Coal

Turkey’s Dependence on Russian Energy, and Its Recent Natural Gas Discoveries

Turkey (officially, Türkiye) is an energy-poor country. Roughly 85% of its energy supply comes from fossil fuels, roughly equally divided among coal, oil, and natural gas. Coal is mined domestically and imported, but almost all of Turkey’s natural gas and oil comes from other countries. Russia supplies roughly half of its natural gas. Unlike most NATO countries, Turkey has not placed sanctions on Russia, and as a result its natural gas imports continue unabated.

Turkey also figures prominently in Russia’s global energy strategy. Two major pipelines transport Russian natural gas to Turkey, one of which (TurkStream) was recently completed (2020). Moscow and Ankara have hoped to turn Turkey into a major natural gas hub, allowing Russia to export gas to southern Europe without having to move it across Ukraine. The Ukraine War has complicated but not undermined such plans. As recently reported by Natural Gas Intelligence, “Russia is turning to Turkey as a potential natural gas hub partner with a new sense of urgency to find new export outlets for volumes left stranded by damages to the Nord Stream pipelines in September.” The Russian-Turkish energy partnership extends beyond natural gas. In 2021, Russia was Turkey’s second largest supplier of coal, following Colombia. Turkey’s first nuclear power plant (Akkuyu), has been jointly built by the Russian firm Atomstroexport and the Turkish construction company Özdoğu; it is expected to come online in 2023.  Financing has been almost entirely provided by Russian investors.

Political tensions between Russia and Turkey have periodically intruded on their energy collaboration. Most recently, Ankara irritated Moscow by asking for a 25 percent discount on natural gas payments and requesting that all payments be delayed until 2024 due to domestic economic problems. Building a Turkish hub for Russian gas exports also faces external economic and geopolitical obstacles, particularly from other NATO countries. As recently noted by Natural Gas Intelligence:

A Russia/Turkey gas hub would have to secure financing for the billions of dollars needed to construct new subsea pipelines under the Black Sea, which is currently in a war zone. Without access to Western technology and financing, a new pipeline project could take years to build.

Turkey’s energy prospects, however, have recently been transformed by substantial natural gas discoveries in its Black Sea Exclusive Economic Zone. In the final week of 2022, an estimated 170 billion-cubic-meter gas reserve was found at the Çaycuma-1 field. Combined with previous recent discoveries in the Sakarya field, Turkey’s natural gas reserves have been elevated to 710 billion cubic meters. Gas from these fields should become available sometime in 2023, alleviating Turkey’s energy crunch. Discoveries to date, however, are not adequate to meet long-term needs, as the country consumes 50 to 60 billion cubic meters of gas every year. To put recent Turkish discoveries in global context, Russia has proven natural gas reserves of some 50,000 cubic kilometers.

Coal remains one of Turkey’s major energy sources, thwarting its ability to decrease its carbon emissions. Turkey’s domestic coal industry is highly subsidized in order to reduce natural gas imports. Lignite, the least energy-dense and most polluting form of coal, predominates. Coal production surged from 2015 to 2019 but has declined since then. To meet the country’s growing demand, imports have surged in recent years. The war in Ukraine, however, has disrupted supplies and increased costs, generating economic hardship. Particularly hard hit is Turkey’s large and energy-intensive cement industry. CemNet reported in March 2022 that the Turkish cement industry was facing an “imminent crisis.”  In 2014, Turkey was the world’s fifth largest cement producer, following only China, India, the United States, and Iran.

Turkey has made relatively modest investments in renewable energy. Hydropower has long provided roughly 20 percent of its electricity, but recent droughts have reduced the supply. Turkey’s has good climatological potential for solar and wind, and wind power is now growing, providing about 10 percent of the country’s electricity. In 2021 the energy think tank Ember reported that “it is now cheaper to build new wind or solar for power generation in Turkey than running even the most efficient hard coal power plant that relies on coal imports.” Ember’s analysts thus foresee an accelerating transition to renewable power, with a “win-win-win situation” resulting in “lower import bills, lower emissions, [and a] lower carbon levy by the EU.” Such hopes may be overstated. Energy intermittency and the lack of economically feasible storage still poses a major obstacle to solar and wind energy development in Turkey – as in the rest of the world.

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Oil, Coal, and Economic Development in Colombia

Although Colombia is not usually classified as a major oil-producer, it ranks 19th in the world according to the Wikipedia, turning out more than a million barrels a day in late 2014. Although this figure was well below that of Venezuela (2.5 million barrels a day), it surpassed those of such well-known oil exporters as Oman and Azerbaijan. It is no surprise, therefore, that Colombia has taken an economic hit from the recent decline in the price of oil. Compounding Colombia’s woes are the continuing strikes on its oil infrastructure by leftist rebels. According to a recent Financial Times article, “rebel attacks on pipelines cost state-controlled oil company Ecopetrol $430m in lost output last year.” As a result of such problems, the “Colombian peso [is] one of the weakest freely-traded currencies in the world, rivalling the rouble and the Brazilian real by falling 36 per cent over the past 12 months.”

Colombia exports treemapBut as another Financial Times article notes, Colombia has been able to weather the recent economic storm better than most oil exporters. The Colombian economy is buffered by its broad production of other goods. As its currency has fallen, exports such as coffee, flowers, car parts, and textiles have surged ahead. Columbia is particularly competitive in swimwear and Venezuela Exports Treemapunderwear; in 2013, its international sales in these categories brought in some US$ 133 million. As the export treemaps posted here show, Colombia is much less dependent on oil than Venezuela, its neighbor and rival. (Tensions between these two countries have intensified in recent weeks, as Venezuela has closed the border and deported hundreds of Colombians.)

Colombia GDP per capita mapBut despite the profitability of some of Colombia’s other exports, oil still looms large. Its significance is readily apparent in the map of per capita GDP posted to the left. As the map shows, the value of goods and services produced per person in Colombia’s 32 departments varies by more than an order of magnitude. The Colombia oil mapmost economically productive departments, Meta, Arauca, and Casanare, form the heartland of the Colombian oil industry. All are relatively lightly populated Colombia GDP per capita map 2lowland departments; Casanare, for example, has only around 350,000 inhabitants. Their economic productivity runs counter to the more general Colombian pattern, as the country’s elevated plateaus tend to be more prosperous than its lowlands. This pattern is apparent on the next map, in which the highland zone is outlined within dark black lines.

Per capita GDP figures, however, do not necessarily tell us much about the actual economic conditions found in particular places. At the sub-national level, wealth from extractive industries in peripheral areas often flows to more politically powerful regions. Unfortunately, more economically revealing statistics on such measures as average household income are not readily available for Colombia. Colombia Reports, however, has posted a Colombia poverty mappoverty-distribution map, which unfortunately lacks a key and excludes Arauca, Casanare and other eastern departments. As can be seen, oil-rich Meta has a relatively low poverty rate, but not to the extent that one might expect based on its raw economic output. Meta’s per capita GDP figure is roughly three times that of Cundinamarca, yet Cundinamarca, located near the capital city of Bogotá, has a lower poverty rate. Poverty is most pronounced in the distressed Pacific coastal department of Chocó, moreover, even though Chocó is more economically productive on a per capita basis than such departments as Nariño and Sucre.

Colombia kidnapping mapIn some respects, Colombia’s oil-rich departments are more troubled than many much less economically productive areas. The oil industry apparently attracts not just attacks on infrastructure by rebels, but also other forms of crime and violence. As the Colombia Reports kidnapping map shows, Meta, Arauca, and Casanare rank at the top of this unfortunate indicator. Kidnapping in Chocó, a department noted for drug smuggling and corruption, is also elevated.

Colombia’s oil industry is associated with a significant amount of environmental degradation, although its severity is much debated. Many locals even attributed a severe drought that hit Casanare Department in 2014 to oil extraction. Although oil drilling itself has no influence on precipitation, it is possible that a variety of oil-extraction activities reduce dry-season stream flow. Informed observers, however, are more inclined to blame such problems on deforestation in the headwater areas located in the Cocuy Highlands. More recently, however, the problem has been one of excess rain, as floods in early and mid-August 2015 forced many people in Casanare to flee to higher ground.

Colombia coal graphOil is by no means Columbia’s only major source of energy. The country has a fair amount of natural gas and significant hydroelectric potential. Coal is even more important. Colombia ranks 11th in the world in coal production, and its standing in terms of coal reserves is similar. Colombia’s reserves are almost entirely composed of high-quality anthracite and bituminous coal. Colombia coal mapAs a consequence, both production and exports have surged ahead in recent years. Colombia’s largest coal mines are located in the northern departments of La Guajira and Cesar, but deposits are widely scattered across the northwestern half of the country.

Global coal prices have dropped significantly, and the use of the fuel is of course increasingly opposed due to concerns about climate change. Some coal producers operating in Colombia, however, remain committed to expansion. As was recently reported in BloomburgBusiness:

Murray Energy Corp. plans to increase output at the Colombian coal mines it bought from Goldman Sachs Group Inc. this month, betting it can lower costs enough to withstand the prospect of several more years of low prices.

The U.S. coal producer founded by Robert E. Murray intends to push up the annual output rate at the La Francia mine in northern Colombia to 3 million tons by the end of the year from about 2.5 million tons now, Murray said in a telephone interview Monday from his headquarters in St. Clairsville, Ohio.

The industry is in a “very distressed and dangerous condition,” with low prices set to last through the end of 2017, he said. “Murray Energy has done its planning to contend with and compete in this depressed market.”

Local activists, not surprisingly, have leveled harsh criticisms against foreign-based coal producers operating in Colombia. Glencore PCL in particular has been accused of “whisking profits out of the country, while causing environmental and labor issues.”

 

 

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