presentation speech by mr. taner yildiz minister of energy and ...

PRESENTATION SPEECHBY MR. TANER YILDIZMINISTER OF ENERGY AND NATURALRESOURCESTHE PRESENTATION OF THE MINISTRY’SBUDGET FOR THE YEAR 2010AT THE PLENARY SESSIONOF THE TURKISH GRAND NATIONALASSEMBLY (TBMM)DECEMBER 18, 2009

Dear President,Esteemed and Honourable Members of the Parliament,I would like to present my regards to all before starting my speech.I am here before you to present the Budget of the Ministry of Energy andNatural Resources for the year 2010.All the public organizations, universities, independent think tanks and, ofcourse, political decision-makers are working to generate secure,sustainable and environment-friendly energy policies with minimized risksin concern with energy related issues throughout the world. The energywhich constitutes the main input with regard to the maintenance ofeconomic developments in the countries in question is continuouslyincreasing its importance as a field requiring follow up and analysis oftrends on a global scale and the implementation of multi-dimensional andlong-term policies and strategies in this respect.The energy security constitutes the base of discussion agendas concerningthe energy sector. Energy prices which have shown an increasing trendwithin the last year despite the shrinkage in the global economy, theincreasing sensitivity against global warming and climate changes, the factthat the dependency on fossil fuels indicates a decreasing trend althoughthere is an increasing trend in the world’s demand for energy and anotherfact that developments in the field of new energy technologies being farfrom meeting the present demand all present continuous increasinghesitations in the countries on energy security related issues and directcountries towards new searches in this field.1

On the other hand, the fact that greenhouse gas emissions generated by theresources which are used to generate energy and activities carried out inthis respect have reached dimensions threatening the global life,environmental effects arising from generation and consumption of energyresources, fossil fuels and risks of losing natural resources of energy in theworld like usable water resources are factors which make the states as wellas the scientists and intellectuals who are responsible for generating ideasin the name of humanity concentrate on energy related issues on a moreextensive scale and conduct research activities in this field.Trade opportunities that have developed as a result of the growingpopulation as well as the facts of industrialization, urbanization andglobalization in the world are increasing the demand for natural resourcesand energy.The projections made by the International Energy Agency (UEA) indicatethat the world’s primary energy demand will increase by about 40 percentin the period between the years 2007 and 2030 in the event that the existingenergy policies and energy supply preferences are maintained. In thissituation called “reference scenario” and corresponding to an annualincrease of 1.5 percent on average in demand, the world’s primary energydemand which was around 12 billion TEOs (ton equivalent oil) in 2007will reach a level like 16.8 billion TEOs in 2030. According to thereference scenario, fossil fuels will have a share corresponding to threefourthsof the world’s energy consumption in the period 2007 – 2030 andwill continue to become dominant resources in meeting the primary energydemand.The 93 percent share in the global demand increase will originate from thedeveloping countries who are not members of the OECD; and, China andIndia will prominently increase their shares in the energy consumption.2

The global economic crisis we are currently experiencing has had seriouseffects on the energy markets. There is shrinkage in the demand while, onthe other hand, delays are experienced in the new projects due to financialdifficulties arising in this respect. The most important influence of theeconomic crisis on the energy sector may probably appear in the form ofdelays in long-term political and economic measures required for the“green development” and interruptions in actions to be taken against globalenvironmental threats like changes in the climate on a global scale; all ofwhich may result in more severe economic outcomes in the future.On the other hand, we should not forget that every crisis also bringsopportunities onto the agenda besides some certain threats which theycreate. Governments may choose to remove or improve their inefficientpolicies and implementations by making use of the need to renew causedby the crises.We are, in our policies and strategies on providing the energy security ofour country, observing also the policies and strategies of all the actorscarrying importance in the regional and global dynamics of the energysector as well as the general trends in this respect; and, developingattitudes in the direction of increasing the benefits.4

Turkey’s General Energy Situation and Its Energy Policies andStrategiesDear President,Esteemed and Honourable Members of the Parliament,In this part of my speech, I will turn to our country from the generaloutlook of the world and provide you with information on our studies andapplications regarding the implementation of policies and strategies in theenergy sector.Taking into account the realities of our country, our policies and strategieshave been established through an analysis of the dynamics on a globalscale and by taking a look at the accession to the EU as well as thegeopolitical perspective in which we find ourselves; and, they may besummarized as follows:• Minimization of the dependency to the outside world,• The importance to be attached to diversification of resources as wellas the importance of local, new and renewable resources,• Minimization of the effects on the environment,• Generation and use of energy in an efficient manner,• Protection of public benefits and consumers’ rights,• Activation of the public and private sector opportunities within theframework of free market applications,• Implementation of policies to take necessary precautions on meetingthe country’s requirements in a secure, continuous and mosteconomical way and in a manner to minimize the environmenteffects encountered.5

It is observed that there is a rapid pace of increase in the demand in eachfield of Turkey’s energy sector as a result of the high rate of economicdevelopment and the increased level of welfare in the country.The rate of increase in the primary energy demand in the period 1990 –2008 has been realized as 4.3 percent which corresponds to three times therate in the world during the same period. Turkey has become the countrywith the highest rate, among OECD countries, with regard to the increasein energy demand within the last 10 years.Likewise, our country has been the second economy in the world, afterChina, having the highest rate of increase in demand in the fields ofelectrical energy and national gas consumption in the period since the year2000.According to the projections made by our Ministry, this trend will continueto exist in the medium term. It is expected that our primary energyconsumption reaching a value like 108 million TEOs by the end of the year2008 will show an annual increase of 4 percent in average in the perioduntil the year 2020 within the framework of assumptions that may bereferred to as the “reference scenario”.In our country in which the net import dependency has reached a level of74 percent, almost all of the oil and natural gas amounts consumed areimported while the rate of import in coal is around one-fifth. We are, inthis context, attaching a high level of importance to increasing thediversification in the resources, technologies and infrastructure used in thesupply of energy. Within this framework, our country’s oil and natural gasexploration activities have gained acceleration both in the country andabroad in recent years.6

We are spending intensive efforts to decrease amounts paid by our countryin respect of oil and natural gas imports which reach values ofapproximately 34 billion dollars each year parallel to the increase in the oilprices in world markets.General Overview of the Electrical Energy Sector in TurkeyDear President,Esteemed and Honourable Members of the Parliament,I would like to touch, at this stage, on subjects like the use of electricalenergy in our country, the relationship of the electrical energy consumptionwith economic and social factors, the development of the installed powerboth with respect to its capacity and ownership related issues and thesituation and development of the reserve capacity.The gross consumption of electrical energy in Turkey (Turkey’s grossgeneration + imports – exports) was realized as 190 billion kWh in 2007with an increase of 8.8 percent.The gross electrical energy consumption of 204 billion kWh estimated forthe year 2008 experienced a decreasing trend within the year under theinfluence of the economic recession and was realized as 198.1 billion kWhat the end of the year with an increase of 4.3 percent compared to theconsumption in the previous year.It is observed, by the years involved, that the peak demand in the Turkishinterconnected system is also developing parallel to the demand in energy.Peak demand was realized as follows;• 29,249 MW in the year 2007 and• 330,517 MW in the year 2008.7

On the other hand, the total length of natural gas pipelines which was4,510 km in 2002 has been increased to 11,294 km. Our natural gasnetwork accessing 5 cities for “industrial and domestic” use and 9 cities for“only industrial” use covers 65 of our cities at present.After the widespread use of natural gas which is a constantly available andrelatively clean source of energy in the cities, especially in the houses, thishas provided our country with a very important advantage in its fightagainst greenhouse gas emissions as well as the changes in the globalclimatic conditions. Moreover, our private sector distribution companieshave gained considerable experience in this respect.A total of 36.7 million subscribers have been scanned within the context ofcontrols to detect loss and theft issues which are the most crucial problemsin our electrical energy distribution system and such controls are still inprogress. The loss and theft ratio in the electrical energy distributionsystem was reduced to a level of 14 percent in 2009 from a level of 25percent suffered in the year 2002.Dear President,Esteemed and Honourable Members of the Parliament,I would like to attract your attention to some important headings which areincluded in the Strategy Paper on Electrical Energy Market and Security ofSupply that was approved by the Higher Planning Council on the date ofMay 18, 2009. The following have been targeted until the year 2023 withinthe framework of the said Strategy Paper;• All our local coal and hydraulic power potential will be integratedinto our economy,9

Electrical energy potential that may be generated from lignite sourceswhich are among our local resources to be used for this purpose is around120 billion kWh/annual with only 44 percent of this source being utilizeduntil today. The rate of utilization for hard coal of which the potential isaround 11 billion kWh/annual is 32 percent. A special importance isattached by our Ministry in the evaluation of this potential to issues like thespread of technologies suitable for the quality of our local lignite resourcesas well as the use of recycling technologies to provide high efficiencies andlow emissions per unit energy in thermal power plants to be newlyconstructed.Coal explorations have been ignored in our country for a long period oftime. Thus, it is not possible to claim that the existing data fully reflect thecoal potential in the country. For this reason, a coal exploration leapforward has been started as of the year 2005 through the mobilization ofopportunities belonging to our organizations, especially the GeneralDirectorate of Mineral Research and Exploration (MTA) and the GeneralDirectorate of Turkish Coal Enterprises (TKİ) in order to be able todetermine the real coal potential of our country.As a result of the implementation of projects regarding coal explorationactivities since 2005, lignite reserves of 4.2 billion tonnes have beendetected through exploration and boring studies of 510,000 m as per theend of October 2009 and our lignite reserves have been increased by 50percent.Likewise, 37 percent of Turkey’s hydraulic energy potential of 140 billionkWh/annual determined to be in the economic category is in operationwhile, on the other hand, a portion of capacity corresponding to 15 percentlies in the projects under construction (including also the ones beingconstructed by the private sector companies). Studies with the aim of redeterminingthe technical and economic hydroelectric energy potentialhave been started. The HEPP (hydroelectric power plant) project andconstruction activities regarding micro and small-power power plantswhich have been ignored for years are being undertaken by TEMSAN forpurposes of developing and popularizing the small HEPP technology.12

“To add nuclear power plants to our collection of sources ofenergy supply”Nuclear EnergyThe integration of nuclear energy into our sources of energy supply will beone of our instruments aiming to reduce the risks arising from thedependency on imported fuels while satisfying the increasing demand forelectrical energy at the same time.In this context, the “Regulation on the Procedures, Principles andIncentives regarding the Competition and Contract to be realized within theContext of the Law on Establishment and Operation of Nuclear PowerPlants and the Sale of Energy”, prepared after the implementation of the“Law on Establishment and Operation of Nuclear Power Plants and theSale of Energy”, came into force as of March 2008. The Council of Statehas decided on a stay of execution with respect to some articles of theabove-mentioned Regulation and our assessments on the subject are still inprogress.Our studies started on the utilization of nuclear energy in the generation ofelectricity will be continued. We are targeting to reach a level of at least 5percent for the share of these power plants in the generation of electricalenergy until the year 2020 and carrying it to higher levels in the long run.13

Our installed capacity of electricity generation has been increased from31,750 MW to 44,600 MW since 2002. The portion of about 7,000 MWout of the 12,850 MW of the additional capacity put into operation in thisperiod is comprised of power plants licensed to the private sector andstarted in our period.Provisional acceptances of 73 energy generation power plants belonging tothe private sector companies have been undertaken in 2009 (as of the dateDecember 8, 2009) and the permission to put into operation has beengranted by our Ministry. Power generation facilities put into operation areas follows:• 1 geothermal energy power plant (47.4 MW),• 14 wind energy power plants (390 MW),• 28 hydroelectric energy power plants (391 MW), and• 33 thermal energy power plants (1,796 MW).The 214 MW capacity of thermal energy power plants belong to plantswith cogeneration facilities. In addition to the above, Obruk Dam andHydroelectric Power Plant which has a capacity of 212 MW has beencompleted and put into operation by DSI (State Hydraulic Works). It isexpected that the total private sector power plant installed capacity willreach a figure of 2,800 MW before the end of 2009.And, the development of the competition-based investment environmentwill continue to become one of our strategies in meeting the importantincrease of the demand in the energy sector.15

PricesThe necessary importance is attached to the establishment of a pricingstructure reflecting costs in the process of transition to a competitiveenergy market. The Decision No. 2008/T-5 dated February 14, 2008 on the“Cost-Based Pricing Mechanism to be implemented by State EconomicEnterprises (KITs) in the Energy Sector” came into force on 01.07.2008.According to the above-mentioned decision, electricity prices applied byEnergy Sector KITs are being revised on a quarterly basis and natural gasprices are revised on a monthly basis in accordance with formulascalculated within the framework of the Cost-Based Pricing Mechanism.The General Directorate of BOTAŞ has determined and implemented itssales prices according to the said decision since July 2008. Within thisframework, natural gas sales prices are being calculated in consideration ofthe parameters regarding “changes in natural gas purchasing prices” and“changes in the exchange rate of US dollars”.Privatizations in the Fields of Electricity Distribution and GenerationImportant steps have been taken in preparation studies on the privatizationof electrical distribution and generation activities. TEDAŞ was taken intothe Privatization Program on April 2, 2004.The reorganization process regarding TEDAŞ has been completed. Theprivatization and transfer transactions regarding electricity distributioncompanies called Başkent, Sakarya and Meram which are among the 20new regional electricity distribution companies have been finalized; and,the transfer of the distribution region comprising Denizli, Aydın andMuğla provinces to the company Aydem Elektrik Dağıtım A.Ş. has beencarried out.16

Finally, the negotiations on tenders of privatization regarding the sharesbelonging to TEDAŞ (100%) in electricity distribution companies atÇoruh, Osmangazi and Yeşilırmak were finalized on the date of06.11.2009. A total price of USD 1,153,500,000 was offered for the saidthree electricity distribution companies.The tender regarding Uludağ, Van Gölü, Çamlıbel and Fırat regions is inthe announcement stage and the deadline for submitting offers for theseregions is January 29, 2010. Preparation studies regarding the other 7companies are being continued by the Privatization Administration (ÖİB)which is targeting the completion of privatizations on electricitydistributions before the end of 2010.Our primary targets in the privatization of electricity generation facilitiesare the development of our generation capacities, the increase in theavailability of the existing electricity generation facilities as well as thecapacity utilization factors and the activation of the private sector’sresources for purposes of increasing the competition in the sector.Issues like rehabilitations required in the existing power plants and theincrease in the installed capacities of power plants through additionalinvestments where fuel resources are at sufficient levels will be consideredin the determination of the privatization method; and, the fundamentalcriteria of establishment of the competition in the market will be taken asthe basis in the determination of generation facilities to be privatized and inthe grouping in the forms of portfolios.Natural Gas Contract TransfersThe Natural Gas Market Law No. 4646 has legally removed the monopolystatus of BOTAŞ and the Energy Market Regulatory Authority (EPDK) isopening tenders for inner city distribution licenses as foreseen in the law.17

However, necessary amendments to the Law No. 4646 have been made forthe purpose of removing difficulties encountered in the transfer of naturalgas purchasing agreements to the private sector and a tender has beenopened of 64 lots (16 billion m 3 ) which corresponds to 64 percent of themarket. The transfers to 4 bidders submitting valid offers for 4 billion m 3corresponding to a total of 16 lots have been undertaken.The establishment of a competition based free market in the natural gassector requires a certain period of transition. In order to avoid creatingrisks in the transition period with respect to the security of supply,developments on the market establishment in the country are followed upclosely and efforts on making changes in the Natural Gas Market Law arecontinued taking into consideration the trends in the world as well as thedifficulties faced by other countries and their experiences in their transitionperiod.“To increase the energy efficiency”The subject of energy efficiency may be seen as a support to otherresources in energy resource diversification while it is also an issue thatmay be evaluated as a resource itself due to the gains to be achievedthrough efficiency. There is not a serious potential for Turkey in thisrespect. The Energy Efficiency Law was put into force in 2007 by theTurkish National Assembly. Arrangements promoting the efficient use ofenergy have been brought about by the Energy Efficiency Law targetingthe utilization of an important potential in this way.Two Prime Ministry Circulars viz numbers 2008/2 and 2008/19 have beenissued on efficient use of energy in the public sector. The “National EnergyEfficiency Initiative” was started with the participation of public andprivate sectors as well as the non-governmental organizations within thecontext of the said circulars; and, the year 2008 was declared the “EnergyEfficiency Year”.18

The replacement of incandescent filament bulbs used for illuminationpurposes with compact fluorescent bulbs which are 5 times more efficientis taken into consideration with priority among the measures to be takenfor purposes of increasing the energy efficiency in a fast and effectivemanner. More than 1,800,000 bulbs have been replaced as a result ofstudies carried out within the context of the “Prime Ministry Circular onthe Replacement of Incandescent Bulbs in The Public Sector” prepared forpublic sector organizations and institutions undertaking the lead in thisrespect. The said study has resulted in 23 percent better illumination inpublic sector organizations; electricity consumption capacity has beendecreased by around 102 MW; and, an annual contribution of 41 millionliras has been made in the budget.In addition, a total of 4 million 800 thousand bulbs of energy-efficientnature were distributed to the primary school students in provinces of highloss and theft ratios in exchange for the old bulbs between December 2008and April 2009 within the context of activities to increase the awareness inthe Energy Efficiency Year.We are continuing to give support to projects involving the increase inefficiency and the voluntary agreements for the industrial sector.“To minimize the adverse environmental effects of activitiesin the field of energy and natural resources”Our country became a party to the United Nations Framework Conventionon Climate Change (UNFCCC) in the year 2004. The Kyoto Protocol wasapproved by the Turkish Grand National Assembly and the Republic ofTurkey became an official party to the said protocol on the date ofFebruary 5, 2009.19

Our country does not have any liabilities in relation to decreasingemissions within the framework of the Kyoto Protocol until the year 2012.But, expectations from countries on decreasing emissions have increasedwith regard to the period after 2012. In this context, the increase of energyefficiency in the energy sector, a better use of renewable resources, thespread of clean coal technologies and the use of nuclear energy will beamong our major policies in handling problems within the framework ofenergy and environment related issues.“To increase the regional and global effectiveness of ourcountry in the field of energy”Energy DiplomacyDear President,Esteemed and Honourable Members of the Parliament,We have continued intensive energy diplomacy activities for our country’senergy supply security since the day we came to office.We have discussions in the countries we are visiting along the lines ofproviding solutions to both Turkey’s and our regional requirements andstrengthening our country’s position as an important player in the globalarena; and, we have established various agreements and collaborations inthis respect as sound outcomes of our contacts.We have had a total of 18 foreign contacts in 11 countries in the last sixmonthperiod.20

The first of our contacts cementing our energy corridor and terminalconcept was with the Czech Republic this was closely followed by ourvisits to Azerbaijan, Russia, Turkmenistan, Qatar, Italy, Nakhcevan, Syriaand Iran.On the other hand, we have taken part in searches for common solutions tothe problems faced by the world during our meetings with my counterpartsin Italy, Sweden and France.We have also observed during our contacts that there are differences intoday’s perception of Turkey by the said countries with the perceptionobserved seven years ago.International ProjectsOur country has a geographical situation close to locations incorporating72 percent of the proven oil and gas reserves of the world like the Middle-East, Caspian Region and Central Asia. Being a country constituting anatural bridge between the countries of resources and the countries ofconsumption, Turkey takes the role of an important player in projectstargeting to provide the diversification of energy resources and the routesof transportation.It is currently foreseen that the region in which we find ourselves willsupply a major part of the world’s energy consumption expected toincrease by a rate of about 50 percent within a period of 25 years. Thecountries situated in the Middle-East, Europe, Russia and Central Asiahold around 75 percent of the global oil and natural gas reserves. Thereserves in Central Asia appear as an important alternative source inmeeting the world’s energy demand. Turkey has the nature of being both abridge and a terminal for the transportation of the production in theMiddle-East and Central Asia due to its geographical and geopoliticallocation.21

Dear President,Esteemed and Honourable Members of the Parliament,Let us now have a quick look at the international projects we are carryingout in the direction of our target to reinforce the position of our country: Baku-Tbilisi-Ceyhan (BTC) Crude Oil Pipeline constituting themost important component of the East-West Energy Corridor becameoperative when the first oil tanker was loaded at Ceyhan Export Terminalon the date of June 4, 2006 and the transportation of Azeri Oil tointernational markets started. The total amount of oil loaded since the year2006 has reached a value of 792 million barrels as of today and thisamount has been transported using 1,000 tankers. And, what a coincidence,the 1,000 th tanker has been loaded today! Efforts are going on to increasethe capacity of the pipeline, that has reached a level of 1 million barrels aday since June 22, 2008, on an incremental basis first to a level of 1.2million barrels/day and then to a higher level like 1.6 million barrels/day.The oil produced in Tengiz field at Kazakhstan has also been carried tointernational markets through the BTC pipeline since October 2008. The Caspian-Turkey-Europe natural gas pipeline project foreseeingthe transmission of natural gas to be produced in the Caspian Region toTurkey and then to other European countries, parallel to the BTC Project,also occupies an important place in our East-West energy corridor policy.Natural gas is currently being supplied in this context through Azerbaijan –Turkey Natural Gas Pipeline (Shah Deniz Project, Baku-Tbilisi-ErzurumBTE) Natural Gas Pipeline) since July 2007. BTE Natural Gas Pipelinewhich has a capacity of 20 billion m 3 is important not only as a means ofmeeting Turkey’s domestic natural gas requirements, but also of meeting apart of the European Union’s continuously increasing gas requirements. Anatural gas amount of 4.53 billion m 3 was taken through this line in theperiod January-November 2009 and the total amount has reached a figureof 10.36 m 3 billion in this respect.22

The first stage of the Southern Europe Gas Ring Project wascompleted with the Turkey – Greece Natural Gas Pipeline put intooperation in November 2007, the inter-connection of our country’s naturalgas transmission network with the infrastructure of neighboring countrieswas thus undertaken and our country became a bridge supplier of naturalgas in this way. The next stage of the Southern Europe Gas Ring Projectwill be the extension of the Turkey – Greece Natural Gas Pipeline to Italythrough the Adriatic Sea. It is planned to increase the total amount of gasto be transmitted through the said pipeline to Italy to a level of about 12billion m 3 /year. The amount of 3.6 billion m 3 will be transmitted to Greecewhile the balancing 8 billion m 3 will be carried to Italy. An Inter-Governmental agreement was entered into on July 26, 2007 with regard tothe establishment of a natural gas transmission corridor between the saidthree countries. The Adriatic Sea passage that will make up the Greece –Italy connection is planned to go into operation in 2014. Another natural gas route to Europe is the Turkey – Bulgaria –Romania – Hungary – Austria Pipeline known as the Nabucco Project.Efforts on realization of the Project are still in progress at relatedcompanies of the above-mentioned countries. The German company RWEhas joined the project as the sixth equal partner. The pipeline project thatwill have a maximum yearly capacity of 31 billion m 3 will make importantcontributions to Europe’s diversification of sources and routes in thisrespect. The Nabucco Project Inter-Governmental Agreement was signedin Ankara on the date July 13, 2009. It is planned that negotiations on theProject Support Agreement will start again in Ankara on July 14, 2009 andbe completed within the year 2009 while operational plans are scheduledfor 2014.23

Syria has started to receive the Egyptian natural gas since July 2008under the Arabian Natural Gas Pipeline Project targeting thetransmission of the Egyptian gas to our country and then to Europe overour country as well as Jordan and Syria. In the present stage, the pipelinehas reached the city of Humus in Syria and it is planned to have natural gasnetworks of both countries interconnected after completion of the 230-kmsection to the Turkish border. It has been decided to establish a jointworking group to discuss the conditions required for interconnectingnatural gas networks of both countries within the framework of thememorandum of understanding signed between Turkey and Syria. It is alsoforeseen, in the Memorandum of Understanding, that Turkey will sell gasto Syria, Egyptian gas will be transmitted to Turkey through Syria, naturalgas will be transmitted from Turkey to other Arabian countries throughSyria and the Syrian gas will also be transmitted to Turkey in the future. A Memorandum of Understanding was signed on the development ofIraq – Turkey Natural Gas Pipeline on October 15, 2009 inconsideration of the potential of Iraqi natural gas to become an importantsource both for Turkey and European countries. On the other hand, the Turkish Straits are not capable of carrying thepassage of the oil that will reach the Black Sea in future in a securemanner. We are now face-to-face with a dangerous load of about 150million tonnes passing through our straits each year. Samsun-CeyhanCrude Oil Pipeline targeting to reduce the existing load traffic in theStraits has been designed as the main component of the North-SouthEnergy Corridor. The groundbreaking ceremony was undertaken inCeyhan on April 24, 2007. Protocols were signed between Turkey andRussia foreseeing the cooperation on oil and natural gas related issues onAugust 6, 2009. The protocol on oil covers issues regarding the support ofjoint ventures between Turkish and Russian oil companies as well as thecommitments to provide the oil necessary to implement the Samsun-Ceyhan Crude Oil Pipeline. Moreover, a Joint Statement was signed inrelation with the Samsun-Ceyhan Crude Oil Pipeline between Turkey, Italyand Russia in Milan on October 19, 2009.24

Furthermore, the gas protocol signed between Turkey and Russia onAugust 6, 2009 among the ones mentioned above is targeting to extend theSale and Purchase Agreement dated February 14, 1984; and, makefeasibility studies on the expansion of existing pipelines for purposes oftransmitting the Russian gas to Turkey and to other destinations via Turkeywhile also constructing new pipelines. In addition to that, Turkey has givenits permission on exploration and environmental research studies related tothe construction activities for the South Stream Natural Gas Pipeline withinits economic region in the Black Sea. Another important issue is the Memorandum of Understandingregarding the purchase of liquefied natural gas (LNG) signed with Qatarwhich has important natural gas reserves, on October 6, 2009. Also,bilateral negotiations are going on regarding the construction of a pipelinethat will reach Turkey through Saudi Arabia, Jordan and Syria.25

An agreement was signed with Iran on October 28, 2009 in the fieldof natural gas. According to the agreement, Turkish Petroleum Corporation(TPAO) will have the right to explore natural gas in some areas of theSouthern Pars Region in Iran without being subject to the tenderconditions. The agreement also foresees the transmission of Iranian naturalgas to Europe through Turkey and the Turkmen natural gas to Turkey viaIran. The subject of interconnecting the electricity networks have attachedimportance for the purpose of increasing the electricity import and exportpotential, supporting the supply security of electricity and making use ofother technical advantages of interconnected networks. The priority and theprimary target for our country is to provide the synchronous-paralleloperation of our electricity transmission network with the Union for theCoordination of Transmission of Electricity (UCTE). The said projecttakes place among the “Priority Project Axes” within the context of EUTrans-European Energy Networks. Important steps have been taken instudies started with UCTE witin this framework. It is targeted, in thetransmission systems and generation facilities of our country, to realize themembership to UCTE within the shortest period of time possible uponcompletion of necessary improvements. Test studies have been started andit is expected to undertake the interconnection between EuropeanElectricity System and Turkish Electricity System in mid- 2010. Ourmembership to UCTE which will increase our electricity trade to a greatextent will emphasize the importance of low-carbon technologies in theenergy sector.26

“To increase the contribution of our natural resources to thecountry’s economy”Our country has global-scale reserves in some resources like boronminerals, industrial raw materials and marble. It is accepted as one of therare countries having reserves sufficient to meet its own requirements forthe industry sector. Having 72 percent of the global boron reserves, ourcountry has reached important levels in the production of boron ores, boronconcentrates, refined boron products and boric acid. Our target at this pointfor the next ten years is to concentrate on boron end products, make ourcountry the world’s center in this respect and fight for global leadershipwith regard to technological and production related aspects. The NationalBoron Research Institute (BOREN) founded for this purpose has takenimportant steps in many fields, including in particular the increase of fieldswhere boron is to be used.A series of new arrangements has been made in the Mining Law No. 3213as well as the regulations regarding the implementation of the said law.Movement in the mining sector has been provided with the saidarrangements and important increases have been recorded both in licenseapplications as well as the sector’s share in exports and national income(GDP per capita). Licensing tender transactions have been accelerated andtenders regarding 82,600 fields have been finalized for purposes of putingidle fields into operation and integrating them into the economy. Newfields of employment have been created and added values have beenprovided for the country’s economy in this way.In this context, our mining exports that were at levels around 700 milliondollars in 2002 were realized as 3 billion, 240 million dollars in the year2008. All of the natural stone productions and exports in this period wereundertaken by the private sector and our marble and natural stone exportshas reached the amount of 1.5 billion dollars by an increase of 4.5 timescompared to the situation in 2002 and they have taken the first rank amongthe mining export items with a share of about 43 percent.27

This product group is followed by metallic ores with an export figure of 1billion dollars and 32 percent share, industrial raw materials with an exportfigure of 647 million dollars and 20 percent share and other products witha 5 percent share in exports. Our mining exports for the period January -November 2009, on the other hand, were 2 billion, 140 million dollarswith a decrease of 21.5 percent in quantity and 30 percent in value.The total value of the mining sector within the national income which was2 billion, 600 million dollars was realized as 10 billion, 170 million dollarsin the year 2008.Cases of ArbitrationA large part of the contracts regarding the transfer of operation rights at thegeneration and distribution facilities which have been signed previouslywithin the framework of the Law No. 3096, in the period before the LawNo. 4628 targeting the liberalization of the energy sector, have beencancelled by the Council of State while, on the other hand, a part of Build-Operate-Transfer Projects for which constructions have not been startedcould not be implemented as they did not conform to the free marketconditions and treasury guarantees have not been provided.,In the 8 cases of arbitration filed against our Ministry in relation to thoseprojects, the total amount of indemnifications claimed is around 1 billion,800 hundred million dollars while an amount of 288 million dollars hasbeen deemed in total compensation payout. An indemnification claim ofabout 1 billion, 600 hundred million dollars has been rejected by theboards of arbitration up until the present day. Furthermore, Atam AlaplıB.V. has filed an arbitration case at International Center for the Settlementof Investment Disputes (ICSID) with an indemnification claim of 93million dollars and this is currently at the trial phase.28

There are also cases of arbitration filed at ICSID in relation to privilegescancelled due to behaviour and acts which violate the contract besides theones regarding Transfer of Operating Rights and BOT projects and thesecases are summarized as follows: A case of arbitration has been filed at ICSID by Libananco HoldingsCompany. Ltd. of Southern Cyprus origin, claiming that they own a shareof about 66 percent of the total capital of Çukurova Elektrik A.Ş. andKepez Elektrik T.A.Ş. separately, against the Turkish Republic with aclaim of indemnification amounting to 10 billion, 100 million dollarswithin the framework of the Energy Charter Treaty. The trial has beenundertaken on the determination of the authorities. A case of arbitration has been filed at ICSID by the company“Cementownia Nowa Huta” of Polish origin, claiming that they own ashare of 12.24 percent in the total capital of Çukurova Elektrik A.Ş. and10.73 percent share at Kepez Elektrik T.A.Ş. against the Turkish Republicwith a claim of indemnification amounting to 4 billion, 648 million dollars;and, the board of arbitration has made a final resolution in favor of ourstate and decided on a payment of 5 million, 304 thousand dollars to ourstate by the company for legal fees and expenses. A case of arbitration has been filed at ICSID by the company“Europe Cement Investment and Trade S.A.” of Polish origin, claimingthat they own a share of 10.24 percent in the total capital of ÇukurovaElektrik A.Ş. and 11.61 percent share at Kepez Elektrik T.A.Ş. against theTurkish Republic with a claim of indemnification not less than 3 billion,800 million dollars. The said case of arbitration has been finalized in favorof our state and the board of arbitration has made a final resolution on thepayment of 3 million, 907 thousand dollars to our state by the company forlegal fees and expenses as well as an amount of 129,740 dollars forarbitration costs.29

BOT Investigation ReportsPursuant to the Approval TEFTİŞ.M:001 of the Prime Ministry dated03.01.2003 and the letter no. 094-002 of the Prime Ministry InspectionBoard with the same date for my attention, inspection reports have beenissued by the board of inspection founded in relation to power plants(including 4 natural gas, 17 hydroelectric and 2 wind energy power plants)put into operation on the Build-Operate-Transfer Model within theframework of the Law No. 3096.Although a certain part of the issues mentioned in these reports wererelated to contract applications, a major part of the criticisms made werebased on the incomplete issues detected with regard to signing the relatedcontracts and non-conforming issues in connection with the investmentcosts.Studies have been conducted jointly by my Ministry and the Head LegalConsultancy Department under the Ministry of Finance (BAHUM) on thesaid reports and a report has been prepared in the light of legalassessments.Coal AidIn accordance with the principles of being a social state, coal aid has beendistributed to 1 million, 700 thousand families each year within a period of6 years between 2003 and 2009. Coal aid distributed has reached a totalquantity of 9 million, 200 thousand tonnes and a cost of 2 billion liras as ofDecember 10, 2009.30

Dear President,Esteemed and Honourable Members of the Parliament,ACTIVITIES OF AFFILIATED AND RELATEDORGANIZATIONS OF THE MINISTRY1. General Directorate of Petroleum Affairs (PIGM)There are 48 oil exploration and production companies established in ourcountry (24 local and 24 foreign companies). These companies are workingon the basis of 408 exploration and 72 operating licenses.A total of 1,427 exploratory shafts have been opened up until the presentday. 55 percent of the shafts have been opened in the SoutheasternAnatolian Region while 28 percent are situated in the Thrace Region andthe remaining 17 percent in other regions.As a result of explorations made in this respect, 107 oil and 42 natural gasfields have been explored and a production 132.4 million tonnes of crudeoil and 11.2 billion m 3 of natural gas has borne fruit in the said fields. Theaverage number of wells working on a daily basis is 1,066 and theproduction of crude oil is around 45,100 barrels per day.Our producible crude oil and natural gas reserves are 39.3 million tonnesand 6.3 billion m 3 respectively as per the end of October 2009.31

2. General Directorate of Electrical Power Resources Survey andDevelopment Administration (EIEI)There are 137 projects developed throughout Turkey in general in theperiod 2003 - 2008 and a hydroelectric potential of 2 billion 750 millionkWh was detected. It is expected to generate an additional potential of 500million kWh after the completion of studies at Fırat - Dicle Basin withinthe year 2009.First survey reports regarding 17 HEPPs (hydroelectric power plant) withpumped storage facilities with a total installed power capacity have beenprepared within the year 2009.Studies have been started to establish a Wind Speed Observation andEstimation Center for purposes of generating real-time wind speedestimations for Wind Energy Power Plant (WEPP) operators as well asTEİAŞ.The “Regulation on Technical Assessment of Applications for WindEnergy Based Licenses” was published in the Official Gazette No. 27049dated 09.11.2008 for purposes of providing the effective and efficient useof wind energy in the generation of electrical energy. Studies on thepreparation of our technical opinion for use by EPDK (Energy MarketRegulatory Authority) are still in progress.Biomass maps on the basis of forestry, animal and agricultural resourceshave been prepared by EIEI for purposes of using our biomass resources inan efficient manner and evaluating these resources in the generation ofelectrical energy.A total of 1,750 energy administrators have been trained within the contextof energy management applications regarding the industrial and buildingsectors of industry.32

Furthermore, the “International Energy Administrator” training program,oriented to Asian, Middle-Eastern and Balkan countries for the purpose ofcooperation in these regions, has been organized on a regular basis eachyear since 2002. A total of 177 persons from 25 countries have beentrained in the 9 international courses organized until today.Financial support applications for Efficiency Increase Projects (VAPs)within the framework of the Regulation on Improving Efficiency for theUtilization of Energy Resources and Energy have been started within theyear 2009. It has been decided by the Coordination Board for EnergyEfficiency to provide financial support for 17 projects amounting to a totalof 1 million TL belonging to 12 industrial enterprises in particular withregard to the electrical motor systems in the industry. Energy savings ofmore than 6 million TL is targeted with the realization of these projects.Applications have been made by 24 industrial enterprises for voluntaryagreements in 2009, within the context of the program of voluntaryagreements between enterprises undertaking to decrease their energyconcentrations and EIEI, and these applications are now in the assessmentstage. It is foreseen that such agreements may be made with about 10enterprises and this may start as of the year 2010.The Chamber of Mechanical Engineers and 10 companies involved inenergy efficiency related consultancy businesses have been authorized,again by EIEI, to carry out projects covering training, energy research andefficiency increase related issues within the context of authorizationactivities in accordance with the same Regulation.33

3. General Directorate of Mineral Research and Exploration (MTA)It is targeted to bring boring and exploration studies by MTA, which wereonly 32,000 m in 2003, up to the level of 300,000 m in 2009.As a result of exploration studies conducted by MTA jointly with ETİMADEN, the known boron reserves of our country have been increased by50 percent, from 2 billion tonnes to 3 billion tonnes.Studies have been made during projects conducted in Thrace, CentralAnatolia, Southern Anatolia, Southeastern Anatolia and Eastern Black Searegions in 2009 within the context of the target to prepare maps coveringthe fundamental data which will constitute the basis in mineral andindustrial raw material exploration activities. Turkey’s GeologicalDatabank has been established after transferring these maps prepared forthe whole country in general into the digital media.MTA prepares active fault line and landslide maps that may be used forcity planning purposes for the whole country and risks of disaster aredetermined by making use of these maps. Landslide maps of our countryhave been completed. Furthermore, the studies regarding the update of theTurkish Active Fault Line Map that has been published by MTA have alsobeen completed and the map will be printed in 2010.Studies on Medical Geology, which is a very new field of research in ourcountry, involved in the detection of effects of rocks constituting theearth’s crust and underground waters on human health are still in progress.The studies regarding the Central Anatolian region have been completed inthe year 2009. The knowledge and experience obtained during the studiesundertaken are being shared with the Ministry of Health.34

The number of MTA’s exploration licenses which were 25 in the year 2004has reached a figure of 632 in 2009. Studies at 40 fields (11 fields for metalexplorations and 29 fields for industrial raw material explorations) withinthe context of licensed exploration activities have been undertaken byMTA within a period of five years (2004-2009).As of November 2009, the number of licenses used for industrial and metalore explorations is 129 while the number of coal exploration licenses is165. A total of 338 licenses on explorations of geothermal resources havebeen granted within the context of the Law No. 5686 on Geothermal andMineral Water Resources.Our country ranks 7 th in the world and 1 st in Europe with its geothermalpotential of 31,500 MWt. While the geothermal heat capacity in ourcountry which has reached a noticeable level within a period of forty yearswas 3,100 MWt, this increased to 4,137 MWt over the last 4 years with anincrease of 39 percent and the amount of boring (drilling) has reached alevel of about 20,000 m yearly.Heat energy of 263 MWt has been integrated into the economy as a resultof boring explorations of 16,500 m completed as of November 2009.MTA has been granted the authority to transfer the geothermal resources ithas found in accordance with the Law No. 5686 in order to provide thechance of concerting such resources to investments in a speedy manner. Inthis context, 4 fields suitable for electrical energy generation purposes weretransferred through tenders in 2008 while 7 fields suitable for heating andthermal tourism purposes have been transferred in the same way in the year2009. Tenders on 20 fields, including 3 fields suitable for electrical energygeneration purposes, are in the planning stage.The number of analyses/tests has been increased from 180,000 to 270,000in the year 2009 through studies conducted by MTA in recent years.35

The target for the year 2010 is to reach a figure of 350,000 analyses madeon 55,000 samples. Modernization studies targeting to increase thecapacity and the quality in analysis/test activities at laboratories of analysisand technology are still in progress.4. Turkish Atomic Energy Authority (TAEK)The most important task of TAEK, within the context of utilizing thenuclear energy for peaceful purposes, is to make contributions indetermining fundamental principles and policies in this respect. TAEK hassupplied the technical support required to the related authorities in thestages of acquiring a nuclear power plant and it continues to do so.Studies on using nuclear technology in the generation of energy inaccordance with the country’s benefits are continuing with thecontributions of TAEK.Research activities on using nuclear energy for peaceful purposes arecarried out by TAEK in cooperation with the International Atomic EnergyAgency (IAEA) and the Organization for Economic Cooperation andDevelopment / Nuclear Energy Agency (OECD/NEA); and, there arecurrently 2 national projects (TUR), 9 regional projects (RER) and 16research contracts being carried out in cooperation with IAEA within thecontext of Technical Cooperation and Research Contract Programs. Thereare also 8 investment projects for research purposes which are included inthe investment program for the year 2009.TAEK’s regulation and auditing activities cover all the activities regardingnuclear facilities and radiation facilities as well as the licensing andauditing issues in relation to applications involving radiation for purposesof carrying out such activities in a secure manner.36

Efforts on the update of the existing legislation on the basis of national andinternational experience as well as the establishment of new legislation inthe fields deemed necessary are continuing in the course of the abovementionedactivities.Our Ministry thinks that our country’s targets of developing nucleartechnology and utilizing it for energy generation can only be reached viaour national industry and human capital within a sound nuclear program. Inthis context, TAEK will continue to lead the efforts towards the reliableand secure utilization of nuclear technologies in line with our country’sbenefits.5. General Directorate of Turkish Electricity Transmission Company(TEİAŞ)TEİAŞ is responsible for providing the operation of the national electricitysystem, the administration of the Market Financial Reconciliation Systemthat will prevail in a competition based environment and the realization ofinvestments (maintenance/renewal/new investments) oriented to thesystem’s operation. In this context, TEİAŞ has conducted the tenders forthe “Remote Counter Reading Project” with a project cost of 1.1 millionEuros and the “Market Administration System Project” with a project costof 2 million Euros. It will be starting an electricity market application fullycompatible with the European Electricity Market as of January 2011 uponcompletion of projects and tests in connection with the above.Electricity transmission lines reaching a length of 43,000 km in 2002 havebeen increased to a level about 46,974 km in 2009.37

The total transformer power which was 61,561 MVA in 2002 has beenincreased to 92,199 MVA in order to reinforce the electricity transmissionline infrastructure.The construction of 14 energy transmission lines (380-154 kV) with a totallength of 307 km and 33 transformer station facilities (380-154 kV) with atotal power capacity of 1,925 MVA which are among the projects in theInvestment Program of TEİAŞ for the year 2009 have been completed asof October 2009.In the draft Investment Program of TEİAŞ for the year 2010, on the otherhand, there are 374 projects in total comprising 95 projects of 380 kV (totalproject cost of 1.8 billion TL) and 279 projects of 154 kV (total projectcost of 1.4 billion TL) in the Transmission Facilities Group and the numberof projects reaches a total of 406 together with other projects. The grandtotal of project costs is 3.2 billion TL.The transmission facilities planned is targeting to increase the operatingperformance of the existing transmission system as well as the increases intransmission capacities of the interconnected system between the regionsof generation and consumption and in the transfer capacity limits in ourinternational interconnections. The constructions regarding the projectscalled “Borçka-Border Gate (Georgia) ETL (130 km)” and “Gercüş-Ilısu-Cizre-Border Gate (Iraq) ETL (130 km)” have been started in this context.Furthermore, feasibility studies in connection with the establishment of theBack-to-Back Station at Van (1,000 MW) planned for purposes ofincreasing the energy trade realized/to be realized with Iran are near to thefinalization stage.TEİAŞ continues its projects regarding the replacement of old transmissionlines – which are inside residential locations of large cities and which havealready completed their economic lives, have problems with regard to theiroperations and constitute risks for the environment, - with theunderground transmission lines.38

6. General Directorate of Electricity Generation Corporation (EÜAŞ)As of November 2009, my Ministry’s related institution EÜAŞ possesses54.4 percent of Turkey’s installed power capacity with its installedcapacity of 24,199 MW and meets 46.2 percent of the total electricitygeneration. It is expected that the institution’s electricity generationtogether with affiliates will reach 89.5 billion kWh as of the end of 2009.Rehabilitation studies are going on at our thermal and hydroelectric powerplants which are in operation for many years by making use of newtechnologies for purposes of increasing their efficiencies as well as thegeneration capacities. These rehabilitation studies have been started in thebeginning of 2005. Rehabilitation studies will be finalized in 2013 forthermal power plants and at the end of 2014 for hydroelectric power plants.386 of 565 projects having a total project cost of about 2.67 billion TLhave been completed at a cost of 542.8 million TL and tender transactionsare still going on for the other 179 projects.A contract was signed with the company undertaking Rehabilitation andOptimization work for 1 st and 2 nd Unit Boilers at Kangal Thermal PowerPlant on the date 07.09.2006. The disassembly and assembly works forUnit 1 have been completed together with the related rehabilitation worksand the power plant has been put into operation at the end of August 2009.Rehabilitation works regarding Unit 2 have been started in May 2009 andplanned for completion in December 2009.The contract concerning the Rehabilitation work for 2 Gas Turbines ofHamitabat Natural Gas Combined Cycle Power Plant was signed on26.12.2007 and the total project cost for this work is around 21.3 millionEuros. Production and delivery of the rehabilitation work are still inprogress. The gas turbine powers and thus the energy efficiencies will beincreased and the work is planned for completion at the end of 2010.39

The contract regarding the Conversion of 4 Gas Turbines to a Double-FuelSystem (natural gas-diesel oil) at Hamitabat Natural Gas Combined CyclePower Plant was signed with the contractor company on 26.12.2007. Thetotal project cost for this work is around 14.6 million Euros. The process ofconversion to the double-fuel system regarding its tanks and piping hasbeen completed. The work is planned for completion in 2010.A comprehensive rehabilitation work has been planned for increasing theefficiency and the installed power capacity of Keban HEPP which has beenin service for 30 years. As a result of the tender finalized, a contract wassigned with TEMSAN on a project cost of 50.3 million Euros on02.04.2009. The delivery of location to TEMSAN has been realized andrehabilitation works will be completed within a period of 5 years.Atatürk-Karakaya HEPP Automation System Rehabilitation project isbeing undertaken to provide a reliable and continuous generationenvironment in the power plants. The contract price is 22.6 million Euros.Rehabilitation works that have started in June 2007 are planned forcompletion in 2010.The contract regarding the work on “Conversion of 4 th and 5 th Units atAmbarlı Fuel-Oil Power Plant to Combined Cycle Power Plants by AddingGas Turbines” which is among our most important investments towardsincreasing our generation capacity was signed on 10.11.2008 at a projectcost of 384 million Euros. The project will be financed using our ownresources and it will increase the installed capacity of the power plant from540 MW to 840 MW. The project is planned for completion at the end of2011.40

The fuel system at 4 gas turbines of Aliağa Combined Cycle Power Plantwhich was not operated for a long time due to the high generation costsarising from its fuel system of diesel oil has been converted to the doublefuel(diesel oil-natural gas) system at a cost of 17.6 million Euros in amanner to utilize also the natural gas resources; and, the gas turbines wereput into service on 15.06.2008. Rehabilitation works on steam turbines of3 rd and 4 th groups have been completed and put into service in September2009 while rehabilitation works on the 1 st and 2 nd groups are planned forcompletion possibly in March 2010. The project will provide decreasesboth in fuel costs and emissions due to the conversion to natural gas.Furthermore, the provisional acceptance of Stack Gas DesulphurizationFacility at Yatağan Thermal Power Plant was undertaken in the year 2008and final acceptance studies are going on in this respect.The Stack Gas Desulphurization Facility at Yeniköy Thermal Power Plantwas put into operation in May 2008 and provisional acceptance works arecurrently being carried out. The provisional acceptance of the facility isplanned for the year 2010 upon the completion of rehabilitation workscontinuing at boilers of the power plant.A contract was signed with the contracting company for the Rehabilitationand Burning Optimization work for 1 st and 2 nd Unit Boilers at YeniköyThermal Power Plant on the date 29.11.2007. The contract price is 57.5million Euros. Boiler rehabilitation work at the 2 nd Unit has beencompleted after design and supply studies and the power plant has been putinto service. The disassembly and assembly works for Unit 1 have beenstarted on September 1, 2009 and the work is planned to be completed in2010.41

The work on the 1 st and 2 nd Unit Boiler Rehabilitations at Soma ThermalPower Plant has been taken into the Investment Program for the year 2009upon the Decision No. 2009/27 of the Higher Planning Council dated16.09.2009. The project cost is 172 million TL and tender preparations arecurrently going on.The Electro-Filter Rehabilitation work at the 1 st and 2 nd Units of SomaThermal Power Plant has been completed and provisional acceptancetransactions have been carried out.The Electro-Filter Rehabilitation works at 1 st , 2 nd , 3 rd and 4 th Units ofSeyitömer Thermal Power Plant have been completed and provisionalacceptance transactions have also been carried out.The ash fill dam construction for Seyitömer Thermal Power Plant has beencompleted and provisional acceptance transactions have been undertaken.The work on the storage and disposal of ash and cinder at ÇatalağzıThermal Power Plant has been completed at a rate of 98 percent. Theproject cost is 38.3 million TL and the work has been planned forcompletion at the end of 2009.The contract on the work for Rehabilitation of Ash Fill Dam at SomaAyıtlı was signed on 21.07.2006. 60 percent of the work has beencompleted and the remainder is planned for completion in 2010.The contract on Çöllolar Coal Site Operation Project was entered into withthe contracting company on 04.04.2007 and the coal production started onthe site on the date of 03.08.2009. A total of 6,067,602 tonnes of coal hasbeen delivered to Afşin-Elbistan “B” Thermal Power Plant from this fieldas per the end of November 2009. The period of contract is 25 years andthe project is totally a private sector investment.42

In addition, price offers were received in the year 2008 for the workconsisting of building and operating a thermal power plant and granting theright to make coal production against royalties for a certain period of timeat the coal sites “C” and “D” coal sites which are in Afşin-Elbistan coalbasin, but the tender was cancelled due to the high prices in offerssubmitted. Tenders will be re-opened in 2010 upon the amendments to bemade in the Law No. 5710 and the cost of investment will be around 4 –4.5 billion dollars. We will be integrating 2 thermal power plants eachhaving an installed power capacity of at least 1,200 MW. The period ofwork is 30 years.A contract was signed with MTA, on the date of 27.09.2007, in connectionwith the 1 st Coal Site Exploration Project at Çayırhan Coal Basin. It is aproject covering issues like boring activities of about 64,000 m, coalanalyses, hydroelectric studies, etc. The physical rate of realization is 79percent and it is planned for completion as per the end of 2010. On theother hand, negotiations with MTA on the 2 nd Coal Site at Çayırhan CoalBasin are currently going on.7. General Directorate of Electricity Trade and Undertaking Company(TETAŞ)TETAŞ purchased energy amounting to 86,950,100 MWh and sold85,337,924 MWh in the year 2008.It purchased an amount of energy of 70,106,446 MWh as per the end ofOctober in the year 2009 against an energy purchasing price of 7.9 billionTL and generated an income of 8.9 billion TL from the sale of energytotaling 69,252,450 MWh.43

It purchased the energy of 4,196 billion kWh from Market FinancialReconciliation Center (PMUM) against a purchasing price of 583 millionTL in 2008 within the framework of the Energy Market Stabilization andReconciliation Regulation; and, sold the energy of 890 million kWh toPMUM against a sale price of 152 million TL.Conversely, on the dates between January 1, 2009 and October 31, 2009, itpurchased the energy of 2,729 billion kWh from PMUM against apurchasing price of 357 million TL; and, sold the energy of 1,424 millionkWh to PMUM against a sale price of 216 million TL.The electricity energy of 450 million kWh was imported fromTurkmenistan in 2008 while the amount imported was 393 million kWhwithin the period of 10 months in 2009. This amount is expected to reach afigure of 550 million kWh at the end of this year.The period of the Electricity Energy Purchase and Sale Agreement dated30.10.2006 entered in the context of the exchange agreement with theAutonomous Republic of Adjaria (Georgia) within the framework of theprotocol signed on the date of 26.09.2006 between my Ministry and theMinistry of Energy of Georgia has been extended until 31.12.2010 uponthe request by the Autonomous Republic of Adjaria. The electrical energyof 319.3 million kWh was sold to Adjaria within the period 2005-2008when electricity energy exchange was realized while the electrical energyof 573.2 million kWh was purchased within the same period. Furthermore,the amount of electrical energy purchased from Adjaria within the first 10months of 2009 is 129 million kWh.On the other hand, a contract was signed with Syria on 03.10.2006 and theexport of electrical energy started within the framework of goodneighborhood relationships, upon the application made by Syria to Turkeywithin the context of searches to bottlenecks in energy at the northern partof that country. New one-year contracts were also signed with Syria in2007 and 2008 upon its request.44

Within this context, electrical energy of 1,191 million kWh was sold toSyria in the period from the date 08.11.2006 until the end of April 2008.A new Electrical Energy Sales Contract was entered into with Syria on thedate 05.06.2009 and sales to this country re-started on 07.08.2009 pursuantto the said contract.8. General Directorate of Turkish Coal Enterprises (TKI)The amount of stripping undertaken by the TKI in the year 2008 is 215million m 3 . A stripping quantity of 300 million m 3 has been planned for theyear 2009 and the rate of realization was around 63 percent (190 millionm 3 ) as per the end of October. A production of 35.9 million tonnes wasundertaken by TKI in the year 2008, a quantity of 34.2 million tonnes hasbeen planned for the year 2009 and the rate of realization has been around80 percent (27.2 million tonnes) as per the end of October.The amount of sales carried out in 2008 was 36.4 million tonnes. 29.4million tonnes out of that figure was given to thermal power plants while 7million tonnes was distributed to the heating and industry sectors. Thesales program for the year 2009 is around 34.4 million tonnes including 79percent to be delivered to thermal power plants and the rate of realizationin the annual sales program was 80 percent (27.4 million tonnes). 22.5million tonnes out of that figure was given to thermal power plants while4.9 million tonnes was distributed to the heating and industry sectors.According to the Decree No. 2003/6154 of the Council of Ministers datedSeptember 22, 2003 and within the framework of joint efforts carried outby General Directorate of Promotions for Social Help and Solidarity, theamounts of coal deliveries realized to families in need have been asfollows:45

663 thousand tonnes in the winter season of 2003-2004, 1,047 thousandtonnes in the winter season of 2004-2005, 1,319 thousand tonnes in thewinter season of 2005-2006, 1,262 thousand tonnes in the winter season of2007-2008, 1,472 thousand tonnes in the winter season of 2007-2008 and1,628 thousand tonnes in the winter season of 2008-2009… The total coaldemands of 2,136 thousand tonnes received from all the provinces havebeen programmed for distribution during the winter season 2009-2010 anddeliveries of one portion of this, namely 1,617 tonnes have been started asof the date December 3, 2009. A total of 9.2 million tonnes coal has beendelivered as of December 2009 within the context of these efforts.Coal washing facilities have become widespread for the production ofbetter-quality and environment-friendly coal and the total capacity of coalstripping facilities which was around 10 million tonnes has now beenincreased to 24 million tonnes.The operation of sites in Soma (Eynez (2004)), Geventepe (2005), Darkale(2005), Karanlıkdere (2006) and Tunçbilek (Büyükdüz (2004)) basins havebeen assigned to private sector enterprises within the context of studiesmade to integrate the underground reserves not operated by the relatedorganization into the economy and provide employment opportunities forthe people living in the region. Employment opportunities have beenprovided in this way for about 7,800 people and an additional productionof 7.7 million tonnes of coal has been realized at the sites mentioned in2008.Some sites situated in the province of Muğla have been granted to KİAŞ, aparticipation of TKİ, for a period of 5 years against royalty charges ; thishas provided employment opportunities for at least 150 people.The coal sites at Tekirdağ-Saray, Bolu-Göynük, Çankırı-Orta, Adana-Tufanbeyli and Eskişehir-Mihalıççık have been transferred to privatesector enterprises against royalties for use in the generation of electricalenergy.46

9. General Directorate of Turkish Petroleum Corporation (TPAO)The record level of investment budgets and surges forward in domestic andinternational exploration, gaining acceleration in the year 2003, haveincreased the exploration and boring activities. The investment budgetreached a level of 417 million dollars in 2008 while that figure has become461 million dollars in the year 2009; and, it is planned as 686 milliondollars for the year 2010.TPAO’s local production of oil and oil equivalents which was at levels of28,000 barrels/day in the year 2008 and before has reached a level of38,000 barrels/day by an increase of 28 percent through investments onexploration, boring and production activities carried out in 2009.TPAO has attached great importance to its exploration activities outsidethe country and especially the hydrocarbon explorations at seas besides itsexplorations on the domestic land sites due to its changed explorationstrategy as well as the increasing investments since the year 2003. Anintensive seismic program has been undertaken in our seas in the period2004-2009 and these activities are currently in progress especially at theBlack Sea in line with this strategy, within the context of explorationprojects carried out either by the corporation itself or in cooperation withforeign companies.Various pieces of information and clues have been acquired during seismicand geological studies carried out at the Mediterranean, Aegean andMarmara Seas (offshore waters around Iskenderun, Cyprus, Mersin,Antalya and Çanakkale) to find out their hydrocarbon potentials and thesaid studies are still going on today.The boring tower that will be used for drilling purposes in deeper sectionsof the Black Sea has started its journey to Turkey from Norway on the dateDecember 3, 2009.47

The tower will probably be at the Sinop-1 location where it will bore itsfirst hole in the middle of February 2010 and the operations are planned tolast a period of six months.Our studies on increasing storage capacities of natural gas storage facilitiessituated in Silivri-Değirmenköy, which are the first facilities of their kindin our country, with a capacity pre-financing credit 1.6 billion m 3 and onconstructing new storage facilities are now underway. The necessarygeological and geophysical studies are being conducted to increase thestorage capacity to 3 billion m 3 and the regeneration capacity to 40 millionm 3 .TPAO continues its production capacity through joint projects carried outat Azerbaijan and Kazakhstan within the context of its internationalactivities; and a hydrocarbon production of about 34,000 barrels/day iscarried out in these two regions. In addition,,exploration and boring studiesat Libya are also continuing.TPAO is currently carrying out studies on the evaluation and consortiumestablishment activities for purposes of participating in tenders opened bythe Ministry of Oil in Iraq and it has completed its preparations to open upan office in Baghdad.Exploration activities are underway in Colombia on the basis of 2 licenseswhile preparations to start boring activities are going on under one license.Moreover, we are attaching importance to the development of Joint Oil andNatural Gas Exploration and Production Projects in relation with Georgiaand Jordan and continuing business development activities with Russia,Ukraine, Algeria, Sudan, Yemen and Brazil.48

10. General Directorate of Petroleum Pipeline Corporate (BOTAŞ)It is expected that the annual natural gas consumption which was 500million m 3 in 1987 reach a figure of 31.9 billion m 3 at the end of 2009.A natural gas import of 29.6 billion m 3 has been realized as per the end ofNovember 2009 including 4.7 billion m 3 of natural gas equivalent liquefiednatural gas (LNG) while 25.3 billion m 3 of natural gas has been sold as perthe end of October 2009, 57 percent of this quantity has been used in thegeneration of electricity, 22 percent for heating purposes in houses and 21percent in the industry sector.There are currently 8 different natural gas and/or LNG purchase and saleagreements signed with a total of 6 countries, including Turkmenistan, forpurchasing natural gas.BOTAŞ has made investments of 1.4 billion dollars for transmitting theimported natural gas to the points of consumption and has beenintensifying its operations of natural gas throughout the whole countrysince the year 2002. The total length of natural gas pipelines constructedwhich was 4,510 km in 2002 has reached a figure of 11,294 km as per theend of 2009 while activities in this respect are still going on within thecontext of 6 projects on 6 construction sites. The supply network covering9 provinces until the year 2002 has reached a figure of 65 provinces with56 provinces being added to the network within the period 2002-2009(November).It is planned to supply natural gas to the provinces Giresun and Iğdır in2010 and then to all other provinces Hatay, Siirt, Muğla, Batman, Kilis,Bingöl, Bitlis, Muş, Şırnak, Mardin, Sinop, Hakkari, Artvin and Tunceliafter 2010 within the framework of budget opportunities.49

The natural gas storage facilities at Northern Marmara and Değirmenköywhich have a capacity of 1.6 billion m 3 were put into operation within theyear 2007 and the said capacity has been increased to 2.1 billion m 3 as ofSeptember 2009. In order to set the demand-supply balance in wintermonths, a natural gas amount of 2.11 billion m 3 is made available in thesaid storage facilities for regeneration purposes.Moreover, we are continuing our studies to finalize the Tuz Gölü (SaltLake) Natural Gas Underground Storage Project. Seismic and boringstudies have been completed within the context of engineering studies andthe Affirmative EIA Report has been received for this project. A total of 12storage units will be constructed for purposes of storing a natural gasamount of about 1 billion m 3 . The first 6 units are planned to be put intoservice in the period 2013-2014 while the second 6 units put into operationin the period 2015-2017; and, a credit from the World Bank will be utilizedfor this purpose. Tuz Gölü (Salt Lake) which has been drying up for yearswill also be revitalized by making use of the salty water discharge unitwhich is one of the most important points of the project.11. General Directorate of Turkish Electromechanical Industry(TEMSAN)TEMSAN is carrying out activities comprising the design, projecting,manufacturing, assembly and commissioning of the electromechanicalequipments for hydroelectric power plants; the works to be handled in theform of turnkey projects; the production of various switching materials forpublic and private sector enterprises; the production of transformerstations; the rehabilitation of power plants; the production of high-powermachinery and steel constructions; the renovation of various electricalmotors of various power levels for use in hydroelectric power plants; and,the development and production of energy systems for use in smallhydroelectric power plants as well as renewable resources of energy likewind and solar energy resources at its facilities established in Ankara andDiyarbakır.50

In this context; the production and assembly works at Alpaslan I HEPP,Kılavuzlu HEPP, Manyas HEPP, Topçam HEPP and Cunis HEPP (orderedby the private sector organization) facilities as well as the rehabilitationworks at Kürtün HEPP, Batman HEPP, Gökçekaya HEPP, DemirköprüHEPP, Karkamış-Borçka HEPP and Keban HEPP are being carried out byTEMSAN.Furthermore, it has also been involved in various rehabilitation works atAliağa Gas Turbines and Combined Cycle Power Plant; Kemerköy,Tunçbilek, Seyitömer and Afşin-Elbistan thermal power plants; and,Altınkaya, Gezende, Doğankent and Karakaya hydroelectric power plantsby making use of local resources. Çumra, Kuzuluk, Karabük, Ordu andYozgat Transformer Stations have been completed and the production andassembly works are currently being conducted at Çamlıkaya HEPP andKulp HEPP as well as Lice, Çaykara and Paşaköy Transformer Stations.The design and production activities regarding turbines of various typesand sizes have been realized for small-size HEPPs within the context ofR&D activities; and, 20 units have been sold until today. The efforts on thedesign and proto-type production of generators for use in hydroelectric andwind energy turbines are in progress. Studies on the generation ofelectricity from wave movements carried out in cooperation with BORENhave been completed, the system in question has been installed at asuitable location at Karasu (Sakarya) and the generation of electricity hasbeen realized. The project to be carried out jointly with ITU (IstanbulTechnical University) with the support of the DPT (Higher PlanningCouncil) on making the performance and acceptance tests for prototypesand models of pumps, turbines used in small HEPPs and water turbinesand the establishment of a laboratory at ITU for R&D activities is at itscompletion phase. Moreover, a trilateral protocol has been signed betweenTEMSAN, OSTIM Organized Industrial Region and Gazi University onuniversity-industry cooperation related issues.51

Bids have been submitted to various tenders in Equatorial Guinea,Azerbaijan, Ethiopia, Fiji Islands, Kyrgyzstan, Madagascar, Nigeria, Syria,Tajikistan and Yemen within the context of export activities. A contracthas been signed for the construction of a hydroelectric power plant inEquatorial Guinea having a project value of 27.5 million dollars. Turbinesales have been realized to the Fiji Islands and Tajikistan. And, a protocolhas been signed between TEMSAN and the Turkish Cooperation andDevelopment Administration (TİKA) on energy facilities to be establishedin the Fiji Islands.12. General Directorate of ETI Mine Works (ETI MADEN)The product profile of ETI Mine Works is comprised of boron products.Boron products are presented to the world markets in the forms ofconcentrated boron and boron chemicals and their equivalents inaccordance with the demands from targeted markets and users. A greatimportance is attached to the production of boron having a high level ofadded value. In this framework, the share of boron chemicals and theequivalent products in exports are increasing while there is a decreaseobserved in the share of concentrates. The boron chemicals sales figure hasincreased from 65 percent to 92 percent, and the equivalent products salesfigure has decreased from 35 percent to 8 percent within the salescomposition over the last 5 years. Thanks to the proactive and technicalmarketing policies implemented in the last five years, the total of boronexports have reached a figure of 518 million dollars in the year 2008 withan increase of 179 percent compared to the figure in 2002.The production of boron chemicals and equivalent products has beenrealized as 1,312,000 tonnes in the year 2008 while it is targeted to realizea production figure of 2 million tonnes by the year 2013 in this respect.52

The investment policy at Eti Maden is to realize low-cost investments onnew and extended facilities by making use of the existing infrastructureand to generate foreign exchange savings by having the machinery andequipments belonging to facilities which have been designed by Eti Madenbe produced by the public and local private enterprises in the country. Theexpansion projects at Emet Boric Acid Facilities (additional capacity of100,000 tonnes/year), Bandırma Borax Decahydrate Facilities (additionalcapacity of 45,000 tonnes/year) and Sodium Perborate Facilities(additional capacity of 14,000 tonnes/year) among the existing facilitieshave been conducted within the framework of this policy.The works at Facilities in Kırka for the Production of Borax Decahydratefrom Weak Solutions (80,000 tonnes/year) started within the context ofstudies to increase efficiency and Agricultural Boron (Eti Dot-67)Production Facilities (8,000 tonnes/year) in Bandırma have beencompleted and started their production activities in 2009.The growth observed in the boron markets in the Commonwealth ofIndependent States and the Far-East made Eti Maden accelerate its marketorganization re-structuring activities in these regions. In this context, amarketing company has been set up in Russia while a liaison office hasbeen established in China for purposes of realizing the sales of boronproducts at the Commonwealth of Independent States and the Far-Eastrespectively. The exports to the Far East have increased by 5 times whileexports to China have increased 22 fold within the last 5 years.A large part of the production costs at Eti Maden are on the basis of TLwhile its revenues are mainly on the foreign exchange basis. Gross sales of2008 were realized as 724 million TL with an increase of 140 percentcompared to the figures of 2002 although the rates of foreign exchange hadshown a low profile since the year 2002; and the profit of the periodreached a figure of 293 million TL with an increase of 114 percent. It isexpected that there will be a gross profit of 317 million TL in 2009.53

Eti Maden has been ranked, according to the data for 2008, 1 st amongpublic sector enterprises with regard to exports on the basis of dollars inthe list of top 500 largest industrial organizations of Turkey as determinedby Istanbul Chamber of Industry every year (26 th in the overall list); it isranked 11 th in the list of top 50 companies making the best profit and it isranked 6 th among public sector enterprises with regard to sales fromproduction (55 th in the overall list) with its sales of TL 725,022,173). EtiMaden’s contribution to the Gross National Product has been realized as413 million TL in 2007 and 505 million TL in 2008.Eti Soda A.Ş., one of the participations of Eti Maden, has opened up itsproduction facilities, having annual soda ash production capacity of1,000,000 tonnes and sodium bicarbonate production capacity of 100,000tonnes established on the basis of a fixed capital of 290 million dollars onthe date 17.03.2009 within the context of its Beypazarı Trona Product; and,these facilities will start full-capacity production by the end of July;Caustic Soda will be produced at an amount of 30,000 tonnes/year at thesefacilities as a side product.13. General Directorate of Turkish Hardcoal Authority (TTK)TTK continues its activities at the Zonguldak facilities where the onlyHardcoal basin in our country is situated. The calculated geological reserveis around 1.3 billion tonnes (until the depth of 1,200 m) and 40 percent ofthis figure represents the existing reserves.The sellable production program for the year 2009 is 2.1 million tonnesand 1.7 million tonnes of this figure represents the production as per theend of November.54

Studies conducted within the context of Restructuring Program beingimplemented for purposes of increasing the production and decreasingcosts are going on and our target is to reach a production level of 5 milliontonnes / annual.An important amount of increase has been achieved in investments withinthe context of Restructuring Program in recent years. Most of the deepshafts constituting the main infrastructure of the enterprise have beencompleted and put into service, while preparations for the main floor arecontinuing at a rapid pace. In this context, the tender for the gallery of 55km has been finalized and the 18-km part of it has been completed. Theamount of investment planned for the year 2009 is 30 million TL and theyear-end figure to be realized is around 35 (34.8) million TL. The amountof investment planned for the year 2010 is 47 million TL.Difficulties with regard to the involvement of the private sector in theproduction at Zonguldak Basin have been removed through arrangementsmade by the Law No. 5177. Thus, the economy in the region has beenrevitalized through the assessment of our hardcoal potential and theincrease realized in the production and employment.In this context, 25 sites at the basin have been tendered on various dates.The production realized at those sites has reached a figure of 830,000tonnes and royalty revenue of 10.6 million TL has been achieved as per theend of November 2009. In the sites subject to an employment figure ofabout 4,600 persons in the present situation, a production of 5 milliontonnes and employment of 9,000 persons are expected when the fullcapacity production goes into operation.55

14. National Boron Research Institute (BOREN)Projects have been started especially in the fields of cement, wood,ceramics and building insulation in consideration of the sizes of sectorsinvolved as well as the high rate of boron usages and these studies are inthe phase of implementation. On the other hand, a large importance isattached to support and follow up activities regarding technologicalprojects belonging to energy and automotive sectors in which boron usagelevels will reach high figures in the long run.There have been a total of 253 project applications since the date theinstitute was founded. 29 of the 86 projects supported through BOREN’sresources have been completed and 26 projects are in the stage ofassessment. Pilot production and industrial implementation attempts aregoing on for the projects that have been completed.56

Dear President,Esteemed and Honourable Members of the Parliament,The total amount of the funds appropriated for the projects belonging tomy Ministry as well as its subsidiaries and affiliated organizations(including TEDAŞ) is 4.1 billion liras for the year 2010.A total of 122.2 million TL has been allocated to the central organizationof my Ministry for the following purposes:• 39.7 million TL for current expenditures,• 5.3 million TL for investment expenditures,• 13.8 million TL for transfer expenditures,• 24.9 million TL for expropriation expenditures, and• 38.5 million TL for lending costs.It has been decided to allocate the following amounts of allowances withinthe framework of the transfer item under the Ministry’s budget;• A sum of 42.4 million TL (including 10 million TL for investmentexpenses) for the General Directorate of EIEI,• A sum of 201.1 million TL (including 100 million TL for investmentexpenses) for the General Directorate of MTA,• A sum of 75.1 million TL (including 32 million TL for investmentexpenses) for the General Directorate of TAEK,• A sum of 7.6 million TL (including 7,1 million TL for investmentexpenses) for the Boron Research Institute,57

A sum of 5.5 million TL (including 400 thousand TL for investmentexpenses) has been allocated to PIGM which is the general-budgetorganization under my Ministry as the budget for the year 2010.I have presented to our General Assembly summary information on theactivities of my Ministry and its budget. I would like to express my kindregards and many thanks in advance for your comments, criticisms andcontributions that will enlighten our activities.Taner YıldızMinister of Energy and Natural Resources