve all our support to complete those new power plant investments. 

This article is to be presumed as an executive summary for an important local thermal power plant investment.  We will be too pleased to receive your comments.

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Haluk Direskeneli, Ankara based Energy Analyst,