In late January 2002, Iran and Turkey officially inaugurated a much-delayed natural gas pipeline link between Tebriz (northern Iran) and Ankara (the capital of Turkey). In 1996, Iran and Turkey had signed a $30 billion, 25-year agreement that called for Iran to supply Turkey with more than 8 Tcf of natural gas beginning in late 1999. Officials in Turkey and Iran variously blamed U.S. sanctions, financing problems on the Turkish leg of the $1.9 billion pipeline, economic recession in Turkey, and delays by the Iranians in completing an important metering station for delaying the project. Exports of Iranian natural gas to Turkey were expected to reach 350 Bcf per year by 2007. There are questions, however, whether Turkish demand will grow rapidly enough to absorb this volume of natural gas from Iran, in addition to gas slated to be supplied by Russia, Algeria, and Nigeria. In June 2002, for instance, Turkey halted natural gas imports from Iran, citing problems with gas quality, even though a lack of demand on the Turkish side appeared much more likely. On November 13, 2002, Turkey announced that it had resumed gas imports from Iran after reportedly securing a lower price and a reduction in the take-or-pay percentage. In August 2004, Turkish officials stated that they would seek international arbitration in the natural gas price dispute with Iran. On May 21, 1999, Turkeys state natural gas and pipeline company Botas signed an agreement on building a $2-$2.4 billion, 1,050-mile, gas pipeline from Turkmenistan, underneath the Caspian Sea, across Azerbaijan and Georgia (both of which would collect transit fees), and on to Turkey. Gas deliveries of 565-1,060 Bcf per year are possible, with additional gas possibly being sent onwards to Europe. The consortium is led by U.S. company Bechtel and includes General Electric, Shell, and PSG International. In mid-July 1999, a top Turkish energy official stated that the Trans-Caspian Gas Pipeline (TCGP) from Turkmenistan was still the preferred option for Turkey despite the potentially huge (as high as 35 trillion cubic feet -- Tcf) Shah Deniz gas field in Azerbaijan, which is located hundreds of miles closer (and on the western side of the Caspian Sea) to Turkey than Turkmenistan. Currently, however, progress on the TCGP appears stalled indefinitely, with the international consortium essentially having suspended operations, and with Turkey already oversupplied with gas from Iran and Russia (Blue Stream).
After months of negotiation and delay, Azerbaijan and Turkey signed a long-term natural gas purchase and supply contract on March 12, 2001 (granted final approval on the Turkish side in February 2003). Starting in 2006, two years later than the original target date, Azerbaijan is to deliver 70 Bcf of natural gas to Turkey, rising to 177 Bcf in 2007 and around 223 Bcf per year from 2009 through 2020. Natural gas for the deal is to come mainly from Azerbaijans $3.2 billion, BP-led Shah Deniz Phase I field development project (given the financial green light in February 2003). To transmit the gas, the $900 million South Caucasus (Baku-Tbilisi-Erzurum) pipeline would stretch some 630 miles, including 290 miles in Azerbaijan and approximately 170 miles in both Georgia and Turkey. Like Turkeys other possible gas deals, the pipeline from Shah Deniz has been called into question by lack of gas demand in Turkey, and now may not be built at all.
Egypt, with huge gas reserves of its own, represents yet another possible source of gas for Turkey, either by pipeline or via LNG tanker. This latter option would include construction of a $1.2 billion liquefaction terminal near Port Said on the Mediterranean coast, and a regasification facility at Aliaga (near Izmir) in Turkey. Egypt and Turkey signed a preliminary agreement for LNG exports in 1996, but analysts have raised serious questions about whether the project is economically feasible. Also, as mentioned above, Turkey already has committed to buying more gas than it probably needs for years to come.
In 2001, Turkey passed a Natural Gas Market Law which will significantly reform the countrys gas sector. Among other things, the Law will abolish the Botas monopoly, separating the company into units for natural gas import, transport, storage, and distribution by 2009. At that point, the various components (except for transport) are to be privatized. In the meantime, Botas is supposed to sell off at least 10 percent of its market share every year, eventually getting it down from 100 percent to 20 percent by 2009. To date, however, progress in these areas has lagged, with -- among other things -- parliamentary delays in approving an amendment easing restrictions on foreign players in Turkeys gas sector. In March 2004, Turkeys energy market regulatory agency threatened Botas with fines over the companys failure to meet the target of reducing its market share by 10 percent per year. As of June 2005, the so-called gas release program still had not gotten underway. One obstacle is opposition by Russian and Iran to changing the terms of their gas export contracts with Botas. In June 2004, the Turkish Energy Ministry proposed reducing the share of gas contracts that Botas would have to transfer to the private sector; 25 percent by 2009 instead of 80 percent. The bill was withdrawn a few weeks later in response to both domestic and foreign opposition. In July 2002, TPAO said that it would begin negotiations with Germanys Lurgi Oel Gas Chemie on building Turkeys first natural gas storage unit. The facility would be located 50 miles west of Istanbul on the Marmara Sea coast, and will include equipment to for gas purification. Meanwhile, Botas reportedly plans to build another gas storage plant at Salt Lake (Tuz Golu) in central Anatolia.In December 2004, Russian President Vladimir Putin visited Turkey, during which the two countries signed a memorandum of cooperation on natural gas development. This includes the volume and pricing of Russian gas sold to Turkey via the Blue Stream pipeline.
Turkey has hard coal (anthracite and bituminous) reserves of around 1.1 billion short tons, plus lignite reserves around 8 billion short tons. Around 40 percent of Turkeys lignite is located in the Afsin-Elbistan basin of southeastern Anatolia, while hard coal is mined only in one location -- the Zonguldak basin of northwestern Turkey. Turkeys state-owned coal company, TTK, produces, processes, and distributes hard coal, while Turkish Coal Enterprises produces most of Turkeys lignite. In addition, Turkeys Electricity Generating Authority produces lignite for three power plants, Between 1990 and 2000, the number of workers in Turkeys coal sector fell from 63,993 to 35,665. Turkish coal, which is used mainly for power generation, is generally of poor quality and highly polluting.