Under-explored and under-exploited
While Turkey has a known oil and natural gas capacity – estimated proven reserves, currently, of 307m boe (barrels of oil equivalent) and with local production approximately 66,000 boe/day in 2010 – the country’s oil and natural gas basins are relatively under-explored and under-exploited. Only about 3,730 wells had been drilled in Turkey up to the end of 2009, of which approximately 60% were drilled in the period from the mid-1950s to the late 1980s. Considerable parts require more extensive exploration drilling given the size and prevalence of the sedimentary basins in the country.
It is well-known within the industry that Turkey would benefit greatly from increased exploration and production (E & P) investment and a much broader application of modern technology and industry practices, including 3D seismic imaging, deeper vertical drilling, horizontal drilling, hydraulic fracturing, workovers and recompletions, as well as secondary recovery methods. These practices and technologies, if employed on a larger scale, have the potential to dramatically increase reserves and production from both conventional and unconventional plays. While that potential cannot yet be accurately quantified, due largely to the infancy of these practices, there is reason to be very optimistic based on the initial results of some pioneering work being done by local and international players.
In addition to this untapped potential, Turkey’s competitive royalty rate of 12.5% and corporate tax rate of 20% result in relatively high profitability in a global context and make Turkey a very lucrative target for investment. Given strong reference prices, and a Government take that is amongst the lowest in the world, companies operating in Turkey should be capable of reaping very robust returns.
Historically, Turkey’s oil and natural gas exploration and development has primarily been focused in Southeast Turkey, in the Anatolia Region near the border with Syria and Iraq, where over 100 oil fields have been discovered to date. The other area of focus has been the Thrace Basin, a region rich in natural gas located in Northwest Turkey where approximately 25 natural gas fields have been discovered to date. The Thrace Basin is a prospective target for unconventional gas (tight gas and possibly shale gas) that has the potential to be unlocked with fracturing technologies in vertical and horizontal wells.
Turkey’s proximity to energy consuming markets, relative ease of monetisation, strong realised pricing, robust crude oil and natural gas prices and favourable fiscal terms make it an excellent prospect for international investment. As new players enter the market, bringing with them new capital, new technology, and new industry practices, Turkey’s oil and gas sector is poised for a fast take-off. I’m delighted that Aladdin Middle East Ltd is playing such an integral part in the development of this sector.
The oldest independent oil and gas company in Turkey
Aladdin Middle East Ltd. (“AME”) is an independent American oil and gas exploration and production company founded in 1961 and focused on the strategic exploration and exploitation of oil and gas assets primarily in Turkey. AME’s head office is in Wichita, Kansas, while the Company’s operational headquarters is located in Ankara, Turkey. Additional field offices are located at operating sites for our production leases.
AME is uniquely positioned as the oldest independent oil and gas company in Turkey, with in-depth knowledge, data and expertise in the region and will look to continue to develop its core business: participating in several existing joint ventures in South East Turkey; exploiting its new oil discoveries; and participating in new projects in the country and the surrounding region. AME made three new oil field discoveries in SE Turkey in 2014, a remarkable success for an independent company of our size and we are currently committed to developing these fields as fast as possible. These discoveries are shaping our future as a strong production company to achieve very favourable value growth for our JV partners and shareholders. The East Sadak/Oymantepe oil field marks the lightest crude oil discovered to date in Turkey. This has set a milestone in Turkish oil exploration and hints at the bigger potential we are sitting on.
We have always pioneered oil exploration in Turkey and have proved that higher quality light oil bearing reservoirs are present in SE Turkey which no one else would believe previously (including oil majors such as Shell and Mobil who operated in SE Turkey until 1997). The Arpatepe discovery we made in 2008 is the first Paleozoic reservoir known to Turkey and the latest discovery, Oymantepe, is not any different, opening a whole new chapter in an untested reservoir that has changed Turkey’s known potential significantly. We believe we are sitting on an Iraqi size and quality oil field in Turkey and that, in itself, speaks volumes for the value this will add to our company going forward.
AME has been crucial in the development of Turkey’s upstream sector. Through AME’s efforts many underexplored basins in Turkey have been evaluated, yielding a vast amount of technical, geological and geophysical information bringing not insignificant financial and social benefits for Turkey. With its rich data-base and library of information, AME has helped to attract a large number of American and European energy companies to Turkey as first time investors in the oil and gas sector.
We are an industry leader in the Turkish upstream and the most senior private player in the country second only to TPAO, the national oil company. Our success is a credit to our superior staff of professionals whose dedication, knowledge and skill allow AME to find new and innovative ways to develop value for our partners and investors. We are committed to respecting the environment, maintaining safety and upholding high standards of social responsibility throughout our operations. Our success is built on technical expertise, business acumen, strong partnerships and proven ability to deliver superior results.
In 2013 AME raised US$20 million in new equity from 4D Global Energy Advisors SAS (“4DGEA), a Paris-based private equity investor that specialises in the energy sector. The equity financing will enable us to finance our committed and contingent work programmes and working capital.
Going forward, we aim to build upon past success, acquiring more leases, drilling more wells, producing in larger quantities and adding value for our investors. AME is striving to be an integral part of what we believe to be a transformative moment in Turkey’s oil and gas industry as new techniques and a reinvigorated desire for exploration help to unleash Turkey’s full hydrocarbon potential. As a part of this process we will continue to add to our assets and infrastructure and hopefully, one day soon, take the step of becoming a publicly traded company.
A journey from field-hand to CEO
As the CEO of Aladdin Middle East Ltd, I am honoured to represent the third generation in a family dealing in the oil and gas industry. The late A. Ecvet Sayer, my grandfather, was among the pioneers who first generated interest in the petroleum business when he was with The MTA (Turkish Mineral Research Institute) which was the institution formed by the Government to search for minerals and petroleum before the enactment of the first Petroleum Code and the formation of TPAO (the Turkish Petroleum Corporation) in 1954. With the advent of a favourable environment for investment, my late father, Oyman Sayer who started as a lands-man for CALTEX, became involved in several oil and gas companies in different capacities that eventually led to him becoming a partner in AME. He is regarded and remembered as the first private entrepreneur in Turkey to partner with and operate an integrated oil and gas company. As a crucial player in the local oil and gas industry, my father has been my primary mentor to me. I learned a lot from him over the years. I still miss him dearly.
I have been engaged in AME’s affairs in Turkey since 1989, always being involved in several Company projects, even when I was still a university student. I am a graduate of Richmond University in the United Kingdom where I obtained a B.A. degree in 1989, in Business Administration and Economics, with International Business as my major. I also attended various courses in the USA on petroleum economy and drilling practices.
I have had the unique opportunity to work at different divisions in the Company from field-hand to land-man to oil-scout and then move to technical and financial departments at the head office, giving me a grass-roots experience and a background to understand the business in all its different and intricate aspects, especially in skills required for reorganisation and restructuring.
My field of expertise involves intensive work in international oil & gas projects and contracts, legislative and financial issues, as well as corporate restructuring and institutionalisation processes. The accomplishments included successful utilisation of the company in international drilling contracts outside Turkey, making successful farm-outs, as well as efficient and profitable appraisal of discovered oil fields in Turkey.
My particular emphasis has been on effective teamwork and a uniform Board-level support and commitment to company policies and fiscal programs. Thanks to its restructuring, with participation from numerous reputable international investors, AME today operates as a streamlined company aiming to grow value on its promising oil and gas projects.
As a token of my great interest in the oil and gas industry, I was one of the five individual founding members of PETFORM (Petroleum Platform Association) which was established with the support of operating oil and gas companies in Turkey, to give voice to industry opinion and perspective vis-à-vis the Government and related bodies. I served as Vice-Chairman and led the Exploration and Production Group of this Association for five years between 2000 and 2006. I am pleased to see that the Association was quite active during the legislative process in the recent adoption of an entirely new Petroleum Law in Turkey which it is hoped will open a new era in the oil and gas sector in the years to come.
Every indicator shows that global oil demand will continue to grow and AME is positioned like never before to increase production and achieve higher returns due to its favorable structure. At AME, we strive each day to live up to the legacy of excellence associated with our company name, and I know that we will continue to grow value for our shareholders with our promising oil and gas exploration and development projects.