Is Turkey’s Shale Taking Off?

Shale in Turkey, both oil and gas, has become something of a talking point in recent months, and ExxonMobil’s reported interest back in March sparked a flurry of industry talk about whether or not Turkey could be a new shale giant.

Of course in the shale industry every burst of enthusiasm is met with an equal wave of cynicism. There has been speculation that Turkey’s shale prospects were over-inflated or that the country would never have adequate technical skills in place to take full advantage of its resources.

But over the past few weeks and months it has become clear that Turkish shale is not just a flash in the pan. Although Exxon’s interest made the most headlines, the real story is the smaller firms. They are making serious progress on tapping Turkey’s lucrative shale basins, and stand poised to enter the big league if and when Turkish shale takes off.

For instance on 16 August Anatolia Energy spudded its first exploratory well at the Dadas Shale, the most promising formation in south-eastern Turkey. The drilling was carried out by Anatolia’s equal partner in their joint venture, Çalık Enerji, on their Antep Licence, a 422-thousand acre field around Gaziantep near the Syrian border.

Antep is estimated to contain about 159 million barrels of unrisked reserves, mostly shale oil. Anatolia also holds licences at Besni, Sinan, and Bismil, all in southeastern Turkey, bringing its total unconventional asset base to 206.1 million barrels of oil equivalent (conventional reserves are estimated at 233.2 million barrels).

Anatolia is not the only company looking to strike it big in Turkish unconventional plays. TransAtlantic Petroleum, one of the pioneering juniors in Turkey, has been focused on the Dadas Shale for some time alongside the Thrace Basin in the northwest, as VP Chad Potter told Natural Gas Europe back in July. Valeura Energy, another Canadian firm, is also dividing its operations between Thrace and the southeast. In the big leagues, Shell is also exploring around Diyarbakır in the southeast.

With good reason. The Dadas Shale is beginning to be seen as one of the most promising shale deposits in the wider region, and some – including Anatolia Energy – describe it as a ‘super source rock’ for most of the oil deposits across the wider Middle East. Turkey’s TPAO suggests it could contain 110 billion barrels of original oil in place, much of which is oil shale. The Thrace Basin is also believed to contain substantial resources, as is the Sivas Basin in central Anatolia.

With such promising deposits, and with no history of large-scale onshore exploration, it’s no wonder that minnows and majors alike are clamouring to start exploring Turkey’s unconventional plays. The country’s open regulatory environment and welcoming government are added attractions. So initial scepticism over the size of Turkish shale is giving way to more practical concerns: over drilling infrastructure and, perhaps, over security.

Drilling rigs, particularly the specialised rigs needed for extracting shale oil and gas, are in fairly short supply in Turkey. Some companies, such as TransAtlantic, have got around the issue by buying up service providers and taking over their rigs. TransAtlantic has also brought in specialised fracking equipment and engineers from the US, where the company earned its spurs. At the moment the number of companies is still small enough to provide a bit of flexibility on rig availability, says an industry source, but a rush of new entrants would limit available capacity in the short term.

Insecurity in the area is a potentially more significant risk. Southeastern Turkey is dominated by the country’s large Kurdish minority and is the battleground between the Turkish military and the separatist Kurdistan Workers’ Party (PKK). Some of the region’s shale acreage also runs up against the volatile Syrian border.

Fighting between Turkish forces and the PKK has increased significantly in recent weeks. The power vacuum in Syria has enabled Syrian Kurds to seize control of the northwest, inspiring the PKK to renew their assault for an independent Kurdish region to sit alongside Iraqi Kurdistan and the new autonomous Kurdish zone in Syria. Ankara has also accused the Syrian regime of supporting the PKK in a proxy war.

The increased violence has yet to affect oil and gas companies operating in southeastern Turkey but it has increased the rate of sabotage on oil pipelines near the Turkish border. Oil and gas facilities have also been spared but in the event of a serious flare-up, and a return to the full-scale fighting that marked the 1990s, nothing can be ruled out. This is particularly the case given Turkey’s increased, loudly-proclaimed emphasis on developing domestic energy reserves: the PKK is certainly smart enough to realise the propaganda value of hitting production and infrastructure facilities.

Such a scenario remains distant, in spite of the mounting regional instability, and in any case investors seem unconcerned. Geological uncertainty, technical complexity, infrastructural wrangles and a simmering insurgency are not enough to put off Turkey’s increasingly bold shale pioneers.

Alex Jackson is an analyst of political, energy and security issues in the Caspian region. He is based in London and can be contacted at ajackson320@gmail.com.