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Tuesday, July 1, 2008

Turkish oil group looks south

Financial Times

Turkish oil group looks south

By David O'Byrne
Published: June 30 2008 17:50 | Last updated: June 30 2008 17:50
Privatisation may have ended the era of the state-owned national oil company in Europe, but someone forgot to tell Mehmet Uysal, chief executive of Turkiye Petrolleri Anonim Ortakligi, Turkey's government-owned upstream operator.
Mr Uysal is happy to talk at length about his ambitious expansion plans for TPAO, which, if realised, should transform what was until recently a local operator into an important Middle East player.
Traditionally the company has restricted its activities to the meagre oil reserves in Turkey's south and east, with limited operations elsewhere in the region. But, thanks to the problematic recent history of the countries to Turkey's east, the company has no shortage of options. TPAO is exploiting opportunities in Iran, Iraq and Syria and is casting its eyes further afield.
In TPAO's favour are a reputation for technical competence and its Muslim identity. But continuing tensions with a Kurdish community both inside and outside the country, coupled with Turkey's position as Israel's leading ally in the Muslim world, have made relations with neighbours to the south and east tricky.
Even though it was in Iraq before the 1990 Gulf war, TPAO's involvement in rebuilding Iraq's hydro carbon sector is in question. Baghdad left the company off a recent list of international operators invited to work in Iraq (pictured left) – an omission many believe is related to clashes with rebels in the semi-autonomous Kurdish region in northern Iraq.
Mr Uysal is confident that the omission can be reversed. "I was in Baghdad recently and was told that they plan to extend the list," he says.
A partnership with Shell to rebuild Iraq's gas sector assures a role for TPAO in Iraq. "Shell is working on a master plan for the entire Iraqi gas sector. When this is approved, we're ready to start work."
Iraq already produces associated gas from five oil fields on which TPAO has previously worked.
A plan brokered last year between Turkey and Iran gives TPAO the chance to develop three blocks of Iran's giant South Pars gas field. TPAO has the option of exporting the gas back to Turkey and on to Europe through the long-awaited Nabucco pipeline, which is designed to carry Caspian Sea and Middle Eastern gas to Europe via Turkey.
However, final agreement has been held up. There are problems with Iran's existing gas exports to Turkey and bickering between the European Union and the Nabucco consortium over whether Iranian gas should be included in defiance of US sanctions. A deal is expected to be finalised this summer.
The most recent addition to TPAO's portfolio is an agreement announced last month with the Syrian Petroleum Company. The deal, expected to be formalised this month, allows for a 50:50 joint venture to prospect greenfield sites in Syria, something SPC finds difficult since the imposition of sanctions by the US.
"There are significant opportunities for finding new reserves both on land and offshore from the Syrian coast," Mr Uysal says. The two companies have drilled two wells and are looking at expanding co-operation into other countries, he says.
"Venezuela has signalled that it prefers working with national oil companies over private companies – there could be opportunities for us there," he says.
But while expanding operations abroad offers the chance to broaden operations, the ace up TPAO's sleeve is closer to home: a major oil find off Turkey's Black Sea coast.
"Seismic surveys have indicated reserves of around 10bn barrels," Mr Uysal says with a smile.
The find is reckoned to stretch from the central Black Sea region as far as the Georgian border.
"We're planning to drill the first well in 2010 and to have reached full production some time after 2015."
TPAO aims to exploit the find in partnership with Petrobras of Brazil, with which it has a five-year exploration agreement for two blocks on Turkey's western Black Sea coast.
That agreement has given TPAO access to the Petrobras's experience in deep-water prospecting and drilling – essential because the Black Sea is more than 2km deep in some areas.
"So far Petrobras have invested over $400m in our existing exploration agreement, and we're expecting them to increase that when the agreement is extended," Mr Uysal says.
TPAO's windfall is a blow for Chevron and BP, which abandoned a drilling venture with TPAO on Turkey's east Black Sea coast, convinced the region held no exploitable reserves.
The find is also likely to affect Turkey's oil suppliers in the Caspian Sea and Middle East regions. Mr Uysal estimates that, once at full capacity, the new field will turn Turkey from a large oil importer – imports last year topped 33m tonnes – to a net exporter.

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