China builds Turkish gas facility

Asia Times Online (Hong Kong) Dec 9, 2011

By Robert M Cutler *, Montreal

China’s Tianchen Engineering Corp has agreed with Turkey to build an underground natural gas storage facility at Lake Tuz in central Anatolia, south of Ankara. The project will be completed in two stages and be constructed to hold up to 1 billion cubic meters (bcm) of natural gas.

The first 500 million cubic meters (mcm) of storage will be completed by 2015 to enter into service in 2016, with the second 500 mcm to be completed in 2018 for entry into service in 2019. This will nearly double Turkey’s natural gas storage capacity to 2.1 bcm, equivalent to 5% of total consumption.

The facility will have an operational life of 10 years and be able to release as much as 40 mcm of gas daily into the Turkish grid. According to Fazil Senel, director of Turkey’s state pipeline company BOTAS, as reported by Bloomberg News. The estimated cost is US$640 million, to be financed by a World Bank loan signed in 2006.

Bilateral relations between China and Turkey were reinvigorated in June 2009 when Abdullah Gul become the first Turkish president to travel to China since 1995, spending nearly a week in the country (visiting Beijing, Xian, Shenzhen, and Urumqi) and signing seven cooperation accords in the fields of banking, culture, energy, and finance.

In October 2010, China’s Prime Minister Wen Jiabao visited Turkey on the last leg of his European tour (previous stops were Greece, Belgium, Germany, and Italy) to seal what he described as a « strategic partnership ». The two countries pledged to continue using their respective currencies for bilateral trade clearing, a method that Turkey already uses with Russia and Iran.

The following month, Turkish Foreign Minister Ahmet Davutoglu continued the exchange by spending nearly a week in China, signing eight more cooperation agreements in different areas, and undertaking to increase bilateral trade from the $20 billion turnover in 2010 to $50 billion by 2015. From this time, the Turkish press began to characterize Turkish-Chinese relations as being animated by a « new cooperation paradigm ».

The Lake Tuz project will represent China’s largest investment in Turkey to date. It is likely to be exceeded by projects for high-speed rail construction. Already under way is a 158-kilometer stretch from Inonu to Kosekoy, the second phase of a prospective 533-kilometer Ankara-Istanbul line.

The geophysical engineering of the Ankara-Istanbul project is especially challenging. (For example, one-third of the Inonu-Kosekoy segment will be tunnels.) According to China Daily, China is contributing $720 million in loans to the project. A Chinese industrial representative on the site insists that the labor employed is mostly local and that the overall project will not return one penny of profit.

It is likely that China regards the project as a showcase demonstration aimed at the European market. The Turkish newspaper Hurriyet reports that China will make further loans for more high-speed lines, including Edirne-Kars, Ankara-Izmir, Ankara-Trabzon, and others.

BOTAS engineers first conceived the Lake Tuz project in 1987 and conducted the first studies for it in 2006, the year of the first tender. Proposals were deemed insufficient, and the tender was re-opened in 2007, only to be cancelled later for a second time. Turkey had been in talks with Russia’s Gazprom at the end of the last decade for construction of the Lake Tuz natural gas storage facility, but those did not pan out.

Then already in early 2010, Turkey announced its intention to decrease its dependence on gas from Russia, which arrives mostly via the Blue Stream pipeline underneath the Black Sea. Later in 2010, Turkey finally offered an open tender for the Lake Tuz project.

Gazprom’s interest came at a time when a « Blue Stream Two » natural gas pipeline project under the Black Sea was under semi-serious discussion between the two countries. However, Turkey did not intend to consume any of Blue Stream Two’s gas. Turkish Prime Minister Recep Tayyip Erdogan told his Russian counterpart, Vladimir Putin, in Sochi in May 2009 that he wanted to transform Blue Stream Two into what he called « MedStream ».

With the cooperation of French companies, the MedStream project would have conducted Russian gas from Samsun on the Black Sea across Anatolia to Ceyhan on the Mediterranean Sea, then under the Mediterranean to Ashkelon in Israel. From there the gas could have gone to South Asia by tanker via the Suez Canal or else from the Gulf of Aqaba through the Red Sea and the Bab-el-Mandeb Strait between Eritrea/Djibouti and Yemen.

The geopolitical map has of course changed since then, but the eventual realization of such a project should not be ruled out. The Turkmenistan-China natural gas pipeline that began operation in 2009, for example, was first sketched on the map (although by Western industrialists who were not involved in its realization) in the early and mid-1990s, in the wake of the Soviet Union’s break-up.

In roughly the same timeframe, different UN specialized agencies convoked low-key expert-group meetings that worked up outlines for connecting North Africa up with the Arabian Peninsula, Asia Minor, South Caucasus, and Europe in energy transmission, in a perspective stretching out to 2025 and beyond.

Those plans form the basis for discussions ongoing today at a more specific project-planning level. In spite of obvious obstacles at present, therefore, even a project resembling the MedStream cannot be ruled out in the longer run.

* Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.