“BTC and Beyond: 10 years Baku-Tiflis-Ceyhan pipeline with an Outlook for the Southern Gas Corridor”

Excellencies,

Dear Guests,

Ladies and Gentlemen,

It is indeed a distinct pleasure for me to address this important and timely workshop on the Baku-Tbilisi-Ceyhan pipeline which established a crucial energy network in one of the most critical regions of the world. I would like to extend my sincere thanks to the organisers for their dedication and commitment to realising this event.

I want to cover three key topics today:

- the role oil and gas play in the Turkish energy profile;

- the importance of the BTC oil pipeline for Turkey and its potential effects for creating a Mediterranean oil hub in Turkey, and

- what the BTC experience means for the Southern Gas Corridor.

Before starting to share my views on these issues, I would like to touch briefly on the main characteristics of energy security which matters greatly for our policy objectives.

I think everyone here today agrees that international energy markets face a number of key challenges. Global energy demand is increasing rapidly due to high economic growth rates particularly in non-OECD countries, while primary energy resources are concentrated in a very limited number of countries.

From the consumer countries’ point of view, secure and sustainable access to energy resources, and from the producers’ point of view, stable and diversified markets are of utmost importance. In the meantime, the transit countries play a very crucial role in enabling the safe and uninterrupted flow of these resources.

Secondly, energy prices can be volatile due to a number of imperfections in the global energy markets such as lack of infrastructure or supply route disruption for political or other reasons. Furthermore, the use of carbon resources at the present rate is not sustainable because of its negative effects on the climate. We believe that enhancing the stability of energy prices through dialogue and encouraging greater energy efficiency as well as deploying lower carbon alternatives have substantial roles in addressing these challenges.

At a time when global energy markets face these challenges, Turkey is becoming increasingly dependent on oil and gas imports to meet its energy needs. This is essentially the consequence of its rapidly expanding economy with a GDP growth rate of 9 and 8,5 percent in 2010 and 2011 respectively. Recent projections show that our demand for energy is anticipated to increase by 4 to 5 percent on a yearly basis. Therefore, secure, affordable and sustainable energy supplies are critical to our social and economic well-being.

In terms of our domestic energy policy goals, we aim to develop our own national resources, to increase the share of renewables and to add nuclear energy into our energy basket. In parallel with these objectives, we strive to diversify our energy supplies and routes. I have to admit that Turkey has a fairly comparative advantage being in close proximity to around 72 percent of the world’s proven gas and around 73 percent of oil reserves.

This considerable benefit has led to historic decisions to build both Baku-Tbilisi-Ceyhan (BTC) and Baku-Tbilisi-Erzurum (BTE) pipelines. Today the BTC oil pipeline represents one of the world’s biggest and most successful mega-pipeline projects. Constructed at a cost of some 3.9 billion dollars, it routinely carries close to 800,000 barrels of oil a day (or 40 million tons a year) for 1,768 kilometers from offshore oil fields in the Caspian Sea to the Ceyhan marine terminal on the Mediterranean coast from where the crude oil is further shipped via tankers to European markets.

Through the BTC oil pipeline, which became operational in 2006, Kazakh oil was also transported to the world markets between 2008 and 2010 and some amount of Turkmen oil started to flow via this project from 2010. The second component of the Corridor, the Baku-Tbilisi-Erzurum natural gas pipeline followed suit in 2007. At present, the BTE carries just over five to six billion cubic meters of gas a year (5-6 bcm/y) along its 918 km long system. That represents the equivalent of around 4.5 – 5.4 million tons of oil a year, or roughly one-eighth of the energy carried by the BTC.

The success achieved by the BTC in carrying Caspian oil to market exemplifies the important role of Turkey as a reliable transit country for Europe’s energy supply security. We, together with our regional allies, worked hard to secure political commitment and to make the project commercially viable. We ensured that the oil out of the Caspian Sea would be developed and transported along secure and environmentally safe routes in a timely manner.

I presume that the importance of the BTC can be assessed fairly when you also consider its pecularities in the sense that it crossed various international boundaries and its length, which was much longer than a classic oilfield to terminal pipeline. This makes it clear that the BTC cannot be considered just as a commercial project, but it is a very key part of a our broad vision.

It should not be suprising that the legacy of the BTC has led us to do more so as to secure an uninterrupted and reliable flow of Greater Caspian and Middle East hydrocarbon resources to Turkey and to Europe via our territory. Turkey and Azerbaijan reached an agreement concerning the sale and purchase of 6 bcm and the transit through Turkey of 10 bcm of Shah Deniz Phase 2 natural gas.

The signature of an Intergovernmental Agreement between Turkey and Azerbaijan as well as numerous contracts between BOTAŞ and the Shah Deniz Consortium exactly on year ago on 25 October 2011 was followed by a Memorandum of Understanding between Turkey and Azerbaijan concerning a standalone pipeline in December 2011. Finally, the Intergovernmental Agreement and Host Government Agreement regarding the development of a standalone pipeline (TANAP) project, was signed by Turkey and Azerbaijan on 26 June 2012 in İstanbul.

We believe that with the finalization of these agreements, Turkey has positively contributed to the final investment decision regarding the SD Phase 2 project.

The final decision as to whether Shah Deniz Phase 2 gas will be transported through upgraded BOTAŞ infrastructure or the TANAP -in Turkey-, and through West Nabucco or TAP -beyond Turkey-, will be made by the Shah Deniz Consortium.

It is worth mentioning that the BTC and other proposed as well as ongoing projects have highlighted the role of the Ceyhan terminal. The terminal is a world class facility at which large tankers can easily and efficiently load cargo and transport it to world markets. Ceyhan will eventually turn into a major international energy hub and the largest oil outlet terminal in the Eastern Mediterranean when 6 and 7 percent of global oil supply will transit Turkey.

Ladies and Gentlemen,

Concluding my speech, I would like to welcome you all and I am delighted to be able to stay here for the whole afternoon and looking forward to listening to your input and to taking part in the discussions that are programmed for the rest of the day.

Thank you.