1. The Turkish Experience: Diversification of Natural Gas Supply and Guaranteeing the Security of Supply By Ali TUNGA Chairman

2.  Turkey’s growing energy requirements give rise to its dependency in respect to energy. As the time passes it seems that Turkey’s dependency in that respect goes to increase more.  For instance Turkey’s energy dependency has been increased to 70,1 % in 2009 from 45,8 % in 1980. It is forecasted that Turkey’s energy dependency will reach to 76,5 % in 2020 (ETKB 1985 and ETKB 2008).  The growing import dependency brings, indeed, serious problems for a country in respect to its cost and imported quantity. TURKISH ENERGY OUTLOOK 45.8% 72% 19802008 ENERGY DEPENDENCY RATE OF TURKEY 76.5% 2020

3. TURKEY NEEDS TO DIVERSIFY THEIR ENERGY SOURCES

4. Natural Gas Demand Estimation and Export Volumes Natural Gas Contracted Volumes Source: www.botas.govtr Source: www.botas.gov.tr

5. -----Total Supply -----Total Demand TURKEY’S NATURAL GAS SUPPLY AND DEMAND AMOUNTS

6. THE ROLE OF THE THE NATURAL GAS IN CONSUMPTION ElectricityIndustryResidential Natural Gas Consumption in 2007

7. EXISTING SITUATION IN DIVERSIFICATON AND SECURITY OF SUPPLY AND PROBLEMS

8. Existing Agreements Date of Signature Duration (Years)STATUS VOLUME (BCM/YEAR) Russian Fed. (Westward) 614 February 198625In Operation Algeria (LNG) 414 April 198820In Operation Nigeria (LNG) 1,2 9 November 199522In Operation İran 10 8 August 199625In Operation Russian Fed. (Black Sea) 1615 December 199725In Operation Russian Fed (Blue Stream) 818 February 199823In Operation Turkmenistan 1621 May 19930- Azerbaijan 6,612 March 200115In Operation TURKEY’S NATURAL GAS SUPPLY CONTRACTS Source: www.botas.gov.tr

9. 5.2 BCM 16 BCM 10 BCM 4 BCM 6.6BCM 16 BCM 6 BCM TURKEY’S NATURAL GAS SUPPLY SOURCES

10. GAS SUPPLY DIVERSIFICATION AND SUPPLY SECURITY: PROBLEMS  65% reliance on single supplier versus EU standard of maximum 30% from a single source  Not allowing private sector to import  Refusing to issue an import license to an existing 10 bcm/yr completed facility  44% of electricity produced from imported natural gas  Exposed to social unrest if political or technical disruption of supply occurs

11. NEW OPTIONS FOR THE REALIZATION OF THE DIVERSIFICATION AND GUARANTEEING THE SECURITY OF NATURAL GAS SUPPLY IN TURKEY: IS IT POSSIBLE TO REDUCE ENERGY DEPENDENCY?

12. BOTAŞ PROJECTS: Turkey as an East-West Energy Corridor, East-West Energy Terminal

13. NABUCCO NEW OPTIONS: DIVERSIFICATION OF GAS SUPPLY SOURCES  Nabucco Pipeline will be connected near Erzurum with the Tebriz - Erzurum pipeline, and with the South Caucasus Pipeline, connecting Nabucco Pipeline with the planned Trans-Caspian Gas Pipeline. NABUCCO  Turkish Government asks to retain a share of Azeri Gas passing through (15 BCM) TURKISH GOVERNMENT ASK 15 BCM FROM NABUCCO FOR INTERNAL USE

14. NABUCCO: A STRATEGIC PROJECT FOR TURKEY  Nabucco is a key project for the establishment of the energy hub in Turkey  As a transit country security of domestic supply with natural gas can be better achieved  Natural Gas Storage as another pillar besides transit and trading to balance supply  Connect the two hubs will be of benefit for both of us to reach our strategic goals NEW OPTIONS: DIVERSIFICATION OF GAS SUPPLY SOURCES

15.  The Trans-Arab pipeline, which currently runs from Egypt through Jordan to Syria, has a capacity of 10 bcm per year. The pipeline, which will be interconnected with Turkey and Iraq by 2009, will provide a new transport route for gas resources from the Mashreq region to the EU. TRANS ARAB PIPELINE NEW OPTIONS: DIVERSIFICATION OF GAS SUPPLY SOURCES

16. IRAQ NATURAL GAS PIPELINE  The state-owned Turkish Pipeline Company (BOTAŞ) has launched feasibility studies for the Turkish segment of the planned Iraq-Turkey natural gas pipeline, to be built parallel to the existing Kirkuk- Yumurtalık oil pipeline. BOTAŞ will complete the segment of pipeline that crosses through Turkey's territory along a Silopi-Bismil-Şırnak- Diyarbakır-Yumurtalık line.  The project aims to transfer 10 billion cubic meters (bcm) of Iraqi natural gas annually to the Turkish and world markets in ten years. IRAQI GAS NEW OPTIONS: DIVERSIFICATION OF GAS SUPPLY SOURCES

17. SECURITY OF NATURAL GAS SUPPLY UNDERGROUND NATURAL GAS STORAGE PROJECTS  Underground natural gas storage facilities are built to regulate fluctuations in consumption and to meet the supply deficit. Two projects are on the agenda: Northern Marmara Gas UGS Project (2.5 BCM) (Completed in 2007) Salt Lake UGS Project (1+4 BCM) -Based on caverns built by leaching of salt domes

18.  Turkey will remain as a net importer of natural gas unless significant gas reserves are discovered in Black Sea  Consumption and bill for imports will double in 2020  All provinces will be consuming natural gas  With current level of dependency on natural gas in power generation and industrial sectors, access to cheap gas will be crucial to be competitive and to ensure sustainable economic growth.  Supply diversity will also be important to enhance supply security  BOTAS has to diversify its business portfolio because of the restrictions brought by Law No. 4646  Developing international trade and transit projects are of utmost importance for such diversification. FUTURE OF THE NATURAL GAS MARKET OF TURKEY

19. GAS TRANSPORTATION VIA TURKEY IS THE KEY FOR THE SECURITY AND DIVERSIFICATION OF THE EUROPEAN GAS SUPPLY??

20. ……..... Russian Option LNG Supply Existing Lines Adriana LNG …….....Direct Central Asian Option ……….LNG Option GAINS FOR EUROPE FROM GAS TRANSPORTATION VIA TURKEY

21.  Enhancement of cooperation with gas producing countries: Russia, Central Asia, Middle East, etc. GAINS FOR EUROPE FROM GAS TRANSPORTATION VIA TURKEY  Access to alternative supply sources via alternative routes: Supply diversity and enhanced supply security  A more liberalized gas market: Gas to gas competition Increase in consumer surplus

22. ALTERNATIVE OPTIONS FOR GAS SUPPLY BULGARIA: HOW BULGARIA DIVERSIFY THE NATURAL GAS SOURCES AND GUARENTEE THE SECURITY OF SUPPLY?

23. ALTERNATIVE GAS SUPPLY POSSIBILITY FOR BULGARIA OPTION 1. INTERCONNECTED PIPELINE BETWEEN TURKEY AND BULGARIA  There should be a INTERCONNECTED natural gas pipeline between Turkey and Bulgaria to realize supply diversification and enhance the supply security.  Today consumption of natural gas in Bulgaria is app. 3,6 bcm per year. 10 % local production, 90 % import from Russia. The demand is growing and the local production will be finished in Bulgaria for the coming years. The country needs diversify supply sources and security of these sources.  Construction of a 80 km long interconnected pipeline between Edirne, Turkey and Bulgaria is needed to meet the supply deficit and diversify the gas sources.  For REALIZATION OF THIS OPTION, Bulgarian and Turkish Governments should talk mutually to develop new strategy.

24. ALTERNATIVE GAS SUPPLY POSSIBILITY FOR BULGARIA OPTION 2. RE-GASIFICATION TERMINAL IN MARMARA EREĞLİSİ /TURKEY  Construction and Operation of a pipeline between Turkey and Bulgaria and LNG Re-gasification Terminal in Marmara Ereğlisi.  Gas Feed: All over the world markets, Algeria, Qatar, Nigeria, etc.  New Markets: Beside Bulgaria can increase its export capacity to new markets: Serbia, Macedonia, Romania, etc. We, as Petco Energy Inc., are ready to sponsor for this project with the cooperation of Bulgarian Government and Bulgarian Private Companies

25. Project Location ALTERNATIVE GAS SUPPLY POSSIBILITY FOR BULGARIA OPTION 2. RE-GASIFICATION TERMINAL IN MARMARA EREĞLİSİ /TURKEY

26. Marmara Ereglisi Table 1 Tekirdag Length:210km Max Q: 4000000 m3 Length:194km Max Q: 4200000 m3 a)To construct Regasification Terminal and a pipeline between Tekirdag and Bulgaria (Table 1)  Length: 210 km  Max.Capacity: 4000000 m3lh  Pipeline Diameter: 711X7,1 mm steel  Pressure in Turkey: 55 bar Turkey Regasification Terminal Option 2: a)To construct a LNG Regasification Terminal in Tekirdağ ALTERNATIVE GAS SUPPLY POSSIBILITY FOR BULGARIA OPTION 2. RE-GASIFICATION TERMINAL IN MARMARA EREĞLİSİ /TURKEY

27. Marmara Ereglisi Table 1 Tekirdag Length:210km Max Q: 4000000 m3 Length:194km Max Q: 4200000 m3 To construct RegasificationTerminal and a a pipeline between Marmara Ereglisi and Bulgaria (Table 1)  Length: 194 km  Max.Capacity: 4200000 m3lh  Pipeline Diameter: 711X7,1 mm steel  Pressure in Turkey: 55 bar Turkey Regasification Terminal Option 3: b)To construct a LNG Regasification Terminal in Marmara Ereğlisi ALTERNATIVE GAS SUPPLY POSSIBILITY FOR BULGARIA OPTION 2. RE-GASIFICATION TERMINAL IN MARMARA EREĞLİSİ /TURKEY

28. WHAT DRIVE SECURITY OF SUPPLY? ASPIRATIONRISKS Diversity of Supply Supply risks through a lack of import options Due to the greater reliance on gas imports from outside Competition Open markets with multiple supplies competing Reliability of Supply Supply sources we can depend on Market Power Especially with regards to transport capacity Risk of Upstream and infrastructure underinvestment

29. DIVERSITY OF SUPPLY IS KEY TO SECURITY OF SUPPLY

30. THANK YOU