ISLAMABAD: The $1 billion loan agreement between Turkish Petroleum Corporation (TPAO) and Turkey’s state owned Vakifbank and Turkiye Is Bankasi signed last week to finance the corporation’s purchase ten percent extra share in the Shah Deniz gas field may create a “domino effect” attracting banks to future energy projects, one energy expert predicts.
The deal signed by TPAO, Vakifbank and Is Bankasi increases Turkey’s share in the field to 19 percent, making it the second biggest shareholder after BP.
The agreement was signed Thursday with a ceremony in Turkey’s Energy Ministry. “We are implementing our projects without treasury guarantee, in a way that the projects guarantee themselves.” said Energy Minister Taner Yildiz during the ceremony, Anadolu news agency reported.
Since that credit deal was signed without a treasury guarantee, it shows the profitability of the project and the reliance of the market, says Gurkan Kumbaroglu, vice president of International Association for Energy Economics, a U.S. based energy association dealing with the policy and economics of oil.
It is strategically important to make Turkey an energy terminal in its region with the support of bank loans to the energy sector, says Kumbaroglu.
”This deal could be an example to other energy fields such as renewable energy technologies and infrastructure investments, that would provide sustainable growth in energy sector and security of supply,” he says.
Energy sector is rapidly growing in Turkey and the profitability is very high which motivates finance sector to grant loan to the industry players, Kumbaroglu says.
“Another advantage of the energy sector for banks is the ability to provide big loans with low risk. It is more favorable for banks to provide few big loans with low risks rather than providing many loans in small portions which increases the risk.”
Turkey’s energy market regulatory authority cancelled licence for nine energy projects because they were not able to start construction in the given time.
“Most of these licences were cancelled due to the financial problems.” Says Kumbaroglu.
“If those projects were financed during licence period we wouldn’t see such a result. Banks should take more active roles in energy investor’s licence applications.”