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The Turkish Energy Sector. Zurich, 15 th of November 2007 Dr. Arnold Hornfeld. Agenda. Short overview about Turkey’s economical situation Turkish energy sector Development and actual situation of the energy market Projection of electrical energy demand in the future

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slide1

The Turkish Energy Sector

Zurich, 15th of November 2007

Dr. Arnold Hornfeld

slide2

Agenda

  • Short overview about Turkey’s economical situation
  • Turkish energy sector
    • Development and actual situation of the energy market
    • Projection of electrical energy demand in the future
    • Hydroelectric power
    • Wind power
    • Geothermal power
    • Solar power
    • Nuclear power
slide3

TURKISH

ECONOMY

Selected Indicators & Brief Overview

slide4

Background

Closed economy

World War II

Post-war experience in economic development:

Average GNP growth at 4.7%

IMF program, continued under a military government:

Massive devaluation of the Turkish Lira, substantial hikes in indirect taxes

1980-1983

Market reforms, breaking the administrative structures of the command economy.

Strong basic infrastructure, esp. in telecommunications and transport.

1983-1989

Liberalization of the capital account:

Populism, 1994 crises, dollarization

1989-1996

Customs Union:

Open market economy, persisting macroeconomic instability, 1999 crisis

1996-1999

Stabilization efforts:

2001 Economic crises followed by the launch of IMF program.

1999-2002

The European Commision published the 2004 Progress Report and recommended to begin the membership negotiations with Turkey.

2004

2005

Effective beginning of the EU accession process on October 3.

Strong economic expansion with a yearly average 7.5% growth.

2003-2008

Secondary strong growth era.

2008-2013

Full membership to the EU.

January 1, 2014

slide5

A Snapshot of theEconomy

As of 2006

  • GDP: US$ 403 billion
  • GDP per capita: US$ 5,566
  • Population: 73 million (population growth rate: 1.5%)
  • Labor force: 24.6 million
  • Labor force participation rate: 49%
  • Overall unemployment: 10% (Unemployment in non-agricultural sectors 12.5% (2006)
  • Life expectancy: 68.7 years
  • Infant mortality: 3.8%
  • Literacy rate: 88.3%
  • Gini coefficient: 0.40
  • Undernourishedpeople (% of population): 1.3
slide6

A Snapshot of theEconomy

For the new 10 members of the EU the share of agriculture in GDP is less than 5%, while the industry and services are 30% and 66%, respectively.

slide7

Population by regions (2006)

7,9 M

20,9 M

6,5 M

11,3 M

9,5 M

7,4 M

9,5 M

GDP by regions (2000)

5-10%

35-40%

0-5%

15-20%

15-20%

5-10%

10-15%

Introduction

Land Area:

769,604 sq km

Total Population (2006):

73 millions

Total GDP (2006):

US$ 403 billions

US$5,600 per capita

State Institute of Statistics (SIS)

Source:

slide8

Around 2015, Turkey’s population is projected to stabilize at the level of approximately 80 millions.

The size of the adult population is offering the window of demographic opportunities.

The population growth rate is decelerating considerably.

Population of selected age groups (1000 persons)

Population growth rate, %

3.0

1990

2000

2010

2015

1945-50

1950-55

1955-60

1960-65

1965-70

1970-75

1975-80

1980-85

1985-90

1995-00

2000-10

2010-25

2.5

0-4

6,610

6,568

6,640

6,667

2.0

5-14

13,328

13,149

12,775

13,278

1.5

1.0

15-64

34,022

44,410

51,408

54,394

0.5

65+

2,243

3,659

4,455

5,495

0.0

TOTAL

56,203

67,804

75,278

79,834

Source: SIS, TÜSİAD “Turkey’s Window of Opportunity: Demographic Transition Process and its Consequences”,1999

Demographics

slide9

Trade Partners

European countries are the biggest export partner of Turkey.

Germany ranks first among the export partners followed by England and Italy.

Main export countries are located in the west.

Exports to Iraq and Russia are higher including the unrecorded trade.

slide10

Trade Partners

European countries are again the biggest import partners of Turkey.

Share of imports from Asia is constantly increasing.

The reason is obviously China. It became the third biggest import partner of Turkey, as of 2006.

slide11

Inflation

Turkey has suffered from chronic inflation since 1970s.

However, with the launch of the stabilization program following 2001 crisis, the inflation rate declined dramatically.

Despite the deviation from target in 2006, inflation is back at 70s’ levels.

slide12

Interest Rates

Interest rates have fallen parallel to the amelioration in the macroeconomic fundamentals.

However, the Central Bank has a prudential attitude for a further decrease in interest rates.

slide14

Industrial Production

Overall industrial production is increasing for the last five years. However, production in labour intensive-sectors such as manufacture of textile products or wearing apperals is decreasing while technology-intensive sectors is increasing.

The increase in production of vehicles, trailers etc. is the main driver of the surge in manufacturing production.

slide15

Foreign Trade

The main driver of the current account deficit has been the rising foreign trade deficit.

The imports of intermediary goods has been increasing since 2001 parallelto robust economic growth.

The imports of consumption goods have also surged with the recovery of demand.

slide17

External Balance

Revenues gained from services sector, excluding tourism, is not enough to offset the foreign trade deficit.

While the deterioration of the trade balance is the primary factor of the current account deficit, the fall in net invisibles’ revenues is making it worse.

slide18

External Balance

The increase in foreign direct investment level has eased the finance of the current account deficit.

Long term borrowing ability of the banks and the private sector in general improved the quality of finance resources.

slide19

EU Membership

...The EU accession process lays the ground for the tremendous scope of the reforms...

...alignment of the domestic legislation with the EU acquis provides opportunity to make necessary regulations...

slide21

EU-TurkeyComparison

GROSS VALUE ADDED BY SECTORS

slide24

Turkey as an Energy Gateway

Turkey is a strategic actor with regards to the energy security of Europe as;

73% of the crude oil and 72% of the natural gas reserves of the world lie in the Caspian and Middle East regions and Russian Federation, surrounding Turkey.

EU currently imports more than 40% of its natural gas needs and 30% of its oil needs.

The import dependency for natural gas is expected to become 67% by 2020 and to 81% by 2030.

And the import dependency for oil is expected to become 50% by 2020 and to 60% by 2030.

Turkey already plays an important role in the East-West energy corridor with 3368 km’s of crude oil pipelines carrying over 130 million tones of crude oil per annum and around 4000 km’s of natural gas pipelines transferring over XX bcm of natural gas. Current pipelines include;

Baku-Tblisi-Ceyhan (BTC), COP

Blue Stream NGP

Shah-Deniz NGP (Baku-Tblisi-Erzurum)

Iraq – Turkey COP

Tabriz-Erzurum NGP

Pipeline Projects include;

Azerbaijan NGP Project

Egypt-Turkey NGP Project

Iraq- Turkey NGP Project

Jordan-Syria-Turkey NGP Project

South European Gas Ring (Turkey-Greece NGP project with Italy extension)

Nabucco Project (Turkey-Bulgaria-Romania-Hungary-Austria)

Turkmenistan-Iran-Turkey Natural Gas Pipeline Project

NGP: Natural Gas Pipeline, COP: Crude Oil Pipeline, bcm: billion cubic meters, bpd: barrel per day

slide25

Conclusions

  • The political and economical structure of the country had undergone a renovation.
  • The political stability delivers safety to market operations and encourages competition.
  • Primary surplus policy compels a fiscal discipline.
  • The growing independence allows the CB to focus on price stability.
  • Banking sector is heading to reassuring grounds both with recovery in balance-sheets and domestic and foreign mergers.
  • Autonomous regulatory institutions fortified the competition conditions in the public and private sector.
  • Privatization process led to an increase in efficiency in the public sector while its expected to induce achievements on competition terms.
  • EU process will further improve the investment environment and strengthen the judicial and institutional foundations.
slide26

Conclusions (continued)

The EU process requires a 6-7% growth in the next 8 years.

Thus we should:

    • not be satisfied with the achievements in hand
    • preserve the stability atmosphere
    • proceed reforms
  • Two main tools:
    • IMF program
    • EU accession process
  • However, the continuation of the growth trend will depend on an economic policy that will demand
    • More decisiveness and
    • Higher attention and expertise

in design and implementation.

estimated development rate and operation growthdevelopment rate
Estimated Development Rate and Operation GrowthDevelopment Rate %

Period

Development Rate %

Population Growth

demand forecast between 2006 2015
Demand Forecast between 2006-2015

Peak Load

Energy Demand

hydroelectric power plants
HYDROELECTRIC POWER PLANTS

ATATURK

HYDROELECTRIC POWER PLANT

power distribution companies

Kırklareli

Sinop

Kastamonu

Bartın

Artvin

Ardahan

Zonguldak

Samsun

Edirne

Tekirdağ

İstanbul

Kocaeli

Rize

Karabük

Trabzon

Düzce

Ordu

Yalova

Sakarya

Çankırı

Giresun

Kars

Bolu

Amasya

Tokat

Gümüş

hane

Çorum

Bayburt

Iğdır

Çanakkale

Erzurum

Bilecik

Bursa

Ağrı

Balıkesir

Erzincan

Kırıkkale

Eskişehir

Ankara

Yozgat

Sivas

Kütahya

Kırşehir

Tunceli

Bingöl

Muş

Manisa

Van

Nevşehir

Uşak

Kayseri

Malatya

Elazığ

Afyon

Bitlis

İzmir

Aksaray

Diyarbakır

Siirt

Batman

Isparta

Konya

Aydın

Niğde

Adıyaman

K.maraş

Denizli

Hakkari

Şırnak

Mardin

Burdur

Adana

Muğla

Şanlıurfa

Karaman

Osmaniye

Antalya

Gaziantep

Kilis

İçel

Hatay

POWER DISTRIBUTION COMPANIES

21 Power Distribution Companies

geothermal power plants
GEOTHERMAL POWER PLANTS

Dardanel A.Ş.

Çanakkale–Ayvacık / 7,5 MW

Gürmat A.Ş.

Aydın-Germencik / 45 MW

Menderes A.Ş.

Aydın-Sultanhisar / 7,95 MW

Elektrik Üretim A.Ş.

Denizli-Sarayköy / 15 MW

Bereket A.Ş.

Denizli-Sarayköy / 6,85 MW

Completed Plants

In Construction Plants

slide51

Installed capacity, 1980-2005 (MW)

Hydro & RES

MW

Natural Gas

Diesel

Coal

Source : TEIAS (Turkish Electricity Transmission Company)

slide52

Installed electricity capacity (MW) for year 2020

Source : TEIAS (Turkish Electricity Transmission Company)

slide53

Advantages of investing in Türkiye

  • Connection to the grid is guarantee
  • TEIAS (Turkish Electricity Transmission Company) guarantees connection point before license is given)
  • EIA Report procedures are fast. It takes 45 days to receive approval from the Ministry of Environment and Forestry
  • Master & application plans are approved in 2-4 months
  • Local Authorities are becoming more experienced in evaluating applications and are friendly for attracting investements in their region
  • Regulatory Authority is leading the expropriation issues for private land
  • This reduces risks for private companies the problems during construction period
slide54

Advantages of investing in Türkiye

  • Windy areas are distant from population
    • Most of the windy areas are far from cities, mainly in forestry areas
  • 75 % of total land is forestry or treasury
  • Land acquisition fee and yearly rental are relatively cheaper than EU countries
    • Land rental fee for a 100 MW wind farm is 60.000€/year for the first 10 years of operation
slide55

QUESTIONS

&

ANSWERS

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