Turkey said to discover 800 billion cubic meters of natural gas in Black Sea

Reuters

Turkey has found significant gas resources in the Black Sea, two Turkish sources said, a discovery which could help the country cut its dependence on energy imports if the gas can be commercially extracted.

PresidentRecep Tayyip Erdoğan told energy executives on Aug. 19 he willannounce "good news" on Aug. 21 that will herald a "newperiod" for Turkey - comments which drove up shares in Turkishenergy firms and lifted the lira from this week's record low.

Hegave no details but the sources said he was referring to a gasdiscovery in the Black Sea, and one source said the scale of thereserves could potentially meet Turkey's energy needs for 20 years.

Turkey'sdrilling ship Fatih has been operating since late July in anexploration zone known as Tuna-1, about 100 nautical miles north ofthe Turkish coast in the western Black Sea.

"There is a natural gas finding in the Tuna 1 well," the source said. "The expected reserve is 26 trillion cubic feet or 800 billion cubic metres, and it meets approximately 20 years of Turkey's needs."

Howeverhe cautioned that it could take seven to 10 years to startproduction, and estimated investment costs at between $2 billion and$3 billion.

Officials,including Energy Minister Fatih Dönmez, have given no details of theexpected announcement, saying Erdoğan will spell out the "surprise"himself.

Turkey'spresidency and energy ministry were not immediately available tocomment on the scale of the find.

Turkey, which is almost completely reliant on imports to meet its energy needs, has been exploring for hydrocarbons in the Black Sea and in the Mediterranean - where its survey operations in disputed waters have drawn protests from Greece and Cyprus.

Ifthe scale of the Black Sea reserves are confirmed, they wouldconstitute a major find given fields containing 1-2 trillion cubicfeet are often developed. However analysts say Turkey could faceextra infrastructure costs in breaking into the market.

"Evenif there is a legitimate find that is developed, it would take fourto six years to get to the production phase," said John Bowlus,editor-in-chief of Energy Reporters.

"Gasdemand and prices are historically low and few are investing in newproduction," which could tighten supply in 3-4 years, he said."If developed quickly, this gas could come on the market at anoptimal time."

Anyreduction in Turkey's energy import bill, which stood at $41 billionlast year from suppliers such as Russia and Iran, would not onlyboost government finances but also help ease a chronic currentaccount deficit which puts pressure on the lira.

Eventhough such a prospect is still distant and uncertain, the lirastrengthened on Aug. 19 after Erdoğan's cryptic comments, as tradersanticipated a positive impact.

Onebanker said the market reaction showed that Turks, who have beenselling lira for foreign currency in recent months, were looking fora reason to convert back to the lira, but that they also want to besure it will not depreciate further.