Sunday, December 11, 2011

Energy and Infrastructure Forecast for 2012

Dear Energy Professional, Dear Colleagues,

In this article, I aim to make forecast in our local energy markets in the New Year 2012.  Economy and business future is shaped by expectations. Market expectations are important in the economic forecasts as well as investments.  There are many economic forecasts made by the nationwide daily newspaper columnists, however as we all see there are almost none made in energy markets.  Within my capacity, I tried to outline a draft forecast albeit maybe somewhat irrational/ unfair for the New Year. Here are expectations for the New Year 2012;

1.                         In early days of 2012, Iran will again cut-off Natural Gas flow due to excessive needs of her own domestic market for at least 1-month. Russians will increase supply capacity in the Blue Stream for a substantial premium as usual.

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

3.                         Russians will experience serious shortage of commercial financing in construction of nuclear power plant in Akkuyu. Because the project is not commercial any more, but it is now purely political. Political risks of a nuclear power plant project cannot be properly estimated; hence non-commercial project has no commercial meaning in our opinion.

4.                         Sinop Nuclear power plant project has been passed first to Japan from South Koreans. Now French EdF and GdF are in negotiations with the responsible bodies. We suspect if French companies can secure approx. 20 billion US Dollar project financing during Euro Zone credit crunch days. Moreover we have long term hostility with French authorities, not to be erased overnight.

5.                         We expect new investment initiatives on new found Konya Karapınar coal mine fields in order to build new thermal power plants under locally developed clean coal technologies.

6.                         Konya ILGIN local coal firing 3x150 MWe new thermal power plant construction is in progress.

7.                         We hope to start new investment for new natural gas fired 450 MWe Combined Cycle power plant at the seaside location of former Mersin Cukurova Elektrik oil fired thermal plant.

8.                         Thermal power plant investment in Amasra is in EIA scheme. It may be activated in Amasra with US TDA Fund on coal-bed methane utilization with high US contractual and OEM participation.

9.                         Local Regulation of foreign personnel employment is changed before the general elections, so cheap foreign employment is not possible.

10.                     Situation in Gerze seems getting out of control, the local community makes oppositions in basketball matches in Istanbul, sets reactions in front of the central building. Beer sales still have 80% market share under heavy pressure from large/ expensive advertising, because competitor could not increased production capacity. Smart investor should stop further push and direct available investment funds to some other sectors.

11.                     Zonguldak Bağlık İnağzı hard coal underground (-400m) mine fields leasing scheme is finalized. Company will look for a nearby seaside empty land to build new 1200 MWe thermal power plant soon.

12.                     Thracian Malkara new local lignite firing thermal power plant investment will be initiated in phases to reach 3x150 Mwe capacity

13.                     Çankırı Orta 3x150 MWe thermal power plant construction is started. Two other investors are making preparations in the region.

14.                     Current account deficit (CAD) is in sever situation due to increased spending on imported coal and imported natural gas purchases, at intolerable levels. Increased use of domestic coal / energy sources became inevitable.

15.                     Thermal power plants are in privatization, but investment appetite is low because of the ongoing global economic crisis. Process will continue in second half of next year.

16.                     Turkey is still at very low annual per capita electricity / production / consumption of 3000 kWh, EU current average is 10K; North American average is 12K. Local market needs more generation.

17.                     Foreign investors have lost their appetite; domestic investors do not have money.

18.                     Local design, local production, local engineering do not exist yet...

19.                     Western natural gas pipeline Russia's Gazprom contract terminates at the end of this year. We all are afraid of the upcoming situation. Because there is great uncertainty. Eskisehir compressor station is in maintenance, EgeGaz supply is limited. Import Licensing of private companies is not in order. Iran, Iraq, Azerbaijan, Turkmen gas are not available in the short term.

20.                     Ministry of Environment is in restructuring. EIA obligations are lifted. The secondary legislation is still pending.

21.                     HEPP and thermal projects receive severe reactions of local people, and reactions will continue on all legal platforms.

22.                     In recent popular movies, investors are more or less incorrectly/ but implicitly represented as negative profiles, it is alarmingly too deceptive. How that profile will be corrected in public image??

23.                     Due to ongoing high environmental pollution, no sufficient filters, no desulphurization, no rehab, so Unit Afsin Elbistan-A, should be shut down, dismantled and sold as scrap. One cannot see any initiative...

24.                     Elbistan Çöllolar landslide disaster was forgotten after the event, we all want to know the remedies, corrective actions.

25.                     Afsin Elbistan C-E tendering is in document preparation in central procurement department of the authority with foreign consultant, anyhow too much time/ effort/ money is consumed if not wasted.

26.                     Rehabilitation of public thermal power plants are almost completed, however we do not have the outcome reports if all satisfied, met with expected requirements.

27.                     Thracian HVDC Submarine transmission problem of the second combined cycle power plant in Bandirma is pending. If it is not possible, it is better to change the site. Why wait??

28.                     Adana Tufanbeyli local coal fuel 3x150 MWe CFB thermal power plant contract is given to South Korean company. We all hope best results in project construction and in operation.

29.                     Samsun Terme new investment for construction of 880 MWe CCPP has been stopped by the court the decision. What will be the case in future, everyone is trying to figure out .

30.                     Kırıkkale 800 MWe Eser, and 400 MWe Gama CCPP are in progress.

31.                     Imported coal firing 625 MWe AYAS Sugözü project is in progress.

32.                     We expect reorganization as well as restructuring in Ministry of Energy and Natural Resources in order to reduce staff, to reassess duties and responsibilities...

33.                     East Med Cyprus offshore drilling work did not reveal expected results. Offshore Contractor Company is not comfortable with the early results. South Cyprus media and government still push positive expectations, trying to keep the case in agenda, but the situation seems hopeless, the investor does not want to gamble any more, return is not earlier than 10 years in time...

34.                     No hostility foreseen between Greece, Israel and Turkey, however pushing for fair share of nearby natural resources is the rule of the game in international politics.

35.                     Black Sea drilling is a never-ending story, everyone is talking about very large reserves, but there is nothing in reality.

36.                     Investment appetite in Wind capacity is almost saturated, 

37.                     Investment in Solar energy is still very little, without making local fabrication of the solar equipment; one cannot go further with expensive electricity generation.

38.                     EMRA licensing is on with reduced speed, copy / paste applications for license overrun archives. Rejection is less than 2%. 

39.                     Electric cars / buses are in agenda, but we all ask who will be paying high cost of new transformers due to additional heavy pulse load.

40.                     How do we run away the climate change obligations of Durban? We had low profile participation from the public sector, with almost no proper presentation to explain our cause.

41.                     Nabucco pipeline project is pending. On the other hand, Azeri gas via TransAnatolian Pipeline project is in fast-track agenda.

42.                     US Presidential elections are in the coming year. We wonder if it would be better when the Republican candidate wins...

43.                     Oil prices per barrel may rise next year due to ongoing financial risks.

44.                     Slowdown in demand for electricity in the first quarter is expected.

45.                     Submarine HVDC cable, gas and water supply pipelines from Turkey to Cyprus are on the agenda,

46.                     Russia political climate will be too hot in the first half of year 2012, but country will recover quickly,

47.                     Military power in Egypt does not want to leave; in any case new civil administration will come to power.

48.                     Changes of power in Syria are expected by summer.

49.                     Turkish natural gas demand will begin to fall, probably by the second half of the year.

50.                     Accelerated increase in local diesel prices, is expected,

51.                     Privatization strategy will be reconsidered in order to increase the ongoing high income based tendering process.

52.                     Turkish oil law will be changed, again,

53.                     EMRA needs to be reorganized and restructured, and Agency may be divided into two, maybe three.

54.                     Euro is expected to depreciate, while US Dollar will appreciate.

55.                     Euro Zone crisis will continue in 2012. So reduce your expenditures, reduce your spending, reduce your borrowing, stay cash, stay liquid. 

We were able to predict this much. Everyone in business environment says that 2012 will be a difficult year.  We shall be too pleased to receive your comments/ contributions in the New Year. Happy and Prosperous New Year to you all!

Haluk Direskeneli, Ankara based Energy Analyst


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