Enhanced Ceyhan

In 1988/89, when the Kirkuk-Ceyhan pipeline was fully operating, annual tanker shipments from Ceyhan reached 90 mdwt. During the first Gulf war, annual volumes fell below 15 mdwt, but rose gradually during the 1990s to more than 60 mdwt in 2002. Due to numerous (at least 25) acts sabotage after the invasion in 2003, volumes were reduced dramatically and were less than 15 mdwt in 2005. In 2006, total shipments from Ceyhan reached 11.4 mdwt, but only 1.4 mdwt stemmed from Iraq.

Last summer we saw the first oil flowing through the new BTC pipeline and in May this year daily throughput had surpassed 700 kb/d. As can be observed from the chart, this has had a tremendous effect on tanker activity. On average, 18 tankers above 80,000 dwt have loaded each month since the end of 2006. Moreover, 10 VLCCs have loaded (for Asian destinations).

The BTC pipeline has a nameplate capacity of 1 mb/d, but could easily increase to 1.5 mb/d and it is maintained that with relatively minor investments, the capacity could be increased to 2 mb/d.

Although the situation in Iraq is still violently chaotic, Iraqi oil minister al-Shahristani maintained earlier this month that the country would restore oil exports through Ceyhan in June targeting 300,000 b/d. Oil exports through Ceyhan may rise in phases to 500,000 b/d. Iraq is taking steps to increase oil production and is targeting a rise in excess of 1 mb/d within 5 years. We assume that the majority of this rise will be exported through the MEG, but having in mind that the pipeline to Ceyhan has a capacity of 900,000 b/d we would not rule out a return to pre-war levels of at least 600,000 b/d.

Finally, the Samsun-Ceyhan pipeline project, bypassing the Bosphorus, is not entirely dead. But for the time being, the Burgas-Alexandroupolis alternative seems to be the likely alternative for crude exports bypassing the strait. Still, if built, this pipeline could add another 1mb/d of crude oil exports through Ceyhan.

In the short term (2008?) we could see more than 1.5 mb/d passing through Ceyhan. In the longer term (2012?) we could see as much as 3.2 mb/d being exported. Assuming that current projections of North Sea and Russian oil production as well as European oil demand are reasonably correct, we could see the emerging long haul trades from Ceyhan to the Far East growing significantly in the coming years.

100,000 b/d, or about 10 Mmt/year, require about 7 VLCCs based on optimum routing. The same volume requires only about 4 VLCCs sourcing the oil in the MEG. Hence, a switch to Ceyhan will contribute substantially to VLCC demand. And, a 100,000 b/d must be considered to be very little in this context as it is expected that crude distillation capacity in the Far East will increase by (at least) 4 mb/d by the end of 2010....