Turkey is relatively well endowed with energy and mineral resources. The extensive mountainous terrain provides numerous hydroelectric sites, although most are far from the main population and consumption centers. The country also has substantial exploitable lignite resources and small reserves of hard coal, petroleum, and natural gas. Commercially exploitable deposits of many minerals have been located, but the territory has been surveyed only partially. Exploitation of these natural resources has occurred relatively slowly.

The combined demands of industrialization and urbanization nearly tripled energy consumption in the 1960s and 1970s. An inappropriate pricing policy, especially the subsidy of petroleum that led to unduly cheap products, was one cause of shifts in the sources of energy that exacerbated shortages. In 1960 more than half of the primary energy consumed came from noncommercial sources, mainly firewood but also manure and other agricultural wastes. These noncommercial sources, plus domestic coal and lignite, accounted for more than 80 percent of all primary energy consumed oil supplied only 18 percent. By 1980, in contrast, oil supplied about 47 percent of the primary energy consumed, coal and lignite about 21 percent, hydroelectric power 8 percent, and noncommercial sources such as firewood and animal wastes only 23 percent. By 1992, 43.5 percent of final energy came from petroleum, 31.1 percent from lignite and hard coal, 4.1 percent from hydroelectric power, 6.9 percent from natural gas, and 14.4 percent from other energy sources, including solid fuels, geothermal, solar power, and wind power.

During the 1970s, the demand for electricity began to exceed supply, and by the late 1970s the power gap began to constrain industry. After 1977 rotating blackouts affecting industrial, commercial, and residential consumers were necessary to meet demand. By 1979 the shortage of foreign exchange had so restricted imports of crude oil that fuel for cars, trucks, and tractors had to be rationed. In the mid-1980s, in an attempt to deal with the energy shortage the Özal administration launched the build, operate, and transfer (BOT) system, under which foreign investors would provide the capital and technology to build plants, operate them for a number of years with guaranteed revenues, and finally transfer the units to the government when the investment had been fully returned. The Atatürk Dam was a major project designed to increase electricity output. Its first two power units came on line in 1992.

Although Turkey's energy resources remained underdeveloped in early 1995, the country had relatively good energy production potential. One estimate places the economically feasible hydroelectric potential at around 29,500 megawatts, which would allow annual production to reach roughly 100,000 gigawatt-hours in years with normal rainfall. Lignite is the second most important potential source of energy, with proven and probable deposits put around 6.4 billion tons. However, Turkish lignite, containing high amounts of water and sulfur, is hard to burn and pollutes the air. T 2000 Turkey's proven and estimated petroleum stocks are equivalent to about three years' consumption. Proven reserves are estimated at about 16 million tons, and enhanced oil-recovery techniques may allow extraction of another 30 million tons. Proven reserves of natural gas total about 12.4 billion cubic meters, and reserves of hard coal about 1 billion tons. Turkey's geothermal resources are considerable, but they have not yet been systematically explored.

Imports of petroleum averaged more than 15 million tons per year in the early 1980s and increased to about 23 million tons in the early 1990s. Most of Turkey's oil fields are located in southeastern Anatolia near the borders with Iran, Iraq, and Syria (see fig. 10). Because of the country's fractured substrata, deposits are often contained in small pockets, which makes exploration and extraction difficult. In 1985 exploration proved that Turkey has oil deposits at very deep levels, but it was not known how large the deposits might be. Shell Oil determined that oil at Paleozoic levels would be recoverable, and other investigations proved significant deposits in central Anatolia under the salt flats in the plain north of Konya. In 1991 British Petroleum began exploring for oil in offshore areas of the Black Sea. It is also suspected that the Aegean shelf contains considerable petroleum deposits, but as long as relations with Greece remain strained, conflicting claims to the Aegean seabed limit prospects for exploration. To speed up the exploration process, the Turkish government in 1983 eased regulations on such activities by foreign oil companies, allowing them to export 35 percent of production from fields they discovered in Anatolia and 45 percent from offshore fields. Although several foreign concerns started exploration after the liberalization package went into effect, up to the mid-1990s no major finds had been reported.

The state-owned oil company, Turkish Petroleum Corporation (TPAO), Shell Oil, and Mobil control most petroleum output, which had climbed gradually to a peak of 3.6 million tons in 1969 but declined to about 2.1 million tons in 1985 as deposits were depleted (see table 8, Appendix A.). By the early 1990s, output had increased once again to nearly 4.4 million tons. The main petroleum project during the 1980s was an attempt at secondary recovery at the Bati Raman fields in southeastern Anatolia, which were expected to produce roughly 1.5 million tons a year over a twenty-year period.

TPAO stepped up oil exploration efforts at home and abroad in the hope of raising output. But prospects for new domestic finds were endangered by the escalating conflict with Kurdish rebels in southeastern Turkey. Western operators in the area were nervous after a sharp increase in the number of attacks on oil installations. Mobil suspended operations at its 3,200-bpd Selmo field and other small sites after Kurdish attacks on its staff. In the early 1990s, talks were underway on a possible transfer of the Selmo operation to TPAO. Shell Oil's rig near the 25,000-bpd Batman refinery was also hit, although operations there continued. TPAO reported no attacks. Total Turkish production in 1993 of about 78,600 bpd--down from about 84,500 bpd in 1991--met 17 percent of the country's 458,000-bpd needs. The state firm in 1993 pumped about 60,550 bpd, Shell Oil about 14,500 bpd, Mobil about 3,230 bpd, and Aladdin Middle East about 330 bpd. On several aging fields, rising water content has halved productivity. TPAO drilled sixty exploration wells in 1993, only one of which hit oil. In 1994 it planned to drill eighty-one, stepping up work outside the affected southeast. Meanwhile, Mobil was doing seismic work in central and southern Turkey, and Shell Oil and United States Arco were both exploring in the southeast.

TPAO's joint venture in Kazakhstan, which holds seven concessions, should help to increase the company's oil reserves. In addition, preliminary tests in 1993 near Aktyubinsk and Atyrau were promising. It is expected to be several years, however, before the oil or gas reaches Turkey, given the need to work out export routes or an exchange agreement with Russia. Turkish sources are cofinancing the venture with the Kazakh state oil company. The project is TPAO's first major overseas enterprise, although its subsidiary, the Turkish Petroleum International Corporation, holds concessions in Australia, Pakistan, and Egypt.

Five refineries with a total capacity of about 713,000 bpd meet most of the country's need for petroleum products. Until early 1995, about 85 percent of refinery capacity was in public hands in four refineries located at Aliaga near Izmir, Kocaeli, Kirikkale, and Batman. A fifth refinery, jointly owned by Mobil, Shell Oil, British Petroleum, and a Turkish company, is located at Mersin.

In early 1995, Turkey's privatization program appeared to be back on track after a period of wrangling over the legality of the sale of the state refinery company TÜPRAS and the retail company Petrol Ofisi. The sale of part or all of each company is scheduled to take place before the end of 1995.

Petrol Ofisi's 4,000 stations control 56 percent of a domestic gasoline market that since 1987 has grown by an average of 5.5 percent a year to 94,000 bpd. Full privatization is expected by the end of 1995.

A TPAO pipeline extends for nearly 500 kilometers from the oil fields near Batman to Dörtyol on the Mediterranean coast. The corporation also owns and operates the Turkish section of the pipeline from Iraq's Kirkuk fields to a port facility near Dörtyol. This pipeline was enlarged in 1984 to carry 1.1 million bpd, a share of which Turkey purchased at preferential rates. A second, smaller-capacity Kirkuk-Dörtyol pipeline was built in the late 1980s, which increased capacity to 1.5 million bpd. Oil flows through the two pipelines ceased after the UN embargo on Iraq was imposed in 1990. The pipeline cannot be used for domestic oil because according to international law the oil in the pipeline at the time of the embargo must be stored, awaiting UN disposition.

Apart from the country's own oil prospects in the Black Sea, Turkish officials see their nation as a strategic hub bringing oil from Azerbaijan and Kazakhstan to the Mediterranean and connecting Turkmenistan and possibly Iran to the European gas network. Turkish officials have pushed their own brand of pipeline diplomacy, encouraging the nations of Central Asia and the Caucasus--as well as Iran--to cooperate so that they can start exporting their prime resources to the outside world via Turkey.

The Turks are convinced that at least some of the projects eventually will come to fruition, beginning with a projected pipeline to bring Azerbaijani crude to the eastern Mediterranean. In the early 1990s, the governments of Turkey and Azerbaijan officially approved plans for such a line. But a series of obstacles remained to be overcome, including rival pipeline projects that would bypass Turkey, border disputes that would render key intervening areas dangerous, and even a degree of antagonism toward Turkey on the part of some neighboring states. The most immediate challenge was the effort to bring oil from Kazakhstan's Tengiz field to the Russian Black Sea port of Novorossiysk, which would mean an upsurge in tanker traffic not only in the Black Sea, but also in the Bosporus and Dardanelles. Turkey has opposed this project vehemently but is constrained by international conventions that guarantee passage between the Black and the Mediterranean seas. In some places, the straits are only 800 meters wide, and the Bosporus bisects Turkey's largest city, Istanbul. The threat to one of the nation's greatest attractions has turned Turkish officials into ardent environmentalists.

Natural gas became important in the 1980s. Gas tapped in Thrace (Trakya, European Turkey) was piped to the Istanbul region and used to produce electricity, thereby reducing the need for energy imports from Bulgaria. In 1986 Turkey began construction of a pipeline to carry Soviet natural gas from the Bulgarian 17eb n border to Ankara the line was completed in the late 1980s. In 1990 government officials announced that they also desired to purchase natural gas from Algeria, a move that would help balance Turkey's large purchases from the Soviet Union.

Policy makers in the early 1970s had targeted lignite as the most abundant domestic source of hydrocarbons, and production grew rapidly from an average of about 7.9 million tons for the 1970-75 period to more than 31 million tons in 1985. Mines operated by the state-owned Turkish Lignite Company are responsible for about two-thirds of output private firms produce the remainder. Production of hard coal is entirely controlled by the government-owned Turkish Coal Company, which suffers from poor management and outmoded technology. Coal production is also hampered by the great depth of the country's deposits. Hard coal output fell from around 6.5 million tons in 1976 to about 3.8 million tons in 1983, and unit costs exceeded those of coal imports. As a result of these trends, Turkey is beginning to import coal for use in power plants. In 1992 Turkey produced about 12 million tons of coal and imported a net of about 4.2 million tons.

The Turkish Electricity Authority (Türkiye Elektrik Kurumu--TEK) is responsible for most electric power generation and distribution. In Adana the Cukurova Electrical Company produces some electricity privately. In Kepez, a city in Antalya Province, another private company produces electricity. Upgrading of the national distribution grid began in the 1980s, and by 1985 about 70 percent of Turkey's villages were receiving electricity. The Fifth Five-Year Plan (1984-89) called for the completion of village electrification by 1989 by the mid-1990s no village was without electricity.

Demand for electricity has increased rapidly, in large part because of the growth of industry, which consumed more than 56 percent of electricity in 1992. By 1985 thermal plants produced 53 percent of total installed capacity hydroelectric plants produced the remainder. During the early 1980s, shortages of electricity had to be covered with imports from Bulgaria and the Soviet Union. In 1984 Turkey and the Soviet Union agreed to build a second transmission line that would allow future increases in Soviet electricity deliveries. Although in the 1990s electricity imports meet less than 1 percent of Turkey's needs, the Turks want to be independent of supplies from unreliable neighbors.

Sources for generating such electricity varied. By 1992 electricity generated by coal accounted for 36 percent of total installed capacity, with hydroelectric plants accounting for 40 percent. The rest was generated using petroleum products.

Turkey's chronic energy shortages make development of hydroelectric power imperative. In 1994 the General Directorate of State Hydraulic Works was building or planning to build about 300 hydroelectric plants. The centerpiece of Turkey's ambitious hydroelectric program, the Southeast Anatolia Project, which includes dams on the Tigris and Euphrates rivers, will increase Turkey's irrigable land about 25 percent and its electricity-generating capacity about 45 percent. As of early 1987, the first two of the three large dams in the program (the Keban Dam and the Karakaya Dam, both on the Euphrates, northeast of Malatya) had been built, and the third, the Atatürk Dam, was under construction, completed in 1994. The World Bank refused to help finance the construction of the Atatürk Dam because Turkey had not reached an agreement on sharing the water of the Euphrates River with Syria and Iraq Turkey, however, arranged independent financing.

Turkish officials had long discussed the possibility that nuclear power might help the country address its energy problems. During the 1980s, the military government drew up a nuclear energy program and established the Nuclear Power Plants Division of the Turkish Electricity Authority to make feasibility studies and to build nuclear plants. Given Turkey's desire to diversify its energy sources, nuclear power was expected to remain on the agenda. By early 1995, however, no electricity had been generated from nuclear power.

Although Turkey has made a good start at addressing its energy problems, some analysts feel that more attention needs to be paid to conservation and pricing policies to limit the growth of demand. Industry is the major consumer of energy, and industrial consumption is expected to grow rapidly if left unchecked. The most energy-intensive sectors of industry, such as iron and steel, food processing, textiles, mining and nonferrous metals, chemicals, cement, and bricks and ceramics, probably could reduce demand significantly if required to do so. However, the government needs to audit major energy users to discover which could cut back consumption. In addition, a shift in relative energy prices to reflect long-run costs might induce industrial restructuring that would take Turkey's energy endowment into account. Moreover, energy policy makers need to improve management of firewood and agricultural wastes, which continue to play an important role in the rural energy economy.

Data as of January 1995