Page 6 - DMEA Week 34

DMEA COMMENTARY DMEA

Turkish gas discovery: has Erdogan

found more reserves of hot air?

So far markets do not see Turkey’s gas discovery as a game-changer

TURKEY NO one can accuse Turkish President Recep
Tayyip Erdogan of underselling Turkey’s gas find
WHAT: in the Black Sea.
Turkey has discovered The wily monocrat built up expectations
320bn cubic metres of and suspense by two days ago promising that he
gas. would today (August 21) announce some “good
news” that would change the country’s destiny.
WHY: Of course, as wags were quick to point out on
Turkey’s president social media, the subtext to all this is that the
says the find will Turkish lira, and by extension Turkey’s economy,
provide the country are in deep crap on the markets and Erdogan’s
with “unprecedented lickspittle officials are now working overtime to
wealth,” but many are deliver some good news every week to distract
unconvinced. the naysayers and avoid an irreversible slide into
the mire. Erdogan, they implied, had also discov-
WHAT NEXT: ered new reserves of hot air. bank Wood & Company, was not talking of a
It could take up to a But the master rhetorician worked the gas game-changer, instead telling Bloomberg: “The
decade to commercialise discovery hard. Though the size of the identi- question now is how much of this gas is recover-
the find, however. fied reserves—320bn cubic metres (11.3 trillion able. This is not clear yet. What the market really
cubic feet), relatively small compared with other wants to know also is how much they can pro-
major gas fields—turned out to be somewhat duce per year, but I don’t think they are in the
more modest than expected from briefings position to say that yet.”
given by supposedly informed sources to news Turkey, almost entirely reliant on imports
agencies the day before, the executive president from countries including Russia, Azerbaijan,
was able to declare in a televised address from Iran and Iraq to meet its energy needs, had an
an Ottoman palace in Istanbul that “Turkey has energy import bill of $41bn last year. Bigging
realised the biggest natural gas find of its his- up the impact the gas resource could have on
tory in the Black Sea” and rejoice: “My Lord has the country’s economy, Erdogan’s son-in-law
opened the door to unprecedented wealth for finance minister, speaking by video link from the
us.” deck of the Fatih drill ship instrumental in iden-
tifying the Black Sea gas, said: “We will remove
Shares and lira slide the current account deficit from the agenda of
From the immediate reaction of the markets our country.”
it appeared that Erdogan had overplayed his
hand—the Borsa Istanbul BIST-100 index fell Lira saved from 7.50?
as much as 1.8% and ended August 21 1.5% Such a stunning prospect would of course be a
down, while shares in Turkish energy companies life-saver for the lira—Turkey market watch-
including refiner Tupras, Aksa Enerji and Aygaz ers said this week’s impact of the headline gas
retreated sharply after the news and the lira was story may have saved the lira, which hit a record
trading 0.5% lower at 7.33 per dollar by the end low of 7.40 earlier in the week, from plunging
of the day—though he must be given some ben- beyond 7.50—but Jason Tuvey at Capital Eco-
efit of the doubt for, who knows, if fortune gives nomics offered a rather more sober outlook in a
the widest of grins to Turkey’s gas explorers in note to investors, saying: “Turkey’s discovery of
the years ahead, some of his further lashings gas in the Black Sea will provide some boost to
of rhetoric—“This reserve is actually part of a the country’s external position, but it might be
much bigger source. God willing, much more quickly eroded.
will come. There will be no stopping until we “President Erdogan unveiled the discovery
become a net exporter in energy,” Erdogan also on Friday of a field containing 320bn m3 of gas.
told assembled media—could come true. While this is pretty small compared with other
As for the discovery as it stands, Jonathan major gas fields globally, the deposit will help to
Lamb, a senior oil and gas analyst at investment cut Turkey’s energy import bill, which amounted

P6 www. NEWSBASE .com Week 34 27•August•2020