December 23, 2010

A Postcard from Europe

Turkey: Energy Link to Europe?

Plans for the Nabucco pipeline were initialized as far back as 2002.

Erzurum, one of Turkey’s biggest cities, has a history of almost 6,000 years, deriving its name from the Persian word, Arz-e-Rum, or Land of the Romans. It is not the Land of the Romans any longer, but the city boasting a curious mix of modernity and ancient tradition is an important cog in Turkey’s economic wheel, for it is in Erzurum that the Nabucco pipeline begins its long journey.

When Wolfgang Ruttenstorfer spoke of Turkey becoming an ‘important energy hub,’ he was referring to Nabucco. Ruttenstorfer, the Chief Executive Officer of Österreichische Mineralölverwaltung or OMV, one of Austria’s biggest energy companies, told Today’s Zaman that Turkey was going ‘to be a crucial player and a bridge in the energy sector.’ He is not far off the mark.

The Nabucco pipeline or the Turkey-Austria pipeline is a planned natural gas pipeline that begins in Erzurum and ends in Baumgarten an der Marchin in Austria. Potentially, it will carry around 31 billion cubic meters of natural gas annually to Europe – a crucial project by any standards that would help lessen European dependence on the Russia-sponsored South Stream pipeline. Concerns over supply still hover, although expectations are that the gas might be supplied from countries like Iraq or Azerbaijan. It’s here that Turkey’s long-held geographical advantage comes to the fore – the country not only is linked to Europe, but also borders the potential supplier states of Iraq, Syria and Azerbaijan. This is the ‘energy hub’ that Ruttenstorfer was speaking of. Although Turkey is not the supplier of the natural gas, its role as the conduit of this energy source to Europe is vital.

The ambitious project has the backing of several European Union members and financing from various EU banks, including the European Bank for Reconstruction and Development and the European Investment Bank. Construction of this pipeline, which has been dogged by delays, is expected to begin in 2011, pending a final investment decision. The first gas to flow out of the spigot begins in 2014.

And of course, there is the small matter of Turkey’s booming economic resurgence. As we wrote earlier, Turkey is poised to become the third-largest economy in Europe by 2050, making it an investing hot spot, apart from being an energy hub. But it’s not just Nabucco that makes Turkey such a key figure in the scramble for energy. There is also the Baku-Tbilisi Ceyhan pipeline, which is a part of the East-West Energy Corridor that terminates in Ceyhan in Turkey. Around 3.7% (a conservative estimate at best) of the world’s oil consumption is shipped through the Turkish straits every day. Projects like the Arab Natural Gas Pipeline, which expects to carry gas from Egypt to Turkey, add to the growth in the energy sector. So it appears that Turkey has become a critical link between east and west, and the country’s role in feeding energy hungry Europe is just the beginning.