Disavowing Kurdish independence, Turkey prepares for Kurdish energy future

MICHAEL TANCHUM

Turkey seems to have officially disavowed any support for the Kurdistan Regional Government (KRG) in Iraq to become independent, despite ruling Justice and Development Party (AKP) Deputy Head Hüseyin Çelik’s comments on June 28 to the Financial Times to the contrary. However, the KRG’s recent export of oil to Turkey’s Mediterranean oil port of Ceyhan, which after transshipment arrived in Israel’s Ashkelon port, highlighted the economic benefit to Turkey of a Kurdish political entity in Iraq with sufficient autonomy to market its energy independent from the constraints of the Iraqi central government in Baghdad. Indeed, Ankara’s far-sighted effort to become a leading energy transportation hub includes a new oil refinery on Turkey’s Aegean coast and the Trans-Anatolian Natural Gas Pipeline that can accommodate oil and natural gas from the autonomous Kurdish region of Iraq.

The new $5.6 billion STAR oil refinery is being built at the Petkim Petrochemical Complex about 50 km north of İzmir. Petkim Petrokimya Holding A.Ş. is the largest petrochemicals manufacturer in Turkey. A subsidiary of the State Oil Company of the Azerbaijan Republic (SOCAR), Petkim currently accounts for approximately 30 percent of Turkey’s market share of refined petroleum products and is aggressively seeking to increase its market share by replacing imported products with its own products produced in Turkey. The STAR refinery will provide Petkim’s plants with feedstock fuel that will enable Petkim to manufacture high value petroleum products at a considerable cost reduction, with the effect of cutting down Turkey’s dependence on imported refined petroleum products, particularly in critical sectors such as diesel and jet fuel. In addition to Azeri Light grade and Russian Urals grade oil, the STAR refinery is being constructed with the capability of refining Kirkuk grade crude oil, allowing Petkim to manufacture high value petroleum products from crude oil imported from the KRG. Test production of the refinery will start in early 2017 and it is expected to become operational by 2018. 

The Trans-Anatolian Natural Gas Pipeline (TANAP) also carries the potential for an independent Kurdish political entity to market its natural gas resources to Turkey and the European Union. For $10.5 billion, TANAP is being constructed by SOCAR and its junior partner the Turkish state-owned, oil and natural gas pipeline company BOTAŞ Petroleum Pipeline Corporation, which owns a 30 percent stake in the project. With an initial capacity of 16 billion cubic meters (bcm), TANAP will initially receive gas from Azerbaijan’s Caspian Sea Shah Deniz field and then transport the gas across Turkey to the Turkish-Greek border where it will link with the Trans-Adriatic pipeline (TAP) for delivery to the EU.

Expected to be fully operational by 2018, Turkey will receive approximately 6 bcm with the remaining 10 bcm intended for the EU. Once operational, the volume of natural gas transported via TANAP is expected to increase by one billion cubic meters per year. Since Turkey’s domestic natural gas consumption has more than tripled, jumping from 15 bcm in 2000 to 46 bcm in 2010, the gas delivered via TANAP is of considerable importance to the continued functioning of the Turkish economy. Aside from natural gas from Azerbaijan, TANAP will also be able to transport natural gas from the KRG, if the latter is sufficiently independent to sell its gas. Experts estimate that the KRG could export 10 bcm of natural gas to Turkey as early as 2020.

With Arab countries in the Middle East embroiled in unprecedented political turmoil, which has started to strain their relations with Turkey, the AKP government’s deepening relationship with the KRG constitutes a foreign policy achievement with significance for Turkey’s long term geo-strategic position. Turkey’s ambition to become a global energy hub would benefit from a Kurdish political entity sufficiently independent to market its hydrocarbon energy resources via Turkey. While the exact political relationship between Turkey and an independent Kurdish government is yet to be determined, the infrastructure of the economic relationship is being established.

*Michael Tanchum is a Fellow at the Shalem College, Jerusalem, and at the Middle East and Asia Units, Truman Research Institute for the Advancement of Peace, Hebrew University.