INCREASING IMPORTANCE OF ENERGY IN TURKMENISTAN – TURKEY RELATIONS – Av.Dr.Döwran OrazgylyjowJuly 28, 2016
Turkmenistan and Turkey are “eternal friends” coming from the depth of history. Relations between these countries have reached high levels today thanks to successful relations managed by both countries’ leaders on the basis of friendship and fraternity. Currently it is the “Golden Age” of the relations between these two sister countries.
In the last 5-6 years, economic relations between Turkmenistan and Turkey have developed, foreign trade volume has increased incrementally, cost of joint construction projects have reached billion dollars. Today, projects undertaken by Turkish companies abroad are mostly in Turkmenistan. For the first time since 1970s when Turkish construction companies first expanded abroad, total volume of construction projects undertaken by Turkish companies in a single country within one year have exceeded 10 billion USD, and this country is Turkmenistan. Since early 2013, total cost of construction projects carried out by Turkish companies in Turkmenistan is 10.3 billion dollars.
The success achieved in the fields of construction and foreign trade would be extended to the field of energy in the near future because Turkmenistan and Turkey have a great potential in “energy” relations. Turkmenistan has important advantages related to oil and particularly natural gas. Turkmenistan has about 10-12% of proven natural gas reserves in the world, which is sufficient to meet Turkey’s current natural gas demand for 500 years by itself. Successful internal and foreign policies pursued by Turkmenistan Head of State Berdimuhamedov helped develop the investment environment, which leads to more direct investment in Turkmenistan. It increases the interest of both local production companies and foreign oil investment companies in Turkmenistan. Today foreign investment companies have a huge share in Turkmenistan’s oil and natural gas production. International oil companies operate in Turkmenistan on the basis of “production sharing agreement” model. Turkmenistan exports natural gas to China, Russia and Iran, and it is expected to export natural gas to Afghanistan, Pakistan and India when TAPI Natural Gas Pipeline project is put into service. Turkmenistan is expanding its natural gas market gradually, and Turkey has a crucial role in Turkmenistan’s getting into the European market.
Turkey is important as a huge and fast-growing natural gas market. It is also important due to its strategic location and the energy policy it pursues. In the last decade Turkish natural gas market grew three times, which indicates that the natural gas in Turkey is rapidly developing. 45-bcm natural gas market in Turkey, which has reached higher levels than most of the natural gas markets in Europe, indicates the huge potential and rapidly growing character of the market. Consumption in Turkey corresponds to 1.4% of global natural gas consumption. Turkish gas market’s future growth potential further increases its importance. According to estimations, Turkish natural gas market will grow 45% and reach an annual volume of 65 bcm by 2023. Most of the natural gas import agreements will expire until then, which increases the interest in Turkish gas market. As a “bridge” between Europe and Asia, Turkey is not only an important natural gas market but also a potential key actor in natural gas trade. Currently Turkey produces less than 1 bcm natural gas but it exports more or less that amount of gas. In other words, the volume of natural gas exports which is approximately the same with the volume of natural gas production indicates that Turkey underlines its place in global natural gas trade as a key actor. We can discuss European natural gas market in another article but when we consider the fact that Europe’s gas imports increase day by day and Turkmen gas is important for the economic and strategic security of Europe; energy relations between Turkmenistan and Turkey becomes more vital.
Current energy relations between these countries include the transportation of Turkmen oil to Ceyhan via BTC pipeline, export of Turkmen electricity to Turkey, delivery of tens of thousands of Turkmen oil products to Turkish market every year, and natural gas agreements. As summarized above, “energy potential” of two countries is much more than current levels. This “energy potential” will be realized when Turkmen natural gas is delivered to Turkish and European markets in the near future. Today, everybody knows Turkmenistan’s reliability as a partner in energy trade. Turkmen gas is important for Turkey’s energy security with regards to the threat of using energy as a “weapon”. When Turkey will become an EU member is still uncertain, but Turkey’s importance for EU will increase when European energy security is enhanced with the natural gas delivered to EU through Turkey. It is obvious that increasing natural gas revenues will strengthen Turkmen economy considering the fact that natural gas is an essential item for Turkmenistan’s foreign revenues. Turkish companies are highly active in Turkmenistan construction sector; thus, increasing natural gas revenues will be beneficial for Turkey as well. Thousands of Turkish citizens work in Turkmenistan, which contributes to Turkish employment. Moreover, equipment and materials are mostly imported from Turkey for the projects carried out by Turkish companies, which directly contributes to Turkish exports. Most Turkish companies open branches in Turkmenistan; in other words, corporate tax for projects carried out in Turkmenistan by Turkish companies is paid in Turkey due to current double taxation agreements.
In brief, natural gas trade between Turkmenistan and Turkey will contribute to the economic and strategic benefit of both countries as well as to regional and global energy security.
*Dr. Döwran ORAZGYLYJOW, “Fatherland Turkmenistan” Journal Chief Editor