The Republic of Turkey, with a population of 63 million, is slightly larger in area than Texas. All of Turkey's area in Asia except for about 5% in the far northwest that is separated from the rest of the country by the Dardanelles and Bosphorus straits, and the Sea of Marmara. Turkey is bordered by Bulgaria, the Black Sea, and Georgia to the north, Armenia and Iran to the east, Iraq, Syria, and the Mediterranean Sea to the south, and Greece and the Aegean Sea to the west. There are 80 provinces (called 'iller') in Turkey's 14 regions; these are shown in Figure 1. The capital city, Ankara, is located in the north central part of the country, and has a population of about 3.4 million. Other major cities include Istanbul (9.3 million) and Izmir (2.4 million), both in the eastern part of the country. Turkey's currency, the lira, has an exchange rate of about 1.71 million lira to the U.S. dollar (as of April 2003). The gross domestic product (GDP) of Turkey, in 2001, was $443 billion (purchasing power parity). Turkey was not one of the ten countries invited to membership in the major European Union enlargement of December 2002, but the EU has indicated they will review Turkey's status for a possible invitation in 2004, if all EU requirements for membership are met.

Figure 1: Administrative Regions of Turkey

Source: State Institute of Statistics of Turkey

In August 1999, the Turkish Parliament passed constitutional amendments by large majorities, which will significantly improve trade and investment. These amendments, comprising Law No. 4446, are intended to help expedite infrastructure projects, such as power plants, by providing easier financing and approval. Article 47 of the Turkish Constitution was amended to provide for principles and methods of privatization to be defined by law, and also specified which state enterprises would be privatized. Article 125 of the Constitution was amended to allow for settling disputes by national or international arbitration, with international arbitration to be used for disputes involving a foreign entity. Article 155 of the Constitution was amended to limit the participation of the Council of State (Danistay) in contracting. The new provisions give Danistay the right to review cases, draft regulations, and give opinions; Danistay will also be able to settle administrative disputes, but its powers are less than before the amendments. In January 2000, Bill No. 4501 was passed, implementing these constitutional amendments into associated law.

In 2001, the Turkish parliament passed a law which will eventually privatize most of Botas, the state-owned natural gas company. By 2009, the law would split Botas into separate units for gas importation, transport, storage, and distribution. Eventually, all the units except transport would be privatized. The plan is to sell off 10% of the Botas market share each year, leaving only 20% at the end.

Turkey's Electricity Market Law went into effect in March 2001. This law sets up a path toward a free market in power generation and distribution. Under the law, the state-owned Turkish Electricity Generation and Transmission Corporation (TEAS) is split into separate generation, distribution, and trade companies, with eventual privatization of the generation and trade companies. It is expected that transmission of electricity will continue to be run by the state. The new law also set the stage for a new organization, the Energy Market Regulation Agency (EMRA), that will oversee the power and natural gas markets, including setting tariffs, issuing licenses, and assuring competition.

The Energy Market Regulatory Board, which runs the EMRA, was commissioned on November 19, 2001. In May 2002, the EMRA issued drafts of the Energy Market Licensing Regulation and the Electricity Market Tariffs Regulation, and these regulations went into effect in August 2002. EMRA has announced a 4-stage approach to a competitive electricity market. The first stage grants licenses to firms in the electricity and natural gas markets, while the second stage, which is expected to start March 3, 2003, will give large industrial users the right to choose their electricity provider. The third stage will start to set up the Market Financial Reconciliation Center for balancing and settlements, and the fourth stage will make this Center fully operational. Legislation has been proposed in the Turkish parliament that would expand the scope of the EMRA to include the upstream activities in the petroleum market. This Petroleum Market Bill is expected to be considered by the parliament in the near term.

Turkey expects a very large growth in energy demand as its economy expands, especially for electricity and natural gas, and has adopted a policy of encouraging foreign investment in power plants and natural gas pipelines to meet the anticipated demand. During the second half of the 1990s, Turkey implemented new methods for energy project financing and ownership. Three models were offered: "Build-Operate-Transfer" (BOT), "Build-Own-Operate" (BOO), and "Transfer of Operating Rights" (TOR).

Turkey's Ministry of Energy and Natural Resources (MENR) had intended that most of the new power plants would be built by foreign developers on a BOT basis. Under this model, private investors would build a power plant and operate it for several years, then finally transfer ownership back to the state. The electric power produced by these projects could be sold to the national grid, the state-owned electricity authority, or even a private end user. In many cases, the Government of Turkey had planned to provide sovereign guarantees that would assure such projects would be profitable for the developers. However, in late 2000, Turkey suffered an economic crisis when several major banks failed. The International Monetary Fund (IMF) assisted Turkey in the crisis but insisted on various reforms to assure stability. As a result, Turkey announced a new policy of no longer offering sovereign guarantees to finance future BOT power plant construction, and reduced to 10 years from 20 the guarantee period for cost recovery. This changed the financial picture so much for 29 projects that had already received approvals that none of them have proceeded. There have also been legal problems with the BOT concept -- Turkish courts have ruled that BOT projects are "concessions" and are subject to judicial review, though it is possible that Turkey's 1999 constitutional amendments may place limits on any reviews.

A similar concept for privatization is the TOR, where a private developer or consortium receives a power plant in exchange for a transfer fee (usually set via a bid process), then operates and maintains the facility as necessary during the predetermined transfer term. At the end of that term, the power plant is transferred back to the state without any further cost or additional requirements. It had been anticipated that many of Turkey's existing power plants could be privatized in this manner, but the IMF is against this approach because of the time limits imposed on the operating rights. Instead, the IMF favors a "full privatization" approach, and may insist on this as a condition for providing Turkey any funds. So far, only two power plants have been privatized under the TOR approach.

The BOO approach has been more favorably received by power developers, as this does not impose any time constraints on the project. As a result, the economics of power production is usually more favorable than for the BOT approach, which results in a lower cost of power generation.

Because of its limited energy resources, Turkey is heavily dependent on imported oil and gas. There are major oil and gas pipelines going through Turkey and additional pipelines are being constructed or are being planned. There is some production of lignite which is used in power plants and industry.

Turkey estimates that there are potential indigenous sources for 246 billion kilowatt-hours (kWh) per year of electric power generation (105 billion kWh from lignite, 16 billion kWh from hard coal, and 125 billion kWh from hydroelectric resources). An historical summary of Turkey's Total Primary Energy Supply (TPEP) and Consumption (TPEC) is shown in Table 1.

Oil
Exploration and Reserves
Turkey has proven reserves of approximately 229 million barrels of oil, most of which is in the Hakkari Basin in the southeast of Turkey. These fields consist of small deposits which have tended to become depleted over the years, increasing extraction costs. However, approximately 20 oil companies in Turkey have been exploring for new deposits in southern and southeastern Turkey, in the European provinces, and in the Black Sea shelf region. There are also potential offshore deposits in the Aegean Sea, but Greece has conflicting claims on this area.

Production and Consumption
The main oil company is the government-owned Turkish State Petroleum Company (TPAO), which accounts for approximately 80% of Turkey's oil production. Royal Dutch Shell and ExxonMobil produce most of the rest.

As Turkey's economy has expanded in recent years, the consumption of oil has increased. This growth in consumption is expected to continue at a rate of about 2-3% per year. Turkey expects that much of its future oil will come from countries in central Asia, such as Azerbaijan and Kazakhstan. TPAO is a partner in oil ventures in these countries.

An historical summary of petroleum production and consumption in Turkey is shown in Table 2.

Refineries and Downstream Processing
Most of the oil refining in Turkey is done by the Turkish Petroleum Refineries Corporation (Tupras), which owns four of the six oil refineries in Turkey. Tupras is currently modernizing its refineries and shifting the product mix toward lighter products such as gasoline, with the aim of achieving the same gasoline and diesel fuel standards as the European Union by 2004. Recently, Tupras was partially privatized in an IPO with 31.5% sold to investors for $2.3 billion.

The other major refinery company in Turkey is Anadolu Tasfiyehanesi AS (ATAS), which is partly owned by ExxonMobil (51%), Shell (27%), BP Amoco (17%), and the Turkish company Marmara Petrol (5%). A summary of Turkey's oil refineries is shown in Table 3.

Petrol Ofisi AS (POAS), the formerly state-owned petroleum distribution company, is now mostly privatized; 51% of POAS was sold to investors in 2000 in an IPO that raised $1.26 billion for the Turkish government. POAS currently operates most gas stations in Turkey. The cost of gasoline to consumers is subsidized to maintain artificially low prices, but these are gradually being increased.

In July 2002, the Turkish government announced that it intends to sell its remaining 25.8% share in POAS to Dogan Petrol Yatirimlari AS, the majority shareholder. The IMF has demanded privatizations such as this as a condition for assisting Turkey through the economic crisis.

Total product output from Turkey's refineries has been trending upward over the last decade, except in 1999 when a major earthquake severely damaged the Izmit refinery. An historical summary of Turkey's output of refined petroleum products by fuel type is shown in Table 4.

Natural Gas
In Turkey, natural gas transmission is the responsibility of a state-owned company, Botas (Petroleum Pipeline Corporation). Botas handles oil and gas pipelines, and also has the monopoly for import, distribution, pricing, and sale of natural gas in Turkey.

The 20 billion cubic feet (bcf) of natural gas that was produced in Turkey in 2000 met only 3.8% of domestic consumption. The rest was imported either by pipelines or as liquified natural gas (LNG). Turkey's natural gas consumption is expected to grow rapidly, quadrupling within the next 20 years, with 1,400 bcf consumption projected for the year 2020. Getting this capacity by domestic production would require $4.5 billion in foreign investment over about the next 20 years.

Presently, the largest share of Turkey's imported natural gas comes from Russia, much of it via the newly-completed Blue Stream Pipeline, which will provide Turkey with 14.1 trillion cubic feet (Tcf) of gas over the life of a 25-year agreement that began in 2002. However, Turkey is trying to diversify its sources, and is considering Turkmenistan, Kazakhstan, Uzbekistan, Egypt, Nigeria, Iraq, and Iran as possible sources. Under a 25-year deal signed in 1996, Turkey plans to buy 3 billion cubic meters (bcm) of natural gas per year from Iran through 2007, after which the amount will increase to 10 bcm annually. In December 2001, gas deliveries from Iran finally began, after repeated delays. Gas purchases from Iran could total $23 billion over the life of the arrangement.

An historical summary of natural gas production and consumption in Turkey is shown in Table 5.

Coal
Reserves and Mining
Turkey has both hard coal and lignite deposits. The hard coal is mostly located in the western part of the country, in the Zonguldak Basin, which has more than 700 million metric tons of workable reserves, about 80% of which can be coked. Lignite deposits are widespread and plentiful; reserves are estimated at more than 8 billion metric tons (7th largest in the world), most of which is economically mineable, though only about 7% has a heat content of more than 3,000 kilocalories per kilogram. About 40% of the Turkey's lignite is in the Elbistan Basin.

Production and Consumption
The Turkish Hard Coal Institute operates five underground mines in Turkey, and is the only hard coal production entity in the country. The two most important lignite fields in Turkey -- the Afsin-Elbistan and Sivas-Kangal coal fields -- are owned by TEAS and operated by private companies under contract. Even though there is significant production of lignite and some production of hard coal in Turkey, not enough coal is mined to meet demand. As a result, Turkey imports more than 16 million tons of hard coal each year, mostly from Australia, the United States, South Africa, and Russia. Coal is used mainly for electric power steelmaking, and cement production. About 75% of the Turkey's lignite is used as a fuel source for electric power production.

An historical summary of coal production and consumption in Turkey is shown in Table 6.

Nuclear
In July 2000, Turkey canceled its plans for building a 1,400 MWe nuclear power plant at Akkuyu Bay on its Mediterranean coast north of Cyprus. Prior to the cancellation, three international consortia were bidding for the $2.5 billion contract. The cancellation was directly caused by Turkey's economic situation and the Turkish Treasury Department's refusal to grant a sovereign guarantee for the project. However, there had been much opposition to the project for a variety of reasons, including a significant seismic risk in the area where the power plant was to be sited.

Hydroelectric and Other Renewable Energy
Hydroelectric Power
Turkey's geography -- a rectangular plateau peninsula surrounded on three sides by seas -- is highly conducive to hydroelectric power generation; Turkey has about 1% of the total world hydroelectric potential. There are many rivers in Turkey and five separate watersheds. The Persian Gulf watershed in eastern Turkey includes the Tigris River (known in Turkey as the Dicle River) and the Euphrates River (known in Turkey as the Firat River), which flow southwest into Iraq and eventually merge and empty into the Bay of Basra at the northern end of the Persian Gulf. The Aras/Caspian watershed in eastern Turkey includes the Aras River, which flows eastward and whose waters eventually empty into the Caspian Sea. The Black Sea watershed covers much of northern Turkey, and includes Turkey's longest river, the Kizilirmak. The Mediterranean watershed covers much of southwestern Turkey, where rivers either flow south to the Mediterranean Sea or west to the Aegean Sea. The fifth watershed covers the region around the Marmara Sea, which includes several smaller rivers. A map of the major rivers of Turkey is shown in Figure 2.

Figure 2: Major Rivers of Turkey

Source: DOE Office of Fossil Energy

Devlet Su Isleri (DSI), the General Directorate of State Hydraulic Works, is Turkey's state water agency, and has the responsibility for developing all of water resources in the country. DSI has the mission of planning, designing, constructing, and operating Turkey's dams and hydroelectric power plants, as well as domestic water and irrigation projects. The Turkish government agency responsible for making surveys for identifying the hydroelectric potential of Turkey's water resources is Elektrik Isleri Etut Idaresi (EIE), the Electrical Power Resources Survey and Development Administration.

As of the end of 2001, Turkey had 125 hydroelectric power plants in operation, ranging in size from the 2,400 megawatt (MWe) Atatürk Power Plant (presently the 6th largest capacity hydroelectric facility in the world) all the way down to many small facilities of less than 2 MWe in capacity. Most are owned and operated by DSI; independent companies who own hydroelectric projects in Turkey include Birecik AS, which owns a 672 MWe power plant on the Euphrates River, and Cukurova Elektrik AS (CEAS) which presently has more than 1,000 MWe generating capacity. Hydroelectric power plants in Turkey currently account for about 40% of Turkey's electricity demand. The Turkish government hopes to see hydroelectric capacity expanded to 35,000 MWe by the year 2010. Ultimately, the construction of more than 300 additional hydroelectric power plants are projected for Turkey to make use of the potential remaining hydroelectric sites; these have a potential of about 69,000 gigawatt-hours (GWh) per year. This long term plan would bring about an additional 19,300 MWe of hydroelectric capacity online at a cost of more than $30 billion.

A summary of Turkey's major existing hydroelectric power plants is shown in Table 7.

DSI is presently undertaking one of the largest water resources development projects in the world, the GAP or Southeastern Anatolian Project, which, when completed, will include 22 irrigation dams and an additional 19 hydroelectric power plants on the Tigris and Euphrates Rivers and their tributaries. Construction of nine of these dams and five of the hydroelectric facilities has already been started. The project also covers, besides agriculture and electric power development, related social and economic sectors including industry, transportation, mining, telecommunications, health, education, and tourism. However, many of these planned dams, such as the 1,200 MWe Ilisu Dam, are controversial because of the large amount of land that would be flooded and the large number of people that would be displaced.

DSI has also planned a cascade of a eleven large hydroelectric dams on the Çoruh River in northeastern Turkey; some of these are already under construction. This is also a somewhat controversial undertaking, as the Çoruh is widely regarded as one of Turkey's most scenic rivers and as one of the top ten whitewater rafting rivers in the world.

In February 1998, the U.S.-Turkey Joint Statement on Hydropower Projects was signed which listed nine hydroelectric projects to be negotiated with consortia headed by American firms. In November 1998, the Ministry of Energy authorized DSI to negotiate the contracts and cooperate with the Turkish Treasury for finalization of loan agreements. Of the nine projects, three -- Hakkari, Alpaslan II, and Konaktepe -- are now under contract. The status of the remaining six is unresolved.

A summary of the major hydroelectric power plants that are planned and under construction is shown in Table 8.

Wind Energy
Turkey is encouraging the construction of BOT wind power plants by private power developers. The first wind power facility in Turkey was commissioned in November 1998, and is located near the city of Izmer in western Turkey. The facility has 12 wind turbines for a total capacity of 7.2 MWe, and is owned by Gucbirligi Holding, Inc.

Turkey has a goal of deriving 2% of its electricity from wind power. In 2000, the Government of Turkey had offered a tender for up to 390 MWe of electricity from windpower. About 25 potential sites for windpower projects had been identified and were undergoing evaluation, but the tender was canceled as part of the IMF-induced economic policy changes. Without the full sovereign guarantees that would in effect result in government subsidies to offset the relatively high expected cost of the power produced, none of 17 windpower projects that had received their BOT approvals have proceeded.

Geothermal Energy
Turkey has significant potential for geothermal power production, possessing one-eighth of the world's total geothermal potential. Much of this potential is of relatively low enthalpy that is not suitable for electricity production but still useful for direct heating applications; at the end of 1999, Turkey's total installed capacity for direct heating was 820 thermal megawatts (MWth), of which about 390 MWth provided heating for 51,600 residences, about 100 MWth provided heating for about 45 hectares of greenhouses, and about 330 MWth was used to provide heated water for about 200 spas. By 2010, as many as 500,000 residences could be heated by geothermal power, which would represent the use of about 3,500 MWth.

Turkey presently has one operating geothermal power plant, a 20 MWe facility in the Denizli-Kizildere geothermal field in the southwestern Turkey province of Denizli. The facility includes nine production wells, and also has an integrated liquid carbon dioxide (CO2) and dry ice production factory that can produce a combined total of 40,000 metric tons per year of the two products. Another 20 MWe power production unit is being planned for this facility.

There are six other geothermal fields that have been identified, all in far southwest Turkey, that may be suitable for geothermal power production: the Germencik-Aydin field in Aydin Province, the Çanakkale-Tuzla field in Çanakkale Province, the Izmir-Sefirihiser field in Izmir Province, the Aydin-Salvatli field in Aydin Province, the Kutahya-Simav field in Kutahya Province, and the Dikili-Bergama field in Izmir Province. The Germencik-Aydin field may be the most promising of these as it has a power potential of at least 100 MWe; a new 25 MWe power plant, to be located near the city of Germencik, is in the planning stages. Turkey hopes to generate 500 MWe from geothermal energy by the year 2010 and 1,000 MWe by the year 2020.

Energy Transmission Infrastructure
The Turkish pipeline company Botas was established by the Turkish Petroleum Corporation in 1974 to transport Iraqi crude oil into Turkey. In 1995, Botas became an independent entity, and was granted the monopoly for transport of petroleum and natural gas within Turkey, and to construct new pipelines as necessary for doing so.

Gas Pipelines, Terminals, and Storage
There are several existing gas pipelines in Turkey. The Eastern Anatolia Gas Pipeline brings gas into Turkey from Iran and is the main natural gas pipeline in eastern Turkey; the pipeline presently extends as far west as Ankara. The 842-kilometer Russia-Turkey Natural Gas Pipeline runs from Russia through Ukraine, Romania, and Bulgaria into Turkey. An extension of this pipeline brings gas to Ankara and to Hamitabat, where it supplies a combined cycle power plant. In 1996, another 209-kilometer extension of this pipeline to the western Black Sea region called the Izmit-Karadeniz Eresli Natural Gas Transmission Line was finished, and following that, a 208-kilometer extension, the Bursa-Çan Natural Gas Transmission Line, was added to take the pipeline to the city of Çan. In 2000, a 107-kilometer extension to the port city of Çanakkale called the Çan-Çanakkale Natural Gas Pipeline was completed.

The $3.3 billion Blue Stream Pipeline, which will transport 16 billion cubic meters per year of natural gas 1,200 kilometers from Russia to Turkey, was completed in October 2002. The pipeline starts at Izobilnoye near Krasnodar in southern Russia and runs overland on the Black Sea coast 370 kilometers to Dzhubga. Construction of the deep-sea portion of the Blue Stream Pipeline began in June 2002. The undersea portion consists of twin pipelines running 375 kilometers under the Black Sea from Dzhubga, Russia, to the Turkish port of Samsun; this undersea portion reaches a depth of 2,150 meters, making it the world's deepest pipeline. From Samsun, the pipeline then runs overland to provide gas to Ankara. The Blue Stream Pipeline was jointly built by Russia's Gazprom and Italy's ENI, with each having a 50% share; the project was undertaken because of Turkey's 1997 agreement with Russia to buy 565 bcf per year of natural gas. The schedule for the pipeline calls for 70.6 bcf of natural gas deliveries to Turkey in 2002, while from 2003 to 2009, Russia will increase deliveries through the pipeline by 70.6 bcf per year until final capacity of 565 bcf per year is reached in 2009.

In March 2002, Turkey signed a $300 million deal with Greece to extend an Iranian natural gas pipeline to Greece. The pipeline will go 125 miles inside Turkey and cross the Dardanelles Straits into Greece. This will extend the pipeline from Karacabey in western Turkey to the city of Komotini in northeastern Greece. The pipeline is expected to carry 17.5 bcf of gas per year, and could be completed by 2005.

Turkey is also planning extensions to the Eastern Anatolia Natural Gas Pipeline within the country. The 565-kilometer Southern Natural Gas Transmission Line Project would extend the Eastern Anatolia Pipeline in three stages: from Sivas to Malatya (168 kilometers), Malatya to Gaziantep (182 kilometers), and Gaziantep to Mersin (215 kilometers). The proposed 618-kilometer Konya-Izmir Natural Gas Transmission Line Project would extend the Eastern Anatolia Gas Main from Konya to Izmir, also supplying the cities of Burdur, Isparta, Denizli, and Nazilli. This project would also consist of three stages: Konya to Isparta (217 kilometers), Isparta to Nazilli (203 kilometers), and Nazilli to Izmir (198 kilometers). BOTAS has planned for completion of both of these projects in 2003.

Georgia, Azerbaijan, Kazakhstan and Turkmenistan have backed a plan to transport natural gas from Turkmenistan and Kazakhstan with a pipeline running under the Caspian Sea to Baku. This proposed $2.7 billion Trans-Caspian Gas Pipeline would be 1,700 kilometers long and carry 16 billion cubic meters of natural gas per year. The projected route of the pipeline is from Turkmenbashy, Turkmenistan, via Baku, Azerbaijan, and Tbilisi, Georgia, to Erzurum in Turkey, where it would link up to the Turkish natural gas pipeline system. There was an intergovernmental declaration in support of the project in November 1999 by Turkey, Turkmenistan, Azerbaijan, and Georgia; the next step would be a definitive agreement by the four governments. Credit Suisse and First Boston have been appointed financial advisors for the project. There are obstacles to overcome before this pipeline can become a reality, however, not the least of which being the economic effects of the new Blue Stream Pipeline from Russia. Turkmenistan and Azerbaijan have also had difficulty reaching agreement on pipeline volumes. It is not yet clear if the Trans-Caspian Pipeline will proceed.

Turkey and Iraq have reached a consensus for the construction of a natural gas pipeline from Iraq to the southwestern region of Turkey that would bring a large amount of natural gas to Turkey from gas fields to be developed by Iraq; implementation of this project is dependent on eventual lifting of the United Nations embargo on Iraq. Also, in February 2000, Turkey and Egypt signed a protocol concerning oil and gas issues that among other things declared their intention for constructing a gas pipeline under the Mediterranean Sea that would transport about 140 bcf per year of natural gas from Egypt to Turkey.

Besides pipelines, Turkey also receives imported natural gas in the form of LNG. There is a terminal at Marmara Ereglisi on the Sea of Marmara. This terminal has the capacity to provide 105 bcf per year of LNG from Algeria. Turkey is also considering LNG imports from Australia, Egypt, Nigeria, Qatar, and Yemen. Also, there are engineering studies underway concerning possible construction of natural gas storage facilities at several sites in Turkey. One of these was for the Northern Marmara and Degirmenkoy gas fields, which could be upgraded for gas storage after their depletion.

Oil Pipelines
Since oil production in Turkey is very limited, approximately 90% of the oil must be imported via tanker or pipeline. At present most of the oil coming from tankers is from Libya or Algeria. Most of the oil arriving by pipeline comes from Russia. Turkey has tried to diversify its oil supply by participating in various pipeline projects, including ones through Iran. Besides pipelines, Caspian Sea oil for Turkey comes via tanker. This requires using the Bosphorus, the narrow strait that connects the Black Sea and the Sea of Marmara. At present, 1.4 million b/d of oil goes through the Bosphorus.

There are several existing oil pipelines in Turkey. The Ceyhan-Kirikkale Crude Oil Pipeline is 448 kilometers long, and annually transports about 25 million barrels of oil. BOTAS has been operating this pipeline since 1983. The Batman-Dörtyol Crude Oil Pipeline began operation in 1967, transporting crude from the Batman area to points of use in Dörtyol on the Bay of Iskenderun. This pipeline is 511 kilometers long and can transport about 24 million barrels of oil per year. The Iraq-Turkey Crude Oil Pipeline runs from Kirkuk, Iraq, to the Ceyhan marine terminal in Turkey; it began operation in 1976 and has operated continuously, except for the 1990 to 1996 period when the United Nations embargo on Iraq was in effect. Turkey suspended operation of the pipeline in August 1990, observing the U.N. embargo. In May 1996, the U.N. allowed limited Iraqi oil exports to resume, and oil deliveries to Turkey resumed on December 16, 1996. In 2000, 286 million barrels of oil were transported via the pipeline, which actually consists of two parallel pipelines, the first line 986 kilometers long and the second 890 kilometers.

Much of Turkey's future oil supply is expected to come from countries in central Asia, such as Kazakhstan and Azerbaijan. In 1998, Georgia, Azerbaijan, Kazakhstan and Turkmenistan signed an agreement to build an oil pipeline from the Caspian Sea across Georgia and Turkey to western markets; this pipeline would go from Baku (in Azerbaijan) via Tbilisi (in Georgia) to Ceyhan (in Turkey). This so-called "BTC Pipeline" is estimated to cost about $1.4 billion, with major investors including BP Exploration (38%), SOCAR-Azerbaijan (25%), and six other oil companies, including TPAO. This pipeline would carry 1 million barrels of oil per day; the total length will be 1,730 kilometers, of which 1,070 kilometers will be in Turkey. It is expected that 30% of the pipeline cost will be financed by the investors with the remaining 70% will come from the U.S. ExIm Bank, Japan's ExIm Bank, the International Finance Corporation, and the EBRD. The Host Government Agreements were signed with Azerbaijan, Georgia, and Turkey in October 2000, and since that time, several rounds of increasingly detailed engineering studies have been accomplished. Construction of the BTC Pipeline began in September 2002 and it is expected to be completed within 32 months. BOTAS is expected to be responsible for building the Turkish portion of the pipeline.

A map of Turkey's existing and planned oil and gas transmission pipeline system is shown in Figure 3.

Figure 3: Turkey's Existing and Planned Oil and Natural Gas Pipelines

Source: Botas

Electricity Transmission
The Turkish Electricity Distribution Company (TEDAS) has the responsibility for operation of Turkey's electricity transmission system. Turkey has connected its electricity grid to neighboring countries from which it buys and sells electricity, even though the Turkish system is not set up for synchronous operations with the other countries. The connections are as follows:

• Azerbaijan (34.5 kilovolts [kV] and 154 kV)
• Armenia (220 kV)
• Bulgaria (400 kV)
• Georgia (220 kV)
• Iran (154 kV)
• Iraq (400 kV)
• Syria (66 kV)

Electricity
Installed Capacity
Turkey's rapid growth in electricity demand, which has led to almost a doubling of installed generating capacity over the past decade, is expected to continue for the forseeable future. This could lead to building a total installed generating capacity of as much as 65,000 MWe by 2010. MENR believes this would require an investment of $3-5 billion per year. An historical summary of installed electricity generating capacity in Turkey is shown in Table 9.

Generation and Consumption
Net electricity generation in Turkey has more than doubled over the past decade, but is not sufficient to keep up with expected demand. As a result, Turkey is importing electricity, and signed an agreement with its neighbor, Bulgaria, which will allow Turkey to purchase 33.7 billion kWh of electricity over the 10-year period from 1999 to 2009. This deal has had implications for future power plant construction planning, because import of electricity from Bulgaria, at 3-3.5 cents per kWh, is actually cheaper than the incremental cost of producing electricity from a new thermal-electric power plant (about 5 cents per kWh).

An historical summary of electricity generation and consumption in Turkey is shown in Table 10.

Industry Overview
MENR has planned for a very large increase in electric generating capacity over the next twenty years. As shown in the Table 11, the largest growth is planned for natural-gas fired generation.

Presently there are five fossil-fueled power plants in Turkey with generating capacities greater than 1,000 MWe. The largest of these is the 1,400 Bursa combined cycle power plant, located near the village of Ovaakca in Bursa province. A summary of Turkey's largest thermal-electric power plants is shown in Table 12.

Many other thermal-electric power plants are under construction or in the planning stages. Five of these will be greater than 1,000 MWe capacity. InterGen, with its Turkish partner Enka, is constructing three large gas-fueled combined cycle power plants that were the first to proceed under Turkey's "Build-Own-Operate" (BOO) program. One of the largest coal-fueled power plants under development is a 1,300 MWe facility at Iskenderun in southern Turkey that is scheduled for completion in 2003, and will burn imported coal; Siemens is the lead developer of the consortium that is constructing and will own the power plant.

A summary of some of Turkey's planned thermal-electric power plants is shown in Table 13.

Cogeneration of combined heat and power (CHP), or "autoproduction" as it is known in Turkey, has been advanced by governmental support and the continuing need for additional electricity generation within Turkey. As late as 1994 there were only four cogeneration plants in operation, with a total capacity of only 30 MWe. Since then, incentives were offered in the form of a 100% tax deduction and duty exemptions for autoproduction facilities and guaranteed purchasing of any surplus electricity by TEDAS. These improved the climate for cogeneration in Turkey so much that by mid 2001, there were 90 operating cogeneration plants (with a total capacity of 2,400 MWe), 55 cogeneration plants under construction (with an additional capacity 2,060 MWe), and 153 cogeneration plants (representing another 10,400 MWe) under evaluation by the Ministry of Energy and Natural Resources (MENR). Many of these are or will be located in so-called "organized industrial zones" or "OSBs". The total installed cogeneration capacity is expected to reach up to 6,000 MWe by 2005, which would represent about 20% of Turkey's total installed electricity generating capacity.

Table 14 lists some of Turkey's larger autoproduction facilities.

Natural gas is the preferred fuel for autoproducers, but there have been natural gas shortages in the late 1990s that have forced some of these small cogeneration power plants to turn to alternative fuels -- not a preferred solution, since most alternative fuels are more expensive than natural gas (on a heat content basis, including deliver costs to the plant site) and some alternate fuels (such as heavy oils) have a high sulfur content. The ongoing expansion of Turkey's natural gas transmission system will be beneficial for autoproduction.

A summary of Turkey's autoproduction, by fuel type, is shown in Table 15.

Turkey is seeking admission to the European Union and is trying to meet EU environmental standards. In that regard, Turkey is requiring flue gas desulfurization (FGD) units on all newly commissioned coal power plants and is retrofitting FGD onto older units.

Turkey's installed thermoelectric generating capacity has about doubled since 1987, and with that came an increase in air emissions, though not a doubling. Historical and projected anthropogenic sulfur dioxide (SO2), nitrogen oxides (NOx), carbon monoxide (CO), and non-methane volatile organic compounds (NMVOCs) emissions in Turkey are shown in Table 16.

Turkey has made much progress over the last two decades in setting up infrastructure for addressing its environmental problems -- an Environment Law was enacted in 1983 and the Ministry of Environment was created in 1991. There are also non-governmental environmental organizations that have emerged. Turkey is a party to many international environmental agreements, including Air Pollution, Antarctic Treaty, Biodiversity, Desertification, Hazardous Wastes, Nuclear Test Ban, Ozone Layer Protection, Wetlands, and Ship Pollution. Turkey has signed but not yet ratified the Arctic-Environmental Protocol and the Environmental Modification treaty. Additionally, Turkey has neither signed nor ratified the United Nations Framework Convention on Climate Change. An historical summary of CO2 emissions from fossil fuel use in Turkey is shown in Table 17.

Turkey has been trying to transfer state assets to the private sector since the 1980s. In 1998, they set a target of trying to get $3-$4 billion in privatization revenues. In the energy sector this includes the state oil products distribution company (POAS) and the Turkish Petroleum Refining Company (Tupras). Privatizing electric generation is expected as part of a new energy law which could soon be proposed.

Under the proposed energy law there would be a major restructuring of electric power in Turkey with the privatization of many enterprises. Turkey has been studying electric restructuring since 1997 in an effort financed by the World Bank. The proposed structure would move most generation into the private sector, with a State Generation Company retaining the authority to run nuclear power. It is also planned that the regional distribution companies will be privatized. However, earlier efforts to privatize regional distribution systems are still in negotiation; none of the regions has yet completed a transfer to the private sector.

Turkey had strong economic growth between 1995 and 1998, but there have been economic difficulties since then. Inflation has been a continuing problem, and Turkey also has a high foreign debt burden. In June 1998, Turkey signed an agreement with the International Monetary Fund, pledging to cut the inflation rate to below 50% by the end of 1998 and 20% by the end of 1999. However, these targets were not met. In late 2000, Turkey suffered a banking crisis and was assisted by the IMF after agreeing to various economic reforms. In February 2001, Turkey abandoned its policy of pegging the value of the lira, instead opting for a floating currency policy which almost immediately resulted in the lira's strength falling by 50% against the U.S. dollar. An historical summary of Turkey's GDP and inflation is shown in Table 18.

In 2001, Turkey had $33.8 billion of exports, which included textiles, apparel, foodstuffs, and steel products. There were $39.7 billion of imports in 2001, which included machinery, fuels, raw material, and foodstuffs. Germany provided 13% of Turkey's imports, while the U.S. provided 8%.

To further strengthen its trade, Turkey became a member of the World Trade Organization (WTO) in March 1995. The United States has also granted permanent most-favored-nation status to Turkey.

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last updated on April 16, 2003

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