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Turkey coup attempt: No immediate impact on oil and gas flows, but long-term concerns raised

A failed coup attempt launched late Friday by Turkish army officers has had little or no impact on oil and gas flows through Turkey, industry officials told Platts.

Some 265 people were killed in the violence.

A spokesman for BP Turkey said Azeri crude flows through the 1 million b/d Baku Tbilisi Ceyhan pipeline were continuing as normal, as were gas flows through the 25 Bcm/year capacity South Caucasus gas pipeline.

An official from the Kurdistan Regional Government (KRG) confirmed to Platts Saturday that crude flows through the main Iraq-Turkey pipeline to Ceyhan were continuing as normal and had not been affected, while a spokesman for the region's main crude producer, Anglo-Turkish Genel Energy, said he was unaware of any interruptions to flows.

Tanker traffic through Istanbul's Bosporus Strait was halted for a period from late Friday, but restarted the following day, local media reported.

As such, supplies to Turkish oil refiner Tupras, and product imports destined for storage facilities around Istanbul and the Marmara region, are unlikely to have been affected.

Tupras did not issue a statement over the weekend and officials were unavailable for comment. The company has not been a major importer of Urals crude, which transits the Bosporus, for some years.

Russia was Tupras' fourth-biggest supplier last year, with imports averaging 62,307 b/d, or 12% of Tupras' total imports over the year. Over the first four months of this year, Tupras' imports from Russia averaged 57,060 b/d.

LONG-TERM EFFECTS UNCLEAR

While the failed coup may have had little effect on Turkey's energy markets, the longer term effects are difficult to gauge.

More than 6,000 alleged plotters were arrested and thousands more officials sacked by Sunday. And with more arrests expected, the fear is that the instability in the country will continue.

At the same time, relations with Washington have taken a serious hit because the rogue Turkish cleric alleged to be behind the plot resides in exile in the US.

Ankara Saturday barred the US from conducting further air strikes against the Islamic State group in Syria and Iraq from the Incirlik air base in southern Turkey.

A major diplomatic break with Washington would be a worrying development given that Ankara has only just succeeded in re-establishing diplomatic relations with Israel and Russia, the latter broken off after Turkish jets downed a Russian fighter jet that had strayed into Turkish airspace last November.

Unlike Russia, which supplies over 55% of Turkey's gas imports and is a source of crude, the US is not a direct energy supplier to Turkey. However, a spat with Washington would seriously impact the investment climate in Turkey, which is already set to take a major hit from the coup attempt itself.

Turkish GDP growth is already declining, with the World Bank anticipating a fall from 4.2% last year to 3.5% this year, estimates made before the UK's Brexit vote and the failed coup.

EXISTING PROBLEMS A FACTOR

Turkey already has major problems with some of its energy suppliers and is locked in long-term arbitration disputes with its two biggest gas suppliers, Russia and Iran, and the risk is that any extended instability in the wake of the coup would affect both demand and the prospects for ongoing energy investment and future projects.

Azeri upstream operator Socar is constructing the 214,000 b/d STAR refinery on Turkey's Aegean coast at a cost of around $5 billion. The plant is designed to produce 4.95 million mt/year of diesel, 1.3 million mt/year of naphtha, 698,000 mt/year of petroleum coke, 1.695 million mt/year of jet fuel, 525,000 mt/year of reformate, 455,000 mt/year of mixed xylenes, 261,000 mt/year of LPG and 157,000 mt/year of sulphur.

The bulk of this is slated to go to the domestic Turkish market, replacing products currently imported. However, any major slump in domestic demand could seriously affect the plant's viability.

Socar officials were unavailable for comment Sunday; they have previously confirmed that the plant is expected to be commissioned in late 2017.

Socar also holds the majority stake in the 31 Bcm/year TANAP pipeline being constructed to carry Azeri gas to Turkey and on to Europe.

An official for the TANAP consortium confirmed Sunday that construction of the line has not been affected by the failed coup, with officials having previously confirmed that completion of the line is viable thanks to the pre-sale of the 16 Bcm/year of Azeri gas already committed.

However, 15 Bcm/year of TANAP capacity has yet to be filled. Any major slump in Turkish demand would likely affect not the line itself, but the development of new upstream resources needed to fill it.

Possible suppliers for that 15 Bcm/year of TANAP capacity include gas fields in the Kurdistan region of northern Iraq and the East Mediterranean gas fields belonging to Israel and Cyprus. Turkey's state gas importer and transit line operator Botas, which also holds 30% of TANAP equity, has announced plans to start work this year extending its gas transit grid to the Iraqi Kurdistan border, with a 20 Bcm/year line to link to a pipeline already being constructed in the Kurdistan region.

Those plans are already on hold thanks to the ongoing conflict with the Kurdish separatist Kurdistan Workers party (PKK) in southeast Turkey.

Similarly, Turkey's recent rapprochement with Israel came about largely due to Turkish interests in transiting up to 10 Bcm/year of Israeli gas to Turkey.

Those plans were always dependent on a long-awaited settlement with Cyprus, a deal that any continuing instability in Turkey is likely to make more difficult to realize even before any possible decline in Turkish energy demand.

Source: Platts