Turkey is going through an exciting phase at the moment. In a period of global economic recession, Turkey has been the fastest growing economy in Europe, for two out of the last three years, and is even projected to post a respectable GDP (Gross Domestic Product) growth figure of 4% for 2013. What impact would you say this economic prosperity has had on the energy sector and indeed Genel Energy?
Naturally, a higher economic growth rate means more energy consumption. As Turkey has grown by 5% on average year-on-year in the last decade, its power demand grows more than that ratio, which for many years was around 7-9%. Furthermore, in Turkey we have very limited potential for oil and gas resources.
At the moment, with its own national production Turkey can only cover about 8% of its oil and only 2% of its gas consumption. The remainder is imported mainly from neighbouring countries. This situation provided Genel with an opportunity. Having created the company in 2002, I became the first person to sign a production sharing agreement in Iraqi Kurdistan (KRI) the same year. At the end, our country’s high level of growth helped us to a great extent, as Iraqi Kurdistan turns into one of the major sources that Turkey aims to get its oil and gas from.
You founded Genel International Ltd in 2002 to extract oil from the Iraqi-Kurdistan region by relying on your Turkish heritage and strong local relationships in the region. Can you tell us a little about this project’s genesis?
In 2002, I was already in the KRI with my own construction company. The same year, Mr. Talabani who later became the president of Iraq, offered me the chance to venture in the oil business. At the time, the only field with a longer lifetime of average Iraqi oil was Taq-Taq. As I mentioned earlier, I signed the first production sharing agreement in 2002, and we took over this field in 2003. My partners and I did not know anything about the oil business, so it was a coincidence, and we decided to take the leap into this line of business. So far, it has been very gratifying.
You brought Tony Hayward in as CEO as few years ago by merging with Vallares to form Genel Energy. This turned out to be a huge success. Can you tell us about how this partnership was created?
In Iraqi Kurdistan, we enlarged our activities and acquired five more licences after the first licence we had, so we reached a point where we realised that we could not just stay as a private company. Our decision was to basically become a public company, to sponsor our growth.
By coincidence, we spotted Vallares which was already registered in the London Stock Exchange (LSE), and they were looking for a partner. We had great assets in Kurdistan, and they had sizeable cash in the company, so this was a marriage between the asset and the money. The first time I met Tony was in London, where we had a private dinner, and we understood that we had a shared vision as to how to develop this company. He kindly asked the name to remain Genel, because he thought that using the Turkish heritage was very important in the region.
According to a recent announcement made by Mr. Hayward, your exports in the Kurdistan region are set to triple by the end of this year, thanks to the completion of the final 31 miles of your oil extraction pipeline. How gratifying is its completion, and what other expansion plans do you have for the region?
Today we can say that it is almost complete. This is a giant step. Right now, oil is being trucked to Turkey every day, but when the pipeline will be completed and become operational (which should be before the end of the year), that will make an immense difference. The second colossal step forward will be building a gas pipeline. Right now, Genel is in a position where it owns the biggest two gas assets in the KRI. In other words Genel sits on top of almost all the gas that will be exported from the region initially.
Genel Energy also invests in many other regions of the world, especially Africa. When you look at the global energy market, where do you see opportunities to grow further?
We position Genel by trying to go to unexplored countries, like we did in the KRI. We take advantage of being the first company wherever we go. We are mainly looking at countries in Africa, and we are also looking at the Eastern Mediterranean Basin closely.
We are one of the companies that pre-qualified for a licence in Lebanon. We are also interested in Afghanistan. But the countries we are mainly established include Malta, Morocco, Somaliland, Ethiopia and the Ivory Coast. The reason why we chose those countries is that we expect to repeat the success story we wrote in Kurdistan.
We are satisfied because in Kurdistan, we did not just create a business – we also created a gateway between Turkey and Iraqi Kurdistan. The reason why I believe the political situation has improved between Kurdistan and Turkey is that business was a main driver. I think Kurdistan is one of the few cases that people should study and understand well as an interdependence model. Business has prepared the fertile ground for politics. Usually it is the other way around. That is probably the achievement that I am most proud of.
What are the strategic advantages of having a British firm as your partner, and vice versa?
We did not just bring in a British company – we also brought Tony Hayward into the game. I have always respected him and followed him very carefully in his BP days, so bringing him in as CEO is probably my other greatest achievement.
The Brits have been all around the world for years through different British and international companies. So they have the industry experience and know-how, which we do not. The second important aspect is that with the joint British and Turkish flags, I do not imagine any country in the world would miss the opportunity of making good use of either, or in our case, both. In short, I am convinced that these two identities are definitely helping us establish ourselves as a company wherever we go.
As Turks we naturally have more experience in KRI because it is very close to our border and our culture, whereas in Africa it’s another story. So far, our company’s dual identity worked wonders, and I think it will also be that way in the future. We can use whichever of our two flags we prefer!