ECONOMIC BROTHERHOOD: New projects in fuel & energy complex of Turkey and Azerbaijan

Part 1

Azerbaijani-Turkish relations have historically gone beyond mere interstate cooperation and have always been more than just good-neighborly relations. ‘Brothers forever’ – this phrase is most suitable for describing the level of mutual trust, support, and assistance of two states, not only mental, spiritual, and cultural, but also political and economic.

Turkey is a participant in almost all large-scale regional projects initiated by Azerbaijan. It is the second-biggest trading partner of Azerbaijan after Italy (trade turnover between the countries in 2020 amounted to about $4.5 billion). In addition, Turkey ranks first among investors in the non-oil sector of Azerbaijan. At the same time, this is the country in which Azerbaijan invests most of all (the total volume of investments in all projects initiated by Azerbaijan is approaching $19 billion).

This list can be continued for a long time, but something else is important – the parties are constantly finding new areas and ideas for economic cooperation, delving deeper into the paths already paved, and opening up additional opportunities.

SOCAR and TPAO tandem: Proposal on Libya

A successful example of the implementation of such large-scale projects as the Southern Gas Corridor and Baku-Tbilisi-Ceyhan, as well as the successful presence of SOCAR in Turkey and Turkiye Petrolleri (TPAO) in Azerbaijan, makes it possible to speak with confidence about the possibility of expanding joint business in the fuel and energy complex to tandem participation in third-party country projects. This issue was even on the agenda of the latest talks during the visit of Turkish President Recep Tayyip Erdogan to Azerbaijan – he himself notified about this during his visit to Shusha. Later, commenting on his statement in an interview with Turkish media, Erdogan noted that these could be projects in Libya: “There is a company associated with TPAO, together with which, just like we are now interacting on the TANAP and TAP projects, my dear friend Ilham Aliyev and I can act in Libya too.”

In his opinion, Azerbaijan and Turkey have rich knowledge and experience, so they can take steps in the field of drilling as well. “I offered him [President Ilham Aliyev] this, and he expressed his satisfaction with this proposal and his readiness to work in this direction. I hope that by taking such joint steps, we will find an opportunity to open up not only for Europe, but also expand our activities in our own countries, and even more in other countries,” Erdogan stressed.

In turn, the chief of SOCAR Investment Department, Deputy Chairman of the Board of Directors of SOCAR Turkey Energy, and Petkim Holding Vagif Aliyev, commenting on this statement, stressed that SOCAR and TPAO have been making joint investments since 1994. “Naturally, we intend to continue this,” he said, adding that these aren’t very remote regions. It is possible to operate in nearby areas rich in energy resources.

Turkey has been engaged in the exploration and production of oil in Libya for almost 20 years, TPAO conducted exploration and production studies in a total of 11 fields and discovered oil in 7 fields, and $100-150 million was spent on this. However, all projects were suspended in 2011 after the civil war broke out in Libya. Leaving aside the political aspects of this issue, at the end of 2019, the Government of National Accord of Libya and Ankara signed an agreement on borders in the Eastern Mediterranean. In June 2020, Turkish Energy and Natural Resources Minister Fatih Donmez said that Ankara had identified seven license areas in the Eastern Mediterranean for exploration and oil drilling. The minister added that drilling could start within 3-4 months. In April this year, Fatih Donmez held talks in Ankara with Libyan Minister of Oil and Gas Ahmad Muhammad Aoun. Later, the Turkish minister wrote on Twitter that the parties ‘decided to develop cooperation, especially in oil and natural gas.’

Naturally, Turkey wants to complete the work it started, mainly since seven fields have been found to have effective hydrocarbon reserves. However, it is too early to say in what part the partnership with SOCAR will be involved – in any case, the Azerbaijani company has enough experience and resources to evaluate any proposal of the brotherly company.

Projects in the Black Sea

At the same time, Libya is far from the first option for joint work of SOCAR and TPAO in hydrocarbon production. Azerbaijan can also take part in projects for the development of hydrocarbon resources in the Black Sea.

Turkey spends an average of more than $40 billion annually on energy imports. At the same time, according to available data, its production is at the level of 350 million cubic meters, that is, less than 1 percent of the country’s annual consumption. Therefore, the attempts of the Turkish authorities to ‘examine every square meter’ are fully justified, especially since, according to geologists, the shelves of the Mediterranean and Black Seas should store a lot of natural gas and oil.

In 2010, the Turkish TPAO carried out work with BP, ExxonMobil, Chevron, Petrobras, which explored five subsoil blocks in the Black Sea. Turkey spent $4 billion in geological exploration of the Black Sea shelf of Turkey, of which Turkey spent $500 million. However, the country failed to find anything there. For some time, the work on the Turkish shelf of the Black Sea was frozen.

But, as they say, the one who seeks finds – in 2017, Turkey decided to resume research with the participation of its vessels. The first Turkish seismic vessel, Barbaros Hayrettin Pasha, has carried out exploration work and has identified rich natural gas reserves off the western coast of the Black Sea. On July 20, 2020, the Turkish drilling ship Fatih began operations in the Black Sea at the promising area Tuna-1, located near the intersection of the Bulgarian and Romanian maritime borders with the internal waters of Turkey. On August 21 last year, Recep Tayyip Erdogan announced in a televised address to the nation that the country had discovered the Sakarya, the largest natural gas field in the country’s history, in the Black Sea at a depth of 2,100 meters, the reserves of which are estimated at more than 300 billion cubic meters. This is a truly historic discovery for Turkey, which will save billions of dollars in energy imports in the future.

Then President Ilham Aliyev also sent his congratulations to Turkey, noting that discovering a new field is the embodiment of the industrial potential and the growing power of this country. “Turkey has made another important step in the field of energy security. The development of this gas field will benefit the brotherly people of Turkey. I am convinced that other exploration projects being currently implemented by Turkey will be successful too,” read the Azerbaijani president’s appeal to Erdogan.

On June 4 this year, the Turkish leader announced the discovery of a new gas field in the Black Sea, the volume of which is 135 billion cubic meters. Thus, the total volume of natural gas reserves discovered by Turkey in the Black Sea has reached 540 billion cubic meters.

Deputy Chairman of the Board of Directors of SOCAR Turkey Vagif Aliyev said Turkey’s discovery of new gas reserves in the Black Sea is of strategic importance. Referring to the possibility of SOCAR’s participation in these projects, he added that “in theory, we can cooperate with TPAO in the field of development and production from fields. This is within the scope of our professional interests. Due to its depth and intensity of waves, the Black Sea may not be suitable for the installation of a traditional platform. However, production can be established with the involvement of new technologies, including without direct participation of people in the process,” said the representative of SOCAR Turkey.

Again, SOCAR draws on its many years of experience in oil and gas exploration and offshore drilling. The Caspian Sea is also far from being an ‘easy’ site for oil production, however, many years of research carried out by Azerbaijani oilmen here both independently and in partnership with foreign companies allowed them to accumulate practical knowledge and skills, as well as study the latest technologies. Some of them were even used for the first time in Azerbaijan.

So, of course, Azerbaijan, with its rich history of oil and gas production, the experience of cooperation with foreign oil giants, good human resources, etc., can become a profitable partner in energy projects for fraternal Turkey.

Expert Gulu Nuriyev