New Realities in Oil Transit Through the Turkish Straits SPECIAL REPORt™ SPECIAL STUDY, EURASIAN TRANSPORTATION FORUM CERA We welcome your feedback regarding this IHS CERA report or any aspect of IHS CERA’s research, services, studies, and events. Please contact us at [email protected] or +1 800 IHS CARE (from North American locations) or at [email protected] or +44 (0) 1344 328 300 (from outside North America). For clients with access to IHSCERA.com, the following features related to this report may be available online: downloadable data (excel file format); downloadable, full-color graphics; author biographies; and the Adobe PDF version of the complete report. © 2011, All rights reserved, IHS CERA Inc., 55 Cambridge Parkway, Cambridge, Massachusetts 02142. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent TERMS OF USE. The accompanying materials were prepared by IHS CERA Inc. and are not to be redistributed without prior written consent. IHS CERA content and information, including but not limited to graphs, charts, tables, figures, and data, are not to be reprinted or redistributed without prior written permission from IHS CERA. Content distributed or reprinted must display IHS CERA’s legal notices and attributions of authorship. IHS CERA provides the materials “as is” and does not guarantee or warrant the correctness, completeness or currentness, merchantability, or fitness for a particular purpose. All warranties of which are hereby expressly disclaimed and negated. To the extent permissible under the governing law, in no event will IHS CERA be liable for any direct, indirect, special, incidental, lost profit, lost royalties, lost data, punitive, and/or consequential damages, even if advised of the possibility of same. IHS CERA Special Report CONTENTS 1. Introduction and Scope of the Study ………………………………………………………………… 1 2. Executive Summary ……………………………………………………………………………………… 5 Overall Findings ……………………………………………………………………………………………… 5 Analysis of Key Drivers Affecting Black Sea Flows …………………………………………………… 8 Black Sea and Bosphorus Evacuation ………………………………………………………………… 10 Comparison with Other Straits ………………………………………………………………………… 10 The Bosphorus Bottleneck ……………………………………………………………………………… 11 Maritime Safety Issues …………………………………………………………………………………… 12 Bosphorus Bypasses …………………………………………………………………………………… 14 3. Analysis of Key Drivers Affecting Overall Oil Flows from the Black Sea …………………… 15 3.1 Eurasian Crude Oil Production …………………………………………………………………… 15 3.1.1 Methodology for the Eurasian Oil Production Outlook ……………………………………… 15 3.1.2 Oil Production in the Russian Federation ……………………………………………………… 21 3.1.3 Oil Production in Kazakhstan …………………………………………………………………… 33 3.1.4 Oil Production in Azerbaijan …………………………………………………………………… 44 3.1.5 Oil Production in Turkmenistan ………………………………………………………………… 47 3.2 Eurasian Crude Oil Consumption ………………………………………………………………… 49 3.3 Eurasian Crude Oil Exports ………………………………………………………………………… 61 3.3.1 Russia’s Crude Oil Exports ……………………………………………………………………… 61 3.3.2 Kazakhstan’s Crude Oil Exports ………………………………………………………………… 63 3.3.3 Azerbaijan’s Crude Oil Exports ………………………………………………………………… 65 3.3.4. Turkmenistan’s Crude Oil Exports ……………………………………………………………… 77 3.4 Eurasian Pipeline Developments and Export Capacity ………………………………………… 78 3.5 Black Sea Oil Balances ……………………………………………………………………………… 88 3.5.1 Methodology Underlying IHS CERA’s Black Sea Oil Flows Scenarios ……………………… 88 3.5.2 Eurasian Crude Oil Arriving in the Black Sea ………………………………………………… 88 3.5.3 Outlook for Offshore Developments in the Turkish Black Sea ……………………………… 102 3.5.4 Offtake Volumes of Crude by Countries along the Littoral of the Black Sea ……………… 102 3.5.5 Volume of Crude Oil Needing Evacuation from the Black Sea ……………………………… 103 4. The Bosphorus Bottleneck: Pushing toward or away from the Congestion Threshold? … 108 4.1 Key Elements of the Bosphorus Bottleneck …………………………………………………… 111 4.1.1 Geographic and Meteorological Restrictions Affecting the Turkish Straits ………………… 111 4.1.2 Historical Trends in Vessel Traffic and Vessel Size …………………………………………… 112 4.1.3 Administrative Restrictions on Tankers ………………………………………………………… 116 4.1.4 The “Perfect Storm” of the Winter of 2003/04: A One-Off Event or Glimpse of the Future? 126 4.2 Comparison with Other High-Traffic Straits …………………………………………………… 130 4.2.1 Turkish Straits: Bosphorus ……………………………………………………………………… 134 4.2.2 Malacca …………………………………………………………………………………………… 134 4.2.3 Strait of Hormuz …………………………………………………………………………………… 135 4.2.4 Danish Straits ……………………………………………………………………………………… 137 Private and Confidential © 2011, All rights reserved, IHS CERA Inc. 55 Cambridge Parkway, Cambridge, Massachusetts 02142. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent. IHS CERA Special Report 4.3 Congestion Model for the Turkish Straits ………………………………………………………… 143 4.3.1 Methodological Approach and Assumptions ………………………………………………… 144 4.3.2 Nominal and Real Capacity of the Turkish Straits …………………………………………… 145 4.3.3 Modeling Results ………………………………………………………………………………… 146 4.4 Maritime Safety Issues ……………………………………………………………………………… 152 4.4.1 Where the Major Safety Risks Lie ……………………………………………………………… 152 4.4.2 Improving Pilot Usage and Pilot Boarding ……………………………………………………… 155 4.4.3 Improving Use of Escort Tugs …………………………………………………………………… 156 4.4.4 Vessel Vetting Standards ………………………………………………………………………… 156 5. Status of Turkish Straits Bypass Proposals ……………………………………………………… 158 5.1 Burgas-Alexandroupolis …………………………………………………………………………… 158 5.2 Samsun-Ceyhan ……………………………………………………………………………………… 161 5.3 Odessa-Brody-Gdansk ……………………………………………………………………………… 164 5.4 AMBO …………………………………………………………………………………………………… 166 5.5 Constanta-Trieste …………………………………………………………………………………… 167 5.6 Istanbul Canal ………………………………………………………………………………………… 169 6. Oil Demand Developments in Global Markets …………………………………………………… 171 6.1 Overview of Methodology …………………………………………………………………………… 171 6.2 Oil Demand in IHS CERA’s Three Global Energy Scenarios to 2030 ………………………… 173 6.2.1 Europe ………………………………………………………………………………………………… 174 6.2.2 North America ……………………………………………………………………………………… 177 6.2.3 Asia Pacific ………………………………………………………………………………………… 179 6.2.4 Mediterranean Region …………………………………………………………………………… 182 Appendix: IHS CERA’s Global Energy Scenarios …………………………………………………… 193 About the Authors ………………………………………………………………………………………… 204 Private and Confidential © 2011, All rights reserved, IHS CERA Inc. 55 Cambridge Parkway, Cambridge, Massachusetts 02142. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent. 1. INTRODUCTION AND SCOPE OF THE STUDY The Turkish Straits are one of several important “chokepoints” on global sea routes that are considered critical to global energy security because of the high volume of oil that transits through them. The Turkish Straits form the maritime trade route between the Mediterranean and the Black Sea, and therefore are an important route for Eurasian oil exports to the global market (see Figure I-1). The Turkish Straits represent an impediment to the flow of oil tankers; the build-up of wintertime queues at either end of the straits is common when daylight hours grow fewer. In fact, the Turkish Straits (the Bosphorus [referred to as the Istanbul Strait locally] and the Dardanelles [Canakkale Strait]), separated by the Sea of Marmara, constitute the only passage for ships either entering or exiting the Black Sea, going to or from the Mediterranean Sea (Aegean Sea). As a result, the Bosphorus is one of the busiest waterways in the world (measured in terms of total ship passages). Furthermore, mainly because of its narrow and winding form, which also makes it necessary to change direction frequently, restrictions are placed on the size of vessels that can navigate the straits. Added to this, of course, ���������� ��������������������������������������������������������������������������� ��������������������� �������� © 2011, All rights reserved, IHS CERA Inc. 55 Cambridge Parkway, Cambridge, Massachusetts 02142. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent. IHS CERA Special Report are ferry services between the European and Asian parts of the Istanbul metropolis and numerous private motor yachts and pleasure vessels, which aggravate the overall situation in terms of traffic. Because of the importance in international seaborne trade, international passage through the Turkish Straits has long been governed by international treaties between Europe’s “Great Powers” and Turkey. The latest of these is the 1936 Montreux Convention, a multilateral international convention, which confirmed the international status of the straits and the general regulatory regime governing vessels directly passing through the straits. The treaty explicitly guarantees international freedom of passage for commercial vessels through the Turkish Straits during peacetime. Despite this, Turkish opposition to any large-scale increase in oil tanker traffic through the straits, especially the crowded Bosphorus, has long been obvious. A long-standing goal of Turkish policy has been to reduce oil transiting the straits, and with the opening of the Caspian region’s oil resources to international development following the dissolution of the USSR, Turkish policymakers became determined to prevent the Turkish Straits from