Showing posts with label Bosphorus. Show all posts
Showing posts with label Bosphorus. Show all posts

Sunday, July 16, 2017

A bearish view from Istanbul

The 22nd World Petroleum Congress circus has left Istanbul, Turkey in a distinctly bearish mood, at least that’s the Oilholic’s verdict! 

'Big Oil' boss after boss pointed out to the congress that IOCs were gearing up for a short-term breakeven of $50 per barrel, and working towards a $30 per barrel breakeven by the turn of the decade. Few, if any expect an uptick to a three figure oil price anytime soon. 

The International Energy Agency expects a flood of US shale barrels, so much so that its Executive Director Dr Fatih Birol noted that describing his outfit as being representative of energy consumers was sounding clichéd these days.

Afterall, IEA members US, Canada and United Kingdom, were also energy exporters. At the same time, global oil inventories remain stubbornly above 3 billion barrels, and not anywhere near the 2.7 billion five-year average OPEC is hoping to achieve via its cut. 

Tied in to all of this are two important considerations in light of what's on the horizon. Firstly, OPEC’s production cut in concert with 10 non-OPEC producers only lasts until March 2018 on paper. What happens after that? Surely more oil is coming our way. Secondly, most at the WPC, including the IEA, predicted US production to climb to 10 million barrels per day (bpd) and for some even as high as 10.3 million bpd. 

So what is there to be bullish about? Agreed - as many readers of this blog have pointed out - inventory rebalancing will gather steam towards the fourth quarter of this year, but not to the extent some are predicting. 

For arguments sake, if that is seen as being supportive of the oil price and that sustains oil futures above $55 for a period, more US and non-OPEC oil is bound to come on to the market. Draw your own conclusions where the ‘crude’ world would be heading to thereafter. In short, this blogger finds little evidence that the oil price would escape its current $45-55 per barrel range using Brent as a benchmark. 

Just a couple of things to flag up before yours truly takes your leave. Here is one’s IBT report from the WPC on how spooked the industry is about not being able to attract enough young recruits and qualified female professionals. Additionally, here is the Oilholic’s foray into the emergence of ‘crude’ robots, that could be coming to an oil and gas field near you. That’s all for the moment folks. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2017. Photo: An oil tanker in the Bosphorus, Istanbul, Turkey © Gaurav Sharma, July 2017.

Wednesday, July 12, 2017

Oilholic’s photo clicks @ the 22nd WPC host city

The Oilholic is by no means a photojournalist, but akin to the last congress in Moscow, and in keeping with a tradition dating back to WPC 20 in Doha, there is no harm in pretending to be one, this time armed with a BlackBerry DTEK here in Istanbul!

The 22nd World Petroleum Congress also marked this blogger's return to Turkey and the vibrant city of Istanbul after a gap of three years. 

The massive Istanbul Congress Center (left) happens to be the Turkish venue for the Congress from July 9-13, 2017. Hope you enjoy the virtual views of the venue as well as Istanbul, as the Oilholic is enjoying them here on the ground. (Click on images to enlarge). 

© Gaurav Sharma 2017. Photos from the 22nd World Petroleum Congress, Istanbul, Turkey © Gaurav Sharma, July 2017, as captioned.

US Secretary of State Rex Tillerson at WPC




Decorations in the ICC front garden
Crooners entertain diners on opening night
IEA's Fatih Birol (centre) speaks at WPC
BP stand at WPC Exhibition
Oil supply chain model at WPC Exhibition
Istanbul 
Istanbul Modern
The Bosphorus, Istanbul
Oil tanker in the Bosphorus
Traditional dancers at WPC's Turkish night



Wednesday, March 12, 2014

The Bosphorus, a 'Wild Project' & Turkish politics

The Oilholic spent better parts of the afternoon in pouring rain examining the strategic maritime artery known to world as the Bosphorus, a strait that forms the boundary between Europe and Asia and splits Istanbul.

For nearly 7 hours, yours truly criss-crossed on ferries from Kabataş on Istanbul's European side to Kadıköy on the Asian side, back to Eminönü on European side [where ancient Byzantium was built] and finally a return journey up and back from Rumelifeneri, Sariyer, passing twice under the Bosphorus and the Fatih Sultan Mehmet bridges.

The said journeys ensured this blogger got a true picture of how busy the world's narrowest natural strait is and it's getting busier with oil and LNG tankers going back and forth from the Black Sea. Excluding local traffic, roughly around 132 ships pass through the Bosphorus on a daily basis, making it the second densest maritime passage after the Strait of Malacca. 

The Oilholic is no naval man, but aboard a vessel on Bosphorus - given the blind bends and S-shaped turns - often one couldn't spot ships approaching from the opposite direction at several points. As if natural and geographical challenges weren't enough, the heavy municipal ferry traffic linking Istanbul's European and Asian sides make navigation even trickier.

The photo (on the right, click to enlarge) is an apt illustration - clicked from a ferry one is aboard, zipping past a Greek tanker, behind which is another ferry, behind which is another tanker in the distance. This is a typical day's navigation for captains of ships passing through here on a murky day like today.

On either side of the Bosphorus live around 14 million souls who call Istanbul home. Makes you think – what if there is a collision? According to Istanbul University, modern navigation techniques have considerably [and thankfully] reduced incidents. Nonetheless, since the end of World War II there have been over 450 incidents on record.

Of the 26 incidents classified as 'major', eight involved tankers and almost all collisions resulted in a crude oil, petroleum or other distillate spill of some description. The worst incident happened nearly 20 years to this day, on March 13, 1994 when a Cyprus registered tanker collided with a bulk carrier resulting in 27 deaths, the spillage of 9,000 tons of petroleum and combustion of another 20,000 tons. The blaze lasted for four days and tanker was completely burnt. Not only was the marine environment harmed, but traffic was suspended for several days.

However long ago the incident may have taken place (and there have been others albeit less serious ones since), it chills people here to this day. Most of the oil shipments originate from Russian ports. Local sources say around 2.5 million barrels per day (bpd) to 3.2 million bpd move through the Turkish straits, which include the Marmara Sea, Çanakkale (or Dardanelles, the separation point of the Gallipoli Peninsula from Asia) and of course the Bosphorus.

The cumulative volume for each year almost singularly depends on how Russian exporters shift their load per annum between Baltic and Black Sea ports. So getting his thinking cap on, Turkish Prime Minister Recep Tayyip Erdoğan, just before seeking re-election for a third term in 2011, announced the 'Kanal İstanbul' project – an idea first mooted in the 16th century.

The PM said that ahead of the 100th anniversary of the Turkish Republic (founded in 1923), the nation needed a "crazy, magnificent" project. The idea is to carve up an artificial canal that would be 50km long, 150m wide and 25m deep. Istanbul itself would turn into two peninsulas and an island courtesy of the artificial re-jigging.

The published measurements carry a message. Any structural engineer would tell you that a canal of the above dimensions would certainly be capable of handling very large crude carriers (VLCCs). This would cut the need for suezmaxes (largest ship measurement capable of transiting through the Suez Canal conventionally capable carrying 1 million barrels) from criss-crossing the Turkish Straits as frequently as they do these days.

It could also help Erdoğan, currently facing local elections and umpteen demonstrations, circumvent the Montreux Convention, which gives Turkey a mandate over the Bosphorus, but allows free passage of civilian ships while restricting passage of naval warships not belonging to Black Sea bordering nations. Critics say the PM is looking to bypass the Montreux Convention, but supporters say he's making a case for good business, while appearing to do his bit for the ecology as well.

Alas a pre-election promise of 2011 and one that's morphed into pre-2014 local elections plan doesn't appear to be properly costed. The figure in the Turkish press is US$10 billion. It's sent all the project financiers this blogger has contacted about it scratching their heads. The headline project valuation is just too low for a project of this magnitude, in fact highly improbable, given the lira's fortunes at the moment.

However, a government official told this blogger that "finance won’t be a problem" while another said "it won’t be needed" as the Turkish Government will self-finance with Phase I already underway. Doubtless, some Russian help – if asked for – would be forthcoming. Ironically, it's a Russian financier, whose kids are [of course] studying in England, who told yours truly, "Erdoğan's project cost estimate is as you British say – a load of bollocks!!"

The PM simply describes the project rather mildly as his "Çılgın Proje" or "Wild Project" and by the looks of things, it certainly is wild. Don't know what the final costs would be, but the target is to have it ready by 2023. As for Russian crude, Ukraine stand-off or not, Baltic or Black Sea routes, it'll ship unabated. Last year, just as Rosneft was eyeing acquisition of TNK-BP, the world largest independent oil trading house Vitol and rival Glencore (now Glencore-Xstrata) agreed to lend $10 billion to the Russian giant to help it finance the acquisition.

In exchange, both the trading houses received a guarantee of future oil supply. A simple Google search would tell you, its not the largest oil trading deals in history, but its right up there dear readers. For Erdoğan, a former mayor of Istanbul, the project would be about his legacy to Turkey, along with a third Bosphorus suspension bridge – Yavuz Sultan Selim Bridge – which is scheduled to open in May 2015.

However, right now under his watch Turkey appears to be in a fight for its soul. Erdoğan's "mildly Islamist" (as The Economist prefers to call it) Adalet ve Kalkınma Partisi or AK Party is hugely popular in rural areas but not quite so in urban centres.

Since arriving on March 8, right up and until this afternoon, as the Oilholic prepares to fly out, there have been repeated protests and clashes in Taksim Square. Even if you are a couple of miles away from the flashpoints, the smell of tear gas is around. It all erupted in May last year with mass protests. The political context is well-documented in the mainstream media as is Erdoğan's tussle with his once mentor cleric Muhammed Fethullah Gülen.

The latest casualty in these god awful political melees was 15-year old Berkin Elvan, who died yesterday following 269 days in a coma after being hit on the head by a tear gas canister last year. He didn't commit a crime say locals; he was just in the wrong place at the wrong time, caught in a skirmish while out to buy bread for his mother.

Erdoğan can build his legacy around urban developments, bridges, canals and superefficient shipping lanes, he can put forward uncosted grandiose dreams, but if lives like Berkin's are the price for his fixation to power, then something is inherently wrong with Turkish politics and the way the PM thinks. On this unusually sad note, that's all from Istanbul folks. Sorry for the temporary digression from what this blog is about, but it's difficult not to feel anything. Keep reading, keep it 'crude'!

Addendum, Mar 15: According to a BBC World service report, as further clashes following the death of Berkin Elvan have spread well beyond Istanbul to 30 other towns, Turkish Prime Minister Recep Tayyip Erdoğan has claimed that the boy had links to "terrorist organisations"…Along with most of Istanbul, the Oilholic despairs!

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© Gaurav Sharma 2014. Photo 1: The Bosphorus Bridge. Photo 2: Traffic in the Bosphorus. Photo 3: Tanker in the Bosphorus. Photo 4: Election fever in Istanbul, Turkey © Gaurav Sharma, March 2014.

Monday, March 10, 2014

Turkey's Russian connection: Bazaars to barrels

The Oilholic finds himself in a soggy Istanbul, with Turkey in the middle of election fever and the Black Sea in the grip of a Cold War style stand-off over Ukraine.

Before landing here, yours truly ran in to a Moody's spokesperson at BA's Heathrow T5 lounge. It seems that the ratings agency predictably sees Gazprom and Russia's banking sector taking a hit, if recent notes to subscribers are anything to go by. With 52% of Gazprom's exports to Europe currently routed through Ukraine and the country contributing up to 8% of its revenues, there is trouble ahead. Nonetheless, it can cope pretty well in the face of an escalation.

When it comes to the banking sector, Moody's reckons the aggregated exposure could be as high as US$30 billion. The Kremlin is likely to step in if needs be but it won't be needed as the figure equates to less than 2% of system assets. Interestingly, just before dashing off to our respective flights, our friend from Moody's gently nudged the Oilholic and quipped, "Wait till you get to Istanbul and see NATO member Turkey's exposure to Russia." And so this blogger came, he saw and he wondered!

We'll come to the barrels later, lets start with the bazaars first. Despite the unusually miserable weather, the city is packed with Russian tourists. From the metro to the tourist spots, you cannot escape Russian chatter in the background. "For sale" signs in retail outlets are up in two languages – Turkish and Russian. In expanding its tourism sector and wider economy, Turkey has welcomed Russian tourists and business investments with open arms including a favourable visa regime for over 10 years now.

The results are tangible. With the Turkish Lira in throes of unpredictability, every big ticket item – from designer stuff and marquee labels to high value Turkish handicrafts – is priced by retailers here in euros; with quite a few Russians around with more than a few euros.

Digressing from retail to banks, the exposure of Turkish banking institutions to Russia is harder to quantify as the current macroclimate in the country [not Ukraine & NATO] has conspired to turn the situation fluid. Unfortunately, no one wants to nail a figure on record as forex permutations are making life difficult extremely difficult for the analysts, but off record it is certainly not "as high as Ukraine."

Excluding exposure of Russian banks to Turkish infrastructure project finance exercises, $5 billion to 10 billion is a reasonable conservative guesstimate. From banks, rather crudely to barrels – Russia is Turkey's 6th largest export market. Mostly consumables, textiles and manufactured goods worth $3 billion were exported by Turkey to Russia in 2012.

What came back from Russian shores was $27 billion worth of imports including crude oil, distillates, natural gas and iron and steel that same year. Of the said figure, $17.26 billion were oil & gas imports! Using a dollar valuation at constant exchange rate (which has been anything but constant), we are looking at a 625% jump in Russian "imports" between 2002 and 2012. The said percentage need not be sensationalised as the starting point was a low base, but it gives you an idea of NATO Turkey's exposure to [and reliance on] Russia.

Furthermore, the Bosphorus is a major maritime artery for oil & gas shipments via the Black Sea. Exports from the Russian loading port of Novorossyisk by tankers via the Turkish straits have been rising steadily over the last 10 years. Recognising this, Turkey even has an embassy in Novorossyisk.

Recently, Poland's Prime Minister Donald Tusk, in sync with the Oilholic, was correctly berating Germany for its exposure to Russian gas and why it would give the EU a weaker hand over the Ukrainian tussle.

"Germany's reliance on Russian gas can effectively limit European sovereignty. I have no doubt," Tusk told reporters, ahead of German Chancellor Angela Merkel’s visit to his country. [Ouch!]

Maybe Tusk ought to look at fellow NATO member Turkey too. If the diplomatic row continues to escalate, Turkey would find it very hard to indulge in verbal or economic jousts with Russia. It took a very vocal stand with Syria, but one suspects it may not be the case this time around. Banks, bazaars and barrels could all feel the squeeze – it's what colleagues in the analyst community down here openly acknowledge.

However, you don't need them or the Oilholic. All you need to do is take the tram from Istanbul's Grand Bazaar through to Kabataş, the last stop on the European shore of the Bosphorus, between Beşiktaş and Karaköy. The journey will help you reach the same conclusions unaided by charts, graphs and economic gobbledegook. And here's hoping, the weather is kinder to you than it has been to the Oilholic. That's all for the moment from Istanbul folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2014. Photo 1: Eminonu Waterfont, Istanbul, Turkey Photo 2: Greek oil tanker Scorpio passes through the Bosphorus, Turkey. ©  Gaurav Sharma, March 2014.

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