MESSAGES FROM ISTANBUL

Turkey is close to achieve its long-standing objective - it turns into an energy transit hub. New statements made recently at the 23^rd World Energy Congress held in Istanbul under the slogan “Embracing new frontiers” and the signing of an agreement with Russia for the construction of the Turkish Stream pipeline are enough to get convinced that Ankara is firmly determined to expand the significant energy transport corridors passing through its territory. The favourable geostrategic position of the country makes this possible.

As stated by President Recep Tayyip Erdogan, currently the Russia natural gas is supplied to Turkey via Ukraine through the Trans-Balkan Corridor. The TANAP gas pipeline will be ready soon and allow transporting the natural gas from Azerbaijan to Europe through Turkey. Furthermore, Erdogan has expressed his support to the idea of transporting the Turkmen gas through the territory of Turkey to the Old World. The Turkish Prime Minister Binali Yildirim added to these plans the transit of gas from the Middle East.

The reconciliation stream

Just a few months ago, the world had been watching the escalating political confrontation between the two major powers, Turkey and Russia. Political analysts had predicted almost the beginning of the third world war; economists were pessimistic about the rupture of commercial relations, ordinary citizens had refrained from touristic trips. But sometimes the life is really unpredictable: now the two leaders pose before the cameras at the signing ceremony in Istanbul of an intergovernmental agreement on the construction of the Turkish Stream gas pipeline. The document was signed by the Russian Minister of Energy Alexander Novak and the Turkish Minister of Energy and Natural Resources Berat Albayrak. The document implies the construction of two natural gas pipelines under the Black Sea from Russia to Turkey, as well as an onshore transit pipeline to Turkey's border with neighboring countries. The capacity of each pipeline is 15.75 billion cubic meters.

According to the Russian president, the launch of the Turkish Stream is scheduled for the end of 2019. In addition, Russia will offer Turkey a discount on gas. This is yet another proof of the extent of reconciliation between the two states.

During a joint press conference, the Turkish President R. T. Erdogan expressed his satisfaction with the current level of partnership with Russia. He believes that the process of normalization of relations will continue at an accelerated pace, and from now on will be developed in a completely different way, including such spheres as defense , politics, trade, economy, tourism, and culture.

Putin added that the Russian government has decided to cancel the existing ban on Turkish agricultural products calling this a win-win decision: Russia hopes that the import of Turkish fruits will help to reduce fruit prices. The Turkish partners will be able to return to the Russian market, which is valued at approximately $500 million annually.

Also, Russia and Turkey are moving towards the implementation of Turkey's plans to establish a major gas hub in the country, said Vladimir Putin.

We are on the eve of new investments that will make Turkey an important energy hub of the region. By the end of this year and in 2017, we will take important steps in this direction. Thus, we will soon transform Turkey into a reliable partner for all the countries of the region as far as the trading of natural gas is concerned, said the Turkish President.

A message for the future

Azerbaijan is on top of the list of countries welcoming the achievement of peace between Russia and Turkey, and is happy to see the far-reaching plans of Turkey.

“Holding of the World Energy Congress in Turkey is a significant event. It shows a gradually increasing role of Turkey in the world energy policy. Not only the countries that love Turkey, but also the friendly states throughout the world are interested in the development and stability of Turkey, as it is playing a significant role in determining the energy policy of the world “, said a special guest of the Congress, President Ilham Aliev.

According to co-chairman of the World Energy Council Yanghun David Kim, the Istanbul Congress provides a historic opportunity to governments, industries and societies, and the messages stated here would be a road-map for the future.

Indeed, the statements made during various presentations were interesting enough and accurately demonstrate the aspiration of participating countries to overcome the existing price crisis in the energy market and to achieve stability.

“The leaders offered various ways to resolve the current situation. In particular, President Ilham Aliyev supported the close cooperation of producer countries, transit countries and consumers. The energy-rich countries, as well as the transit and consumer countries should work together as a team. There should be no unjustified competition. A healthy competition environment must be ensured”, said the Azerbaijani President. He also stressed the need for greater understanding between the countries extracting and exporting hydrocarbons. “Azerbaijan has always supported the idea that the interests of our countries and peoples must be ensured”, added the president.

The same policy allowed the country to strengthen its power and develop the economy in just five years of independence. “In the first years of independence, we were dependent on foreign investment. Today, we are putting major investments in other countries, including the investments that we have made and will continue to make in brotherly Turkey, namely $20 billion”, said President Aliyev.

He added that seven countries have already joined forces for the implementation of the Southern Gas Corridor. This number may increase in the future. “Today, when the world is concerned with energy issues and energy security problems, it is impossible to neglect the roles of Turkey and Azerbaijan, since we have natural resources, vast geography, and a diversified transport structure. We have laid the grounds and will continue to build relations with all countries on equal and mutually beneficial interests”, stressed the Azerbaijani President.

In his speech, President Erdogan referred to the TANAP project of Azerbaijan highlighting it as a new alternative for Europe. “This is the first decisive step towards the establishment of the Turkish-Greek interconnector. We believe this is very important for Europe”, said the Turkish President. He pointed out that the Caspian region was of great importance for filling the pipelines going through the Turkish territory. Turkey has plans to transfer the Turkmen gas through TANAP too.”

Mr. Erdogan also stated that Turkey has great potential in terms of investments in the energy sector and called upon the energy companies to invest in the Turkish economy. “Those who believe and invests in Turkey had never regretted, nor will they regret in the future. We are a transit country, but we also invest in the development of the technical facilities. Together with Russia, Algeria, and Norway, we aim at creating the fourth energy corridor for the delivery of fuel to Europe”, said the Turkish President.

President Vladimir Putin has also stressed the importance of equal partnership. “Russia will continue to cooperate constructively in the energy sector with all stakeholders based on the principles of mutually beneficial and equal partnership. The demand for energy resources is supported not merely by motorization and energy connectivity in such large countries and economies as China, India and certain other states, but also by continuing penetration of petroleum and gas chemistry products into the most diverse spheres of human life and industrial processes”, said the Russian President.

According to Putin, the large-scale growth of liquefied natural gas (LNG) production leads to the gas market becoming really global for the first time, with skyrocketing development of related infrastructure.

Mr. Putin stressed that the attempts to restrain the development of the energy sector by political instruments, in particular, by using unilateral sanctions, were inadmissible and did not add to stability on world oil markets.

The restraining factor

Speaking of stability, it will be relevant to add that “the hydrocarbon world” was impatiently waiting for the last day of the Istanbul meeting. The representatives of OPEC member- and non-member countries was held in the Turkish capital on October 12 as part of the World Energy Congress.

During the last informal meeting in Algeria, the cartel agreed to limit the production rates at 32.5-33.0 million barrels of oil per day (mbod). However, the cartel does not have agreements on specific limits for each of the countries. Earlier, OPEC has announced that the majority of countries support the limitation of oil production for the next six months. The final decision is expected at the next meeting of organization to be held in Vienna on November 30.

A day before the meeting, the Russian President Vladimir Putin said that Russia was ready to join the joint measures to limit production, and encouraged other oil exporting countries to do the same. He added that the low oil prices had provoked “the longest cycle of falling investment in the energy sector in 45 years. Capital expenditures in oil production have dropped by almost half trillion US Dollars in just two years and the decline in investment in geological exploration has caused the smallest oil reserves growth in 70 years”.

“We’ve been witnessing a massive revocation of investment decisions on projects, which are now considered as economically unviable”, he said, adding that “if these trends persist, the lack of financing will become chronic and the global excessive production of energy resources will inevitably turn into a deficit and new unpredictable price shocks and will eventually hurt both producers and consumers”.

According to Putin, particular agreements reached in this sector with OPEC will give “a positive signal to markets and investors” and “will help subdue speculative activity and avoid new price fluctuations”.

On the contrary, the Executive Director of the International Energy Agency (IEA), Fatih Birol, believes that a compromise within OPEC to reduce oil production may not produce the desired balance in the oil market. An increase of oil prices to $60 per barrel will increase the production in USA, hence blocking the effect of OPEC actions. This will also be sufficient for North American producers of shale gas to re-start production increase.

At all accounts, the 23^rd World Energy Congress showed that oil and gas will continue to play a predominant role in the life of humankind at least for another century. And the natural gas will have a greater advantage. Its export and transit will be profitable for a number of countries, including Azerbaijan.