Energy routes avoid major disruption from failed Turkey coup attempt

Turkey’s crucial energy routes avoided prolonged disruption from Friday’s failed military coup, but the action underlined the risks associated with its role as a key trade crossroads between the Middle East and Europe.

The 27-kilometre Bosphorus Strait connecting the Black Sea to the Mediterranean was shut for several hours on Saturday by Turkey’s maritime authorities over security concerns.

Cargo passing through includes a significant amount of Russia’s crude oil exports, and non-oil commodities from Russia and other countries bordering the inland sea.

Russian authorities at the Black Sea port of Novorossiysk said they expected oil shipments would not be affected.

There was also no delay to shipping through the Mediterranean port of Ceyhan, which is the terminus of Turkey’s two pipelines bringing crude from the Kurdish province in northern Iraq, and from Azerbaijan through the Baku-Tbilisi-Ceyhan pipeline.

The Ceyhan pipeline has become invaluable for oil producers in the Kurdish region of Iraq, which since last year has taken greater direct control over its oil exports.

The Kurdistan Regional Government’s energy ministry reported last week that it had shipped an average of nearly 500,000 barrels per day of oil through Ceyhan last month, bringing in revenue of more than US$561 million.

UAE companies have a direct stake in smooth shipments of oil through Turkey, including RAK Petroleum-controlled DNO, which operates the Tawke oilfield, one of the largest in Iraq’s Kurdish region, with a production target this year of 135,000 bpd.

Dana Gas, which mainly is a gasfield operator, also exports condensate through Ceyhan, while the Abu Dhabi National Energy Company, known as Taqa, is expected to start up its Atrush oilfield near the Turkish border at a rate of 35,000 bpd this year.

Disruptions to the Ceyhan pipeline caused by conflict with ISIL militants have already cost the KRG and oilfield operators this year.

Results have included a 10 per cent decrease in output from the Tawke for the first quarter of the year, compared with the same period last year, because of sabotage.

Some smaller operators already have diverted production to refiners in neighbouring Iran since international sanctions against Tehran were lifted, and some of the larger operators are considering following, said Hadi Fathallah, an economist and independent energy consultant.

Turkey still harbours big plans to be a natural gas centre for Russia, the Caspian and the Middle East, through pipelines that are at various stages, from concept to completion.

The coup attempt will probably give investors pause but should not disrupt any long-term investment, said Michael Harris, the head of research and Turkey expert at Renaissance Capital in London.

“Energy investment is something that requires a lot of political will, and the more [president Recep Tayyip] Erdogan consolidates power the more likely it is he will be able to push through deals,” Mr Harris said.

Mr Erdogan’s government had moved in the past few weeks to mend diplomatic fences with Russia, which is by far Turkey’s dominant gas supplier, and with which it also has key energy projects including gas pipelines and the building of Turkey’s first nuclear power plants.

A deal was also struck with Israel, which included a gas supply contract to receive gas from Israel’s offshore Leviathan field.

“Even if the result is more consolidation [of power by the Erdogan government], I don’t think it is going to be viewed as making any of these energy projects higher risk,” said Mr Harris.

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