Working towards greater prosperity & security
At the World Economic Forum (WEF) in Istanbul the Chief Executive Officer of UAE-based Crescent Petroleum, Majid Jafar, discussed the shale boom that has rocked the United States in terms of providing energy self- sufficiency, and outlined some of the lessons Middle Eastern producers, in particular Turkey, might learn from the phenomenon
The clear relationship between secure and competitively priced energy and economic prosperity is well defined in terms of economic theory. This is all the more evident today in the United States, where the combination of entrepreneurialism and technology applications created the shale gas and shale oil revolutions.
Today, the US not only enjoys cheaper energy, but also impressive and invaluable domestic supply security. However, while some argue that the conditions in the US are unique, I would maintain that very similar circumstances apply in Europe and the surrounding energy-rich regions. In terms of geographic scale, the distance from Berlin to Ankara, for example, is no different than the distance from New York to Houston. And, while we applaud the great energy interconnectivity and the highly liquid energy markets in North America, including Canada, we still debate the do-ability of such connectivity and market development in the context of the Europe-Middle East-Caspian-North Africa-Russia circle.
Greater energy integration in the region is beneficial to all stakeholders. From an EU perspective, more integration signposts further diversity, and, as a result, increased security of supply.
the increased integration of energy markets, especially oil and gas markets, with the EU and Turkey would contribute significantly to the entire region’s ongoing prosperity and stability
In this context, connecting the oil and gas production regions with the oil and gas consuming markets is a core role Turkey should be looking to fulfill as soon as possible. Turkey and its ally Azerbaijan have now forged an important partnership to finally construct TANAP (Trans-Anatolia Gas Pipeline), which will carry up to 31 billion cubic metres per annum by 2026.
From the Middle East region’s perspective, the increased integration of energy markets, especially oil and gas markets, with the EU and Turkey would contribute significantly to the entire region’s ongoing prosperity and stability. Energy, trade and interdependency, underpinned by long-term import agreements and infrastructure connectivity promises the potential for huge prosperity, as well as geopolitical stability. Given that the Middle East holds 47% and 43% of global oil and gas reserves, respectively, while delivering only 32% and 17% of respective global oil and gas production, suggests the region will benefit from new market access. For example, northern Iraq is estimated to hold more than three trillion cubic metres of gas resources. Channelling this valuable resource to the Turkish market, and via Turkey onward to EU markets, would deliver huge economic and gas supply security benefits to both, while at the same time enabling Iraq to capture a significant market share in the world’s premium energy markets and, as a result, delivering massive prosperity and wealth to its citizens. Unfortunately, such resources remain stranded in Iraq at the moment.
Turkey should aspire to create a highly liquid, wholesale gas trading market – the Turkish Gas Hub (TGH). I predict that such a hub would become a dominant gas price marker not only for the Middle East region, but also, through LNG markets, an important mid-point hub between Asian and European gas markets. Through the establishment of TGH, a transparent liquid gas market could be created at the heart of the EU-Middle East border, which would have strong potential for becoming the backbone of regional energy connectivity.
further deregulate of energy infrastructure access, construction and expansion is essential
Meanwhile, further deregulate of energy infrastructure access, construction and expansion is essential. Turkey has already made huge progress on this issue. However, an impartial transmission access system and debottlenecking, alongside the construction of new connections on a regulated basis are essentials in an area where state monopolies are still commonly in place.
Finally, the private sector must play a much bigger role in the regional energy industry. The first steps towards this end could be initiated by rapidly shifting the role of the state from a player to a regulator.
With such changes in place, private sector investors would have the confidence to select from a range of energy sector investments, using the transparent and EU-linked energy pricing scale. I firmly believe implementation of these guidelines would result in the total transformation of the energy industry in the Middle East region.