Less than two years ago, Turkey's first drillship, Faith, departed Antalya to start looking for offshore oil and gas for Turkish Petroleum (TPAO) in the country's bid to become energy independent. The country, which is almost solely dependent on natural gas imports from Russia, Iran and Azerbaijan, spent over $1 billion in drilling vessels in this quest. On Friday, Turkey President Tayyip Erdogan said Faith drilled what is believed to be the biggest natural gas field discovery ever in the Black Sea and largest in Europe since the 1970's, with an economic value of nearly $65 billion, based upon prices over the last four years.
The find is unofficially estimated at 26 trillion cubic feet (TCF) of natural gas. If the initial estimate is indeed correct, TPAO's discovery at the Tuna-1 well (now dubbed Sakarya) would be in the same super-major class as the Troll field offshore Norway, a natural gas source that has been fueling Europe for decades. Official sources cite 11 TCF on the Tuna-1 well thus far, with 1,000 meters and two zones left to go. Turkey boasts this was just the beginning of the finds and asserts the well is part of a massive gas field in the area.
If the 26 TCF cited is accurate, it would qualify the discovery as one of the largest offshore gas field discoveries in the world and produce enough natural gas to meet Turkish demand for 20+ years.
Investors looking for exposure to Sakarya or even Turkish Black Sea energy in general will find it difficult given that Turkish gas blocks are dominated by the government and given only to the national petroleum company TPAO.
The one exception to this is junior oil and gas producer Trillion Energy International (CSE: TCF)(OTC: TCFF)(FSE:3P2N), which holds a 49% interest (TPAO has the other 51%) in the SASB gas field offshore Turkey, which is about 100 kilometers south of the Tuna-1 discovery block.
Trillion Energy announced on June 30, 2020 that it is planning its own 7 well drilling program on SASB Gas Field Turkey for 2021.
A True Heavyweight
Black Sea hydrocarbons have been challenging, as evidenced by a series of delays in development of like Neptun Deep, a JV megaproject between ExxonMobil (NYSE: XOM) and OMV Petrom offshore Romania estimated to hold up to 3 TCF of natural gas. Exxon has reportedly invested over $750 million in Neptun Deep.
By comparison, TPAO's discovery, located about 100 kilometers from Neptun Deep, appears to be much larger in scale. Based upon current drilling at the Tuna-1 well, Turkish officials estimate 11 TCF of natural gas. Extrapolation of that data suggests the initial discovery is part of a larger gas field estimated at 26 TCF. Now it is up to TPAO to further delineate the magnitude of the resource and the economic viability of extracting the natural gas.
Tuna-1 shows the natural gas to be deep-water, as defined by 500 meters of pay encountered starting at a depth of 3,500 meters.
1,000 meters of is still set to be drilled to evaluate two additional structures.
As is stands, Turkish officials estimate the initial discovery to cover total area of 250 square kilometers, 500 meters thick as part of a larger body. The true dimensions of the resource remain unknown. However, on August 22, 2020, the Turkish government boasted this was "just the beginning" and Turkey was on the cusp of further new discoveries, and that "we are very hopeful it will lead to other fields in the same area"
What Does This Mean for Trillion Energy?
Again, the only public participation in Turkish natural gas isn't a major like Exxon, Royal Dutch Shell (NYSE: RDS.A) or Marathon (NYSE: MRO). It's Trillion Energy, a company with a market capitalization of a mere C$5.0 million (OTC:TCFF; CSE: TCF).
Trillion's SASB (an acronym for South Akçakoca Sub-Basin) is the only currently producing Turkish Black Sea natural gas asset. It contains substantial 3P reserves to the tune of 27 billion cubic feet worth about US$133 million to Trillion, with a blue sky opportunity to significantly expand the resource with an announcement of further resources pending.
More than $608 million has been invested in infrastructure at SASB, including four production platforms and 10 wells already tied-in since natural gas was first discovered at approximately 1,200 meters in depth over a decade ago. To date, about US$300 million in gas has been produced, most of which has come from relatively shallow depths.
Provided natural gas demand in Turkey in 2019 was nearly 45 billion cubic meters, sale of the raw fuel, generally at much higher prices than in the U.S. or Europe, is not an issue.
For the shallow gas deposits, Trillion has demonstrated a strong 80% success rate in past drillings based on 3D seismic data. To that point, a $140 million re-development plan is designed to bolster production from existing shallow gas structures at SASB, which is forecast to produce 94 billion cubic feet of natural gas starting in 2021, for which Trillion would have a 100% interest.
The new Sakarya discovery blows the potential for SASB wide open. For starters, no one knows the true scope of Sakarya yet. Considering the Troll field offshore Norway covers a whopping 750 square kilometers, there is the potential that SASB (< 100 km away) could benefit from the massive natural gas field.
Furthermore, seismic anomalies at depths greater than 6,000 meters have previously been detected at SASB, although they remain unexplored so far. The intercept at 3,500 meters at Sakarya makes it nearly impossible to overlook the opportunity at SASB to drill deeper. Plus, unlike Sakarya, the infrastructure is already in place at SASB.
The Turkish government has a highly ambitious plan to try and bring a well online at Sakarya in 2023 at a cost between $2-$3 billion should additional work prove the resource and economics of such capex. By contrast, work at SASB could be done much more quickly at far less expense.
Add it up and Trillion Energy finds itself in a very enviable position as the momentous news of Sakarya should re-ignite interest in Turkish Black Sea hydrocarbons. Judging by shares of TCF rising 50% last week, interest is already starting to accelerate.
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