TPAO Highlights Black Sea Prospects
At the APPEX Regional Forum last week, oil executives were keen to drum up support for Turkey’s onshore and offshore energy prospects. This was hardly surprising: the conference was taking place in Istanbul and Turkey’s state oil company TPAO was sponsoring.
But the figures being discussed, and the palpable interest they generated about the opportunities in Turkey suggests that the country’s dogged attempt to portray itself as a producer in its own right – not just a transit state – are paying off. The biggest question is whether the major players are ready to invest big into Turkey.
If there is a rush coming, the Black Sea seems to be a likely place to start. Exxon, Petrobras, Shell and Chevron are all active there, and participants suggested that negotiations were currently ongoing with several other IOCs. Not that the Black Sea is without its challenges: Chevron temporarily withdrew in late 2010 and Exxon abandoned the search at two areas in late 2011 after coming up dry. “The results [of early exploration] have been somewhat disappointing”, TPAO acknowledged.
But this seems to have been a minor setback, and Turkish officials were keen to talk up the Black Sea’s strong geological prospects. TPAO’s Offshore Manager Veydat Aydemir said that since 2004 Turkey had acquired (mostly domestically) 80,000km2 of 2D seismic and 15,000km2 of 3D seismic in the Black Sea. This includes an understanding of a continuous 1000km stretch. He said that the company was confident that its exploration model was sound and was determined to return to deepwater drilling alongside international partners. Shallow appraisal wells are set to be drilled throughout the Black Sea in the next two years, alongside extensive activity (shallow and deepwater) by international companies.
The Akçakoca and Istranca areas are some of the most significant gas finds in the Black Sea, TPAO President Mehmet Uysal said. Akçakoca, which is being drilled by a number of companies including TPAO, Tiway Oil and Foinavon Energy, is believed to hold up to 2tcf of gas.
Logistics also have to be factored in, Uysal pointed out. Limited access through the Bosphorus means that moving large-scale rigs and platforms into the Black Sea is time-consuming, and expensive. He said that deepwater rigs must be dismantled into two sections, and the Bosphorus entirely closed off to other traffic, for the equipment to be shipped through the narrow waterway. Hardly an insurmountable obstacle, but one that will affect rig supply if Black Sea oil and gas really takes off.
The eastern Mediterranean – specifically the Mersin and Iskenderun basins – was the other offshore area of focus. Both areas are believed to be highly prospective but largely unexplored. Partly this is for political reasons – maritime borders in the region are notoriously vague – but also because TPAO has only recently opened up the area to international partnerships. Shell is leading the charge there: it signed an exploration deal with TPAO last November and is conducting initial research. TPAO itself is planning to drill a deepwater well next year. Other firms are watching closely, company representatives said in Istanbul.
The eastern Mediterranean is also the route through which Israeli gas would have to take if it was transported to Europe or Cyprus via a pipeline. This scenario has been hammered as being politically unviable (given the tensions between Turkey, Israel, Greece, and the two Cypriot states) and commercially unsound (both Israel and Cyprus have discussed plans for LNG terminals instead). But TPAO were adamant that the “only way to produce and export” Israeli and Cypriot gas would be through a “peace pipeline” to Ceyhan in Turkey. Few people are buying that idea.
Onshore it was shale that garnered the most attention. Unconventional resources, Uysal said, were “A game changer… we cannot ignore this”. Central Anatolia’s shale reserves are estimated at around 1tcm, southeastern Anatolia’s at 1.5tcm, and the Thrace Basin at 3.5tcm.
The Thrace Basin is probably the most advanced in exploration terms, whilst the southeast has suffered from the ongoing fighting between the army and Kurdish separatists. One oil explorer active in the southeast said that the violence was limiting access to their assets and making it difficult to conduct research.
Although some participants reserved their judgement on whether the figures provided by TPAO were accurate, they agreed that little of the prospective areas - including 400,000km2 of offshore sedimentary basins and significant onshore shale plays - very little had been explored. Given the size of reserves in nearby areas, including the Israeli/Cypriot sectors of the eastern Mediterranean and Iraq, there was significant interest in what Turkey had to offer.
Most participants were also fairly pleased with the financial terms on offer: a flat 12.5% royalty tax and a 20% corporate tax rate, far more attractive terms than in other neighbouring areas. Although there are concerns that this could change if Turkey becomes an energy hot spot, the government and TPAO seem to be very much open for business.