Turkey looks to boost crude transit role in 2020

Istanbul — Turkey is moving closer to giving the green light for two key infrastructure projects in 2020 that will boost its role as a transit route for crude from Iraq and the Caspian region.

Approval for plans to rebuild and possibly expand the Kirkuk-Ceyhan oil pipeline and for the construction of a ship canal bypassing the Bosporus bottleneck have been on the cards for years.

But progress was made in September when the Iraqi and Turkish energy ministers discussed the construction of a new crude export line from Iraq's Kirkuk oil fields.

The new line to Turkey's Mediterranean oil export hub at Ceyhan would run parallel to the existing twin 1.6 million b/d line.

Turkish energy minister Fatih Donmez responded positively to the proposal for a 1 million b/d, 1,000 km long pipeline linking the Kirkuk fields to Ceyhan, according to reports.

Inside Iraq, Baghdad may well begin construction of its own section of the line, which would replace the existing line, which was partly destroyed during the ISIS insurgency.

With the capacity expected to be only 1 million b/d, however, this suggests the additional line will aim to carry Kirkuk crude only as far as the Turkish border.

Baghdad is preparing to launch tenders for the construction of its section of the line, and that work could begin as soon as 2020.

A revamped Kirkuk-Ceyhan pipeline would both boost revenues and relations with Baghdad, while at the same time offering some leverage over the Kurdistan Regional Government (KRG) in the semi-autonomous region of Iraq adjoining the Turkish border.

Crucially, a new Iraqi export line for Kirkuk crude would allow Baghdad to export higher volumes, independent of the KRG's 1 million b/d pipeline which opened in 2014 to the annoyance of Baghdad. It would also give Ankara leverage over the KRG, with whom relations have been poor since the KRG announced plans to declare formal independence from Baghdad. Ankara opposes such a move, fearing further trouble from its own Kurdish minority.

KANAL ISTANBUL

Turkey's second plan for boosting oil transit in 2020 involves the construction of a 45 km ship canal across Turkey's European province of Thrace to the Sea of Marmara to bypass the congested Bosporus. A pet project of President Tayyip Erdogan, the "Kanal Istanbul" aims to remove tanker traffic from the Bosporus, passage through which currently requires a pilot and which is often closed in winter due to fog.

Speaking on December 30, Erdogan responded to recent criticism of the project from Turkish opposition leaders, warning the canal would be built "whether they want it or not."

"We'll either use a Build Operate Transfer (BOT) model or fund it through the state budget. We have the necessary capability," he said.

However, it's far from clear whether such a canal is either wanted or needed. To date, shippers have shown little interest in paying a toll for using the canal when passage through the Bosporus is free.

Without withdrawing from the 1936 Montreux Convention which guarantees free passage to civilian vessels, however, it is difficult to see how Turkey could persuade tanker traffic to switch routes.

Similarly, Caspian volumes reaching the Black Sea have not grown to the extent once anticipated, with part of what does reach the sea now being transited to refineries in Europe by pipeline.

Turkey does not produce separate data for tanker traffic transiting the Bosporus and the Dardanelles. Data for all hazardous cargoes shows a marginal volume increase over the past decade, but a marked decrease in vessel numbers, suggesting congestion is not a growing problem.

-- David O'Byrne, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com