Commentaries

Discovery of a gas field in the Black Sea by Turkey and further prospects

by Rovshan Ibrahimov

On August 21, 2020, President of Turkey R.T. Erdogan, in his 9-minute speech, declared that a large gas field was discovered in the territorial waters of Turkey on the Black Sea. The field, formerly known as Tuna-1, was renamed Sakarya. According to President Erdogan’s statement, the field’s reserves are estimated at 320 billion cubic meters (bcm) of gas.

It should be noted that the presence of oil and gas deposits in the Black Sea was known before. Earlier, oil and gas were discovered and produced here to a certain extent by Turkey’s neighbors in the Black Sea – Bulgaria and Romania. In addition, part of the Danube block is in the territorial waters of Turkey. Turkey itself has long been engaged in oil and gas exploration in the Black Sea and also in the discovery of the offshore Akchakocha (Akçakoca) gas field in the Black Sea. Sakarya became the second, but larger, which means strategically significant.

Hypothetically, it should be noted that the discovery of the Sakarya gas field, for the first time in the history of Turkey, could allow this country, albeit for a certain period, to become self-sufficient in terms of meeting its needs for natural gas. The annual gas demand before the coronavirus was 48-50 billion cubic meters of gas and this newly discovered reserve can fully meet the domestic needs of Turkey within 6 and a half years. However, Turkey will not be able to produce an average of 50 billion cubic meters per year. The total natural gas production will likely fluctuate between 4-6 billion cubic meters.

The extraction of such a volume of gas will allow Turkey to partially meet its needs. However, more significant for Turkey is an opportunity to purchase natural gas from suppliers under more favorable conditions. Moreover, Turkey’s natural gas purchase contract with Russia expires by 2021.

Since Turkey made this discovery in its national territorial waters, there should not be any legal problems with neighboring countries. This circumstance makes it possible to carry out exploration and operational work more comfortably. However, since the gas field is located in very close proximity to Bulgarian and Romanian territorial waters, there is a high possibility that this field may be part of a larger block extending to the territorial sectors of these neighboring countries. This might lead to certain disagreements over the ownership of the gas field.

Practice shows that large gas fields contain higher volumes of gas than their original estimate and this indicates the potential presence of other deposits nearby. If the discovery of the field is confirmed, Turkey will continue to search and new discoveries will increase the profitability of production. Meanwhile, the presence of gas also means the presence of oil condensate, which will allow Turkey to extract a record amount of oil along with natural gas. Turkey is unlikely to export gas but will focus on meeting domestic needs.

Erdogan made a populist statement that natural gas will be supplied to consumers from the field as early as 2023. This is a significant date for Turkey; in 2023, Turkey will celebrate the 100th anniversary of the republic. However, there is neither sufficient infrastructure nor appropriate equipment near the discovered field for the extraction of natural gas. In particular, the composition of the Black Sea is complex. The bottom of the sea is covered with hydrogen sulfide and oxygen does not penetrate through the water column. This factor creates additional difficulties for gas extraction from the ecological perspective.

Meanwhile, the Turkish leadership will need to build the necessary infrastructure from scratch, which will cost the country at least $ 5-6 billion. To secure this amount of financing, Turkey will have to apply to international organizations for sponsorship. However, Turkey is reluctant to do so. Turkey has been facing financial problems and is unlikely to fund the gas extraction from the discovered field without external sponsorship. One possible solution to this problem could be the creation of a consortium with leading international energy companies. However, major energy companies were previously reluctant to operate in this region. For example, ExxonMobil abandoned gas exploration in the Romanian Neptune field, which was considered the largest in the Black Sea with reserves of 200 bcm of gas before the discovery of Sakarya. Like  Chevron, the company has also abandoned projects for the extraction of shale gas in Ukraine. BP could be a good option for Turkey since this company is already involved in a number of projects in this country.