Genel Sets Sights on Turkey and Europe for Gas Exports
Following the Deepwater Horizon disaster of 2010, Tony Hayward, CEO of British Petroleum Plc was faced with a very difficult job. He tried to confront the environmental issues as the energy giant was under siege of media and governments. The accident killed 11 workers and is the United States' worst offshore oil spill, which was also the biggest-ever accidental release of oil into an ocean amounting to over 5 million barrels. It took BP months to plug the leaking oil well. In November 2010, he stepped down from one of the highest-ranking positions in energy the sector globally.
In 2011, he founded a company called Vallares with banker Nathaniel Rothschild and Julian Metherell to invest in oil and gas ventures. In the same year, Vallares merged with Genel Energy, a Turkish company that has large interests in Kurdistan region of Iraq. Mehmet Sepil, a Turkish businessman with interests in the construction industry, founded Genel in 2002.
On the sidelines of the Atlantic Council's Energy and Economy Summit in Istanbul, Mr. Hayward discussed his future investment plans both in oil and natural gas with Natural Gas Europe.
Baghdad and Irbil agreed on oil revenue sharing last week. What are your future investment plans after this landmark agreement?
I think our investment plans will not change. We are committed to the Kurdistan region for about ten years and there has been a focus there for the last four. We are encouraged by the agreement; we think it’s a very important first step, which is a consequence of compromise on both sides. That’s really a good thing, and we hope that it will be the foundation of a broader, longer-term agreement.
Also, there are security issues rising at the KRG border. What’s your outlook on Iraq from a security perspective?
We’re in the Kurdistan region of Iraq, and also we continue to have great confidence in the KRG’s ability to keep our operations safe and secure. We continue to operate through the summer, increased the production even as ISIS emerged. That’s particularly through very significant international support that the region is receiving to confront the threat of ISIS.
Why did the geopolitical tensions not change the course of the oil prices from declining?
The oil market is driven by fundamentals at the end of the day. The fundamentals that we have today, there’s more supply in the oil market bigger than demand. It’s a consequence of two things. It’s a consequence of weaker demand than expected and consequence of very lackluster economic performance of Europe and a slowdown in China. And it’s a consequence of more supply coming to the market. The biggest impact of course is the growth in the US, which everyone could predict and everyone could see, but no one expected Libya could come back to the market with 900,000 thousands barrels per day. And these two things result in imbalances. To get the market back in to balance, today we need to take some supply off the market. It looks very likely that oil market will be back in balance by the second half of next year.
Are you expecting any decisions on OPEC meeting?
I gave up long ago predicting what would come out of OPEC meetings. It’s much better to ask them, and let them make their decisions.
What's your take on natural gas in Iraq? What are your plans for natural gas investment and any plans to export gas to Turkey?
As a growing economy, Turkey spends $50-60 billion annually for its energy imports. The Russian Federation, Azerbaijan and Iran are the biggest energy exporting countries to Turkey, and also Turkey wants to diversify its energy resources, and decrease the dependency ratio on energy imports with investments in renewables, solar, nuclear and local resources like lignite.
We signed an agreement with the KRG last week, which we believe is very important and will enable the development of the two largest gas fields that Genel discovered in the region. The names of the fields are Miran and Ban Nawi. Between them, they have between 12-20 trillion cubic feet of natural gas to be developed. It's very large volume, which is almost equal to 50% of Shah Deniz field reserves in the Caspian Sea. We expect the first development will be in the Kurdistan region, domestic markets to pair the economic growth in the Kurdistan region. More broadly, it will also benefit all of Iraq.
The second phase will be to begin exporting natural gas to the Turkish market in 2017-2018; the exports may begin from 2017 winter. We can ship 10 bcm per year from 2017, the exporting volume could rise to 20 bcm by 2025, which will be the 30% of Turkey’s natural gas needs. Turkish companies may benefit from the expanding the natural gas industry of the Iraqi Kurdish Regional Government. With time, who knows, we may see the molecules of Kurdistan regional natural gas coming to Europe in the coming future.
Murat Tinas