Turkey Finds High-Grade Oil on Its Border With Iraq

This article was written by Oilprice.com -- the leading provider of energy news in the world.

The past decade has seen Turkey's economy take off, but one significant drag on its performance is the country's paucity of indigenous hydrocarbon resources, resulting in massive energy import bills.

Turkey's booming economy is the envy of its Middle Eastern and European neighbors. In 2013 the World Bank reported:

Turkey is one of the largest middle-income partners of the World Bank Group (WBG). With a Gross Domestic Product (GDP) of $735 billion, Turkey is the 18th largest economy in the world. In less than a decade, per capita income in the country has nearly tripled and now exceeds $10,000. Although economic growth was slowed by the onset of the global economic crisis in 2008, it has nonetheless remained resilient-making Turkey an example from which other countries in the region can learn.

Energy imports in 2012 cost Turkey $60.1 billion, an 11% increase over 2011, according to data from the state statistics body TurkStat. Energy accordingly accounted for a quarter of Turkey's $237 billion spent on imports in 2012, and the International Monetary Fund forecasts that by 2017 Turkey's annual energy import costs will surpass $70 billion. In 2010 and 2011, Turkey's economy was one of the fastest growing economies in the world, at over 8% annual growth rates.

The authoritative U.S. government's Energy Information Administration reports in its country brief on Turkey last year that the country's proven oil reserves stood at a mere 270 million barrels, located mostly in the country's southeast region. The EIA continues: "Turkey's oil production peaked in 1991 at 85 thousand barrels per day (bbl/d), but then declined each year and bottomed out in 2004 at 43 thousand bbl/d. Although Turkey's production of liquid fuels has increased slightly since 2004, it is far short of what the country consumes each year."

It is in this context that the Jan. 13 announcement by state-owned Turkish Petroleum Corporation (TPAO) that it had discovered oil at a high gravity well in Silopi district in Turkey's eastern Sirnak province along the country's 205-mile-long border with Iraq and near its frontier with Iran. Notably, both Iraq and Iran are major oil producers.

High-gravity oil was found at a depth of 1.8 miles at a TPAO's Caliskan-1 well, which it started exploring six months ago less than a mile from Hezil Creek. TPAO said this is its first discovery of so-called high-gravity oil in the region, but offered no estimate of the site's reserve potential. TPAO Batman Regional Director Gokhan Akin said, "Sometimes water is also encountered in high-gravity oil and the capacity of it will be cleared within a week."

While TPAO's Caliskan-1 well discovery is potentially good news, any viable production to make a dent in Turkey's oil consumption rates, which averaged 706,000 bpd in 2011, is still years away, and Ankara is accordingly seeking to diversify its oil import sources, from Russia to Iran and Iraq.

A recent contract signed in Iraq's northern Kurdish region has the potential to strain Turkey's relations with Baghdad, however. Turkey's Genel Energy, the biggest oil and gas operator in Kurdistan, said shipments of crude to Turkey through a new pipeline will start shortly, allowing the company to receive higher prices for its Iraqi production. On Jan. 15, Genel Energy stated that Iraq's Kurdistan Regional Government "expects sales via the pipeline to commence in the near future and ramp up over the remainder of the year." Some "early oil" crude has already flowed Turkey's Mediterranean deepwater Ceyhan oil port.

The Iraqi government, which insists that the KRG has no right to unilaterally conclude oil agreements without Baghdad's permission, has reacted angrily to the development. On Jan. 17, Iraq's oil minister, Abdul Karim Luaibi, stated, "The Oil Ministry has taken the necessary procedures by asking the legal parties in Baghdad and Ankara to start the legal process to conduct a lawsuit against the Turkish government because it allows the (Kurdistan) region to pump oil through the export pipeline without the approval of the central government," according to a statement given to Platts. Whether Baghdad will follow through on its threat remains to be seen.

And TPAO's Caliskan-1 well discovery is also becoming a political bone of contention. Turkey Energy Minister Taner Yildiz has said the government will not share the results of the study regarding oil discovered by TPAO in Sirnak, in order to prevent accusations of exploitation ahead of the coming local elections, scheduled for March, commenting, "Even if we find oil, we won't say."

In the meantime, Turkey's energy import bills continue to rise.

2014's top investment 
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Related articles: 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2809404, ~/Articles/ArticleHandler.aspx, 9/30/2014 10:34:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement