New Silk Road in energy

I met Fatih Birol, Ph.D., the chief economist of the International Energy Agency based in Paris years ago at a World Economic Forum.

I remember very well when I had the opportunity to chat with Birol for the first time; he had reproached Ankara saying, “Even the Japanese government is making better use of me.”

Water under the bridge and Fatih Birol is today well-known in Turkey and is a name both the public sector and the private sector consult for energy politics.

Birol makes regular presentations on the “World Energy Outlook,” which has been closely observed by energy markets in the past years, in Istanbul under the umbrella of Turkish Industry & Business Association (TÜSİAD).

Dr. Birol, who came to Istanbul once more to present the “World Energy Outlook 2012” report, once again gave important messages on the future of energy markets, as always.

One of the most significant messages on behalf of Turkey was “energy productivity.”

At a time when Europe, the United States, China, Japan and many other countries are enabling their “energy productivity” policies, Turkey, a country where energy imports constitute the major portion of its current account deficit, seems to have forgotten this topic.

I am curious about what is being done lately regarding the comprehensive energy productivity project En-Ver that was brought up during the time of former Energy and Natural Resources Minister Hilmi Güler.
 
Former head of the executive committee of the Construction Materials Industrialist Association (İMSAD) Orhan Turhan, whom I came across during the TÜSİAD meeting, pointed out the fact that among the 200 public announcements that are regularly run on television channels, not one of them was on energy productivity.

According to İMSAD’s calculations, with energy productivity applied to buildings, it is possible to save $15 billion.

If we go back to the report, I want to highlight three aspects that Fatih Birol has pointed out. They are about the United States, Iraq and the New Silk Road in energy.

If we start from the first one, the United States has reached independence in energy. “This was an American dream. Both because of shale gas, which is defined as the biggest revolution of recent years, and also because of the energy policies introduced in the first term of President Barack Obama, the U.S. is no longer dependent on Middle East oil,” said Birol.

An interesting point is that just as the U.S. is no longer dependent on Middle East oil, in 2020 it will exceed Saudi Arabia in oil production. In the 2030s, it will become a net oil exporter.

Coming to Iraq, in the report prepared by Dr. Birol and his team it was calculated that this country, until 2035, with an average of $200 billion annually will accumulate a total of $5 trillion of revenue from oil exports.

Birol said, “A rich Iraq is a situation where Turkey can benefit a lot. Just imagine a rich country like Saudi Arabia right next to us.”

Truly, no doubt that it would be the gain of its neighbor Turkey the most, an Iraq which becomes rich and which invests more in its infrastructure would result in the strengthening of its middle class which in turn would consume more.

According to the International Energy Agency’s calculations, Iraq has the capacity to produce 3 billion barrels of oil daily. This figure will reach 6 billion barrels when it is 2020.

The third important aspect is a concept that Birol describes as the “New Silk Road,” meaning that all equilibriums in the energy market will change.

When it is 2035, almost 90 percent of Middle East oil will be exported to Asia. Major buyers in Asia are China and India.

Birol said, “We will see a new Silk Road between Beijing-New Delhi and the Gulf countries. Energy markets will mainly shift from the West to the East.”