Energy: A development opportunity
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by Hatice Utkan
OluÅŸturulma Tarihi: Temmuz 08, 2009 00:00
ISTANBUL - Rising energy demand forces the govenment to focus more in the area. Bureaucratic obstacles should be lifted to create further development opportunities in the sector, says Kerim Alain Bertrand of ISI Emerging Markets in Turkey.
A growing energy demand in Turkey and the world puts energy deals at the fore, providing opportunities for investors and the economy in general. Last year, Turkey’s total energy deal volume reached $6.6 billion with 19 deals, according to the annual "Energy Deals" report prepared by ConnectedThinking and PriceWaterHouseCoopers.Â
While domestic players try to grab a piece of the pie in the energy market, regulatory obstacles and developments in neighboring countries deeply affect the sector.
"Bureaucratic obstacles create the biggest problem in the energy sector," Kerim Alain Bertrand, chief executive of ISI Emerging Markets in Turkey, told Hürriyet Daily News & Economic Review in an interview last week. "Fortunately, with the European Union accession process, legislation is integrating with EU legislation. This gives confidence to international investors."
On the other hand, even as Turkey implements suitable pricing for energy companies and gives greater importance to privatization, the judiciary can halt tender processes through lawsuits from labor unions. "That’s why international investors think that the deal process is hard in Turkey," Bertrand said.
Regulatory uncertainties are the biggest challenges for investors during the deal process, according to the report by ConnectedThinking and PriceWaterHouseCoopers. "Legislation on energy deals should be clear, and they have to be prepared with intensive care and attention." The Energy Market Regulatory Authority aims to attract the private sector to energy. "The obvious truth in Turkey is that both in the sense of economy and demography, demand for energy is increasing. The government cannot close the energy gap by itself, due to budgetary problems. Thus, it has to create various incentives for the private sector. These incentives can be about pricing or land guarantees," said Bertrand. "For investors, price is very important," he said.
Renewables
Turkey is extremely suited to produce renewable energy, Bertrand said. "But, renewable energy is more expensive. The return of investment in this area takes a long time. That’s why it needs a suitable price determination," he added. "Wind energy, on the other hand, has the lowest price. However, it has a land dimension." Such problems may deter investors from the sector, he said.
Turkey has taken important steps in rendering the country an energy corridor between the East and the West.
"The Baku-Tbilisi-Ceyhan, or BTC, oil pipeline makes this target possible," Bertrand told the Daily News. "Turkey has two targets in energy. First one is to meet its domestic energy need. The second is becoming an energy corridor between Asia and Europe."
According to Bertrand, the key to becoming such a corridor in natural gas is the Nabucco project. "There is also the Bluestream project, which involves building a pipeline between Russia and Samsun, a Turkish port city in the Black Sea region. But this will not stop the [energy] dependency [on Russia]. All these projects involve the geographic locations of countries, as well as politics," he said.
Bertrand also noted rising Turkish energy investments in northern Iraq, commenting on the Iraqi government’s "first round" in oil bids. "The first prices that the market has faced in Iraq were unfeasible. But, these prices can drop since Iraq needs foreign investors to develop its energy sector," he said. Turkey’s proximity to Iraq brings key advantages to its energy firms, he said.
While domestic players try to grab a piece of the pie in the energy market, regulatory obstacles and developments in neighboring countries deeply affect the sector.
"Bureaucratic obstacles create the biggest problem in the energy sector," Kerim Alain Bertrand, chief executive of ISI Emerging Markets in Turkey, told Hürriyet Daily News & Economic Review in an interview last week. "Fortunately, with the European Union accession process, legislation is integrating with EU legislation. This gives confidence to international investors."
On the other hand, even as Turkey implements suitable pricing for energy companies and gives greater importance to privatization, the judiciary can halt tender processes through lawsuits from labor unions. "That’s why international investors think that the deal process is hard in Turkey," Bertrand said.
Regulatory uncertainties are the biggest challenges for investors during the deal process, according to the report by ConnectedThinking and PriceWaterHouseCoopers. "Legislation on energy deals should be clear, and they have to be prepared with intensive care and attention." The Energy Market Regulatory Authority aims to attract the private sector to energy. "The obvious truth in Turkey is that both in the sense of economy and demography, demand for energy is increasing. The government cannot close the energy gap by itself, due to budgetary problems. Thus, it has to create various incentives for the private sector. These incentives can be about pricing or land guarantees," said Bertrand. "For investors, price is very important," he said.
Renewables
Turkey is extremely suited to produce renewable energy, Bertrand said. "But, renewable energy is more expensive. The return of investment in this area takes a long time. That’s why it needs a suitable price determination," he added. "Wind energy, on the other hand, has the lowest price. However, it has a land dimension." Such problems may deter investors from the sector, he said.
Turkey has taken important steps in rendering the country an energy corridor between the East and the West.
"The Baku-Tbilisi-Ceyhan, or BTC, oil pipeline makes this target possible," Bertrand told the Daily News. "Turkey has two targets in energy. First one is to meet its domestic energy need. The second is becoming an energy corridor between Asia and Europe."
According to Bertrand, the key to becoming such a corridor in natural gas is the Nabucco project. "There is also the Bluestream project, which involves building a pipeline between Russia and Samsun, a Turkish port city in the Black Sea region. But this will not stop the [energy] dependency [on Russia]. All these projects involve the geographic locations of countries, as well as politics," he said.
Bertrand also noted rising Turkish energy investments in northern Iraq, commenting on the Iraqi government’s "first round" in oil bids. "The first prices that the market has faced in Iraq were unfeasible. But, these prices can drop since Iraq needs foreign investors to develop its energy sector," he said. Turkey’s proximity to Iraq brings key advantages to its energy firms, he said.