Turkey – An Unstable Energy Hub

Friday night’s attempted coup in Turkey revealed just how sensitive the oil market is to geopolitical incidents right now. Both WTI and Brent futures rose around 1% as events unfolded in Turkey, even though Turkey is not a major oil producer. Turkey is an important energy transport hub and the coup – had it been successful – could very well have threatened the flow of energy across boarders.

Crude Oil Pipelines

A major pipeline operated by BP (called the Baku-Tbilisi-Ceyhan) runs from Azerbaijan to the Turkish port city of Ceyhan on the Mediterranean. Another pipeline runs from Kirkuk and Erbil in Iraq to Ceyhan. Combined, these pipelines can carry a maximum of 2.7 million barrels per day, though BP reports that this quarter the pipeline has only transported about 740,000 barrels a day due to declining production in Azerbaijan.

No action was taken to curtail the flow of oil through these pipelines during the recent attempted coup, however they have been sabotaged in the past. Kurdish separatist groups in Turkey have blown up sections the pipelines in Turkey and violence in Iraq in 2003, 2009, and 2013 effected the flow of oil from Iraq. As recently as this past February sabotage again halted the flow of oil between Iraq and Turkey. This stoppage had severe consequences for the Iraqi-Kurdish autonomous region that depends on oil revenue from this pipeline and for European refineries who had been purchasing this relatively cheap oil.

Natural Gas Pipelines

Natural gas pipelines crisscross the Anatolian peninsula and several new pipelines are under negotiation. A key natural gas pipeline runs from the Iranian city of Tabriz to Ankara. Another runs horizontally through Turkey and connects Azerbaijan to European connector lines. These pipelines have both been sabotaged by Kurdish separatist groups.

Currently, Turkey is at the center of new natural gas pipeline development. Despite Russian-Turkish tensions over Syria and Iran, the two countries were moving forward with a new natural gas pipeline. The Turkish Stream pipeline, a $12 billion joint Russian-Turkish project, would have carried natural gas from Russia to Turkey but was suspended in December 2015, after Turkey shot down a Russian warplane on the Syrian-Turkish border. Since then, Turkey has reportedly been negotiating with Israel to build a pipeline to carry natural gas from Israel’s newly discovered offshore natural gas field, Leviathan. Other natural gas pipelines slated for development include the Southern Gas Corridor, a pipeline designed to bring natural gas from Azerbaijan to Italy and relieve European dependence on Russian natural gas.

Maritime Oil Transportation

Turkey controls a very important choke point for maritime oil transportation – the Turkish Straits (specifically the Bosporus and Dardanelles). An average of 2.9 million barrels of oil a day passed through these straits in 2013 (about 3% of global supply), mostly from Russia to the Mediterranean. At the time of the coup, at least ten crude oil tankers were approaching Turkish ports in Ceyhan and the Turkish Straights. They were forced to anchor on the southern side of Straits when the Turkish government halted all movement through the Bosporus on Saturday while they consolidated control after the attempted coup. However, the delay only lasted several hours and all sea transport is once again functioning normally.

Even though the attempted coup in Turkey had almost no impact on the flow of energy across key regions, the event should highlight Turkey’s growing strategic importance as an energy transportation hub. Not only is Turkey a cultural rendezvous of East and West, it is also a key land and sea choke point for oil and natural gas moving from East to West – whose importance is only growing.