A huge natural gas pipeline to Europe and new gasoline refineries are some of the plans in the works that could burnish Turkey's credentials as an energy "bridge" to Europe and the world, but last week's fire at a key pipeline has raised questions for both investors and global energy markets over Turkey's reliability as an energy provider.
Turkish officials deny any sabotage was behind a big fire that struck the Turkish side of the Baku-Tbilisi-Ceyhan, or BTC, pipeline Wednesday,but Kurdish separatist group PKK has vowed in the past to bomb the facility and claimed to have disrupted its operations. The oil pipeline had been running at a capacity of about 850,000 barrels a day.
The PKK claims have prompted concerns over security at the long-delayed Nabucco pipeline, which is expected to take Middle Eastern and Caspian natural gas through Turkey and on to Europe.
Despite signs the $7.4 billion project's future is in doubt for other logistical reasons, European policymakers still hope Nabucco - a majority of which will pass through Turkey - will be built and help reduce European dependence on Russian gas.
Construction on the 3,300-kilometer gas pipeline is scheduled to begin in 2009, with startup expected in 2012.
"Nabucco...incidentally would pass even more through PKK-prone territory than the Baku-Tbilisi-Ceyhan oil pipeline," said Samuel Ciszuk, a Global Insight analyst based in London.
A senior official at Turkish pipeline company Botas International Ltd. said Monday that the government has stepped up military security near the 1,768-kilometer oil pipeline and rejected suggestions that Turkey's reliability as a transit country was in doubt.
"The BTC portion running through Turkey has operated without issue since the line began operating" two years ago, the official said.
BP PLC (BP), which operates and owns 30.1% of the pipeline, confirmed to an analyst last week that at least 500,000 barrels a day of production from its Azeri fields is no longer flowing through the BTC pipeline and that it was being forced to ship some oil through alternative routes.
Two days after the BTC pipeline incident, Russia launched military attacks on Turkey's neighbor Georgia that are ongoing, putting at risk a small but significant chunk of the world's daily oil flows.
About 1.2 million barrels a day of oil - roughly 1.4% of the world's daily flow - moves through Georgia, according to Julian Lee, senior analyst at the London-based Center for Global Energy Studies. Most of that crude is piped from Georgia on to Turkey through the BTC pipeline.
Turkey is hoping to turn its Mediterranean port city of Ceyhan into a refining hub. Austrian oil and gas company OMV AG (OMV.VI) is planning to build a $3 billion refinery at this port and other companies are examining refining projects.
But PFC Energy's Julia Nanay said she believes a worsening of events in the region could make some investors rethink what priority they give to new or expanding energy projects in Turkey.
"The Georgian conflict and the pipeline attack in Turkey create a great deal of uncertainty for east-west (pipeline) routes and have heightened the risks for exports to the West from the Caspian region," said Nanay.
Global Insight's Ciszuk said a worsening of instability - which many analysts fear given the Caspian region's long history of internecine conflict - may actually prompt some firms to consider trying to take more of their oil and gas products through Russia rather than seek ways to avoid it.
"Many companies might actually prefer Azeri (and) Kazakh gas and oil going over Russia even more in the future, as that at least will represent stability," he said.
Companies are largely staying mum on the subject, saying the events are still relatively young.
"We just have to sit back and watch for now. We are watching some history repeat itself and hopefully it ends soon," said an executive at a major Western oil company with operations in Turkey and the Caspian region.