Energy: A new world challenge and a complex dilemma for Turkey

Energy: A new world challenge and a complex dilemma for Turkey

00:40 02 March in ARTICLES, In English


Hürriyet Daily News | Monday, March 2 2015 


The ongoing energy crisis, originating from the substantial and totally unexpected drop in the price of oil, is nothing like what we have seen before. The historic slide has roiled the energy sector, with fallout ranging from stalled oil and gas developments to bankruptcy filings and imbalances in consumer countries.

The lack of new investments in production because of uncertainties could push prices much higher in 2017 and 2018 when a supply gap might emerge. But not yet to the $100-plus levels unless there is a drastic cutting of production, at least by a margin of 1.5 million barrels per day. Unlike in the past, the potential for users to go to alternative energies is also greater.

Geopolitically, a belligerent Vladimir Putin could stir troubles abroad to distract from the dire situation at home and the brutal Islamic State of Iraq and the Levant (ISIL) crisis in Syria, Iraq and Libya could get out of hand, putting the whole region on fire. Interestingly, however, these tensions, which are incessant, have not been duly reflected in the oil price.

We are about to discover that it will be as disruptive as the shock of oil price hikes in 1974. And Turkey, a country quite intertwined in the global energy economy by virtue of its heavy dependence on imports of oil and gas, 93 and 98 percent respectively (also in considerable degree of imports in coal, renewables and nuclear technology), can hardly escape the winds of change now in the making as a result of these new dynamics.

Undoubtedly, Turkey has big ambitions for the future, aspiring to become one of the world’s top 10 economies by 2023 (which is unlikely to occur now, but the ambition remains – even if it is achieved at a later date); it has a young and increasingly better educated, mobilized population; its middle-class is beefing up and the urban transformation has gained incredible speed – all these factors generate stronger energy demand, significantly above the world average.

Therefore, energy is not simply a commercial commodity for Turkey to fuel its ever-demanding economic machine, but it is a “soft-belly” and represents a vital national security matter, linked inextricably to the global system. It is not only energy supply security that Turkey strives to achieve through the diversification of energy sources and fuels, but also the attraction of massive international capital (to the tune of $120 billion over the next decade) into major energy projects.

Therefore, it is critically important for Turkish business and government leaders to take the actions proposed below:

Incorporate the environment, taxation, competition, investment, trading, commerce and foreign policy/security into the energy calculus with the aim of creating a new integrated energy vision and management;

Given that energy is not a local, but global strategic commodity, follow and influence world energy dynamics as much as possible because Turkey’s energy is plugged into the world system, with decisions and choices in Riyadh, Beijing, Brussels and Washington DC having consequences for Ankara;

Double the efforts to improve energy efficiency and conservation through an ambitious demand management policy and capacity building (which is also one of the best energy security strategies);

Stay away from energy-intensive and polluting industries (which could possibly be relocated to energy-rich countries in the region) and turn toward intelligent technologies and sectors that bring higher added value and require cleaner energy;

Focus on the economic exploitation of domestic energy resources as befits local resource endowments (i.e. wind and geothermal in the Aegean region, photovoltaic power in the Mediterranean, Central Anatolia and southeast, small-scale hydro and offshore wind in the Black Sea);

Invest in equity oil, gas and petrochemicals in the surrounding region where hydrocarbon riches offer better opportunities and rates of return, as other energy-hungry nations such as China, Korea, Japan and India do; and with the ambitious goal to supply at least 50 percent of the country’s energy requirements from nearby and controllable joint production sources;

Implement the requirements for becoming a genuine regional energy hub, which goes beyond the development of pipelines that crisscross the country (i.e. the Southern Gas Corridor, Blue Stream and “Turkish Stream,” Kurdistan Regional Government [KRG] oil and gas pipelines, the Iran-Turkey pipeline and the potential East Med gas pipeline). Such an ambition needs to be supported by market and price liberalization, physical infrastructure, conducive legal and institutional frameworks, and a “soft power” approach in foreign and security policy;

Also, create a regional energy exchange in Istanbul for electricity, gas, coal and oil markets;

Given that Turkey has an expanding energy economy, but only a handful of world-class energy companies, develop a strategy to build internationally competitive “energy champions” through public-private and international partnerships (but not another episode of state-owned or -controlled enterprises);

Invest in technology and human capital enhancement, while reducing subsidies, in order to be one of the pioneers in green energy, particularly in wind, geothermal and solar energy, where Turkey has a strong competitive advantage; and

Create a Turkey Energy Fund to provide long-term and low-cost seed capital to energy projects and deals that are considered to be essential and strategic.