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Türkiye - Energy

"Türkiye has realised the biggest natural gas find of its history in the Black Sea," Turkish President Recep Tayyip Erdogan announced 21 August 2020, adding that ultimately Ankara aims to become a net energy exporter. In a televised address, Türkiye’s President Recep Tayyip Erdogan said the discovered reserves at a zone known as Tuna-1 are around 320 billion cubic meters (BCM). Türkiye's drilling ship Fatih has been operating since late July in an exploration zone known as Tuna-1, about 100 nautical miles north of the Turkish coast in the western Black Sea.

On 17 October 2020 Erdogan said the estimated reserves in a gas field off its Black Sea coast reached 405 billion cubic metres. Türkiye raised the estimated reserves after finding an additional 85 billion cubic metres. Türkiye expects the first gas flow from the field in 2023. One source close to the matter said an annual gas flow of 15 billion cubic metres was envisaged from 2025.

Türkiye consumes around 45 BCM of gas a year, down from 50-55 BCM just a few years ago as some power plants have switched to renewable sources. To find a gas reserve in the Black Sea and not the politically treacherous East Mediterranean bodes well for Türkiye. To build a pipeline to export the gas in the East Mediterranean will be very challenging considering all the political tensions. After Erdogan's announcement, Türkiye's Finance Minister Berat Albayrak said he's hopeful that the county "will no longer post current account deficits after natural gas discovery in Black Sea, but will see current account surplus."

An immediate benefit for Ankara is that it now has the leverage to negotiate its existing gas import agreements. Any substantial discovery of natural gas reserves in the deep waters of the Black Sea will have a far-reaching impact on Türkiye’s economy, which relies on imports to meet almost all its energy needs. The foremost benefit comes within a couple of years as Ankara will be able to reduce its energy import bill and stop the drain on its foreign currency reserves.

Türkiye charged Greece, France, Egypt, and other countries with trying to illegally deprive it of Mediterranean energy resources and box it in. Just as it turned away the 1920 Treaty of Sevres — meant to box in and hold back the Turkish nation — Türkiye will make the same efforts to restrict other powers from energy resources near its shores, the country’s president vowed. "Just as it rejected the Treaty of Sevres 100 years ago, Türkiye will not bow down to the modern Sevres being pushed on it in the eastern Mediterranean," Recep Tayyip Erdogan said in the Turkish capital Ankara on 18 August 2020. In the wake of the Great War, the Turkish War of Independence pushed back Sevres, a pact meant to liquidate the Ottoman Empire and all but abolish Turkish sovereignty, in favor of the 1923 Treaty of Lausanne.

Türkiye Energy Map Türkiye Energy Map
In 2018, Türkiye spent $41 billion on energy imports. The payments it makes to buy gas from other countries such as Russia and Azerbaijan have been a drag on its currency for years. “It will solve a lot of our energy supply security problems. Türkiye right now is only producing about 1 percent of its natural gas locally - the rest is imported,” Mustafa Topuz, a founding partner in Ankara-based MNCM Consulting, said 21 August 2020.

Developing offshore wells can take at least 5-6 years, but the Turkish policymakers can still drive a more immediate gain from the find by using it as a bargaining tool, Sohbet Karbuz, a Paris-based oil and gas analyst, said. “Turkish contracts with its suppliers that amount to 38 billion cubic meters (a year) will expire by 2026. This gas discovery means Türkiye doesn’t need to rush to renew its contracts. It gives a big leverage to Türkiye to renegotiate the terms and pricing.”

For decades, Türkiye depended on energy imports as there was a general belief among policymakers and the private sector that the geology of the country was not feasible for hydrocarbon reserves. But successive discoveries made by regional countries such as Israel coupled with Türkiye’s exclusion from the Eastern Mediterranean energy scene pushed Ankara to expedite its own efforts. In 2017, as per a new policy, Türkiye bought seismic and drilling ships to kickstart exploration in its territorial waters.

Türkiye still needs to partner with a multinational company to develop its own field - a process that will cost billions of dollars. While on the one hand this obviously helps Türkiye reduce its current account deficit, this project’s financing cost and other commitments will be US dollars. In the long term this will have a positive effect but in the medium to short term I don’t expect a dramatic decrease in the gas bill of end consumers.

The news of the discovery came as Türkiye is gradually increasing import of liquified natural gas (LNG) primarily to benefit from a global slump in gas prices - although piped gas that comes from Azerbaijan and Russia continues to be major sources of supply. John Bowlus, editor-in-chief of Energy Reporters, told TRT World 21 August 2020 that Türkiye wouldn’t be too concerned about developing its own gas reserves even when prices are depressed. “By and large gas will be around for at least 30-40 years. If a country like Türkiye is trying to make an investment now in a new find, it can pay off down the road.”

A slump in gas prices has forced companies to suspend work on projects that add new supply to the market - something which can lead to gas shortages in future. Presence of pipeline infrastructure such as the TurkStream in the Black Sea makes it easier for Türkiye to export gas from its own fields.

Installed electricity generation capacity in Türkiye reached 40,000 megawatts (MW) as of 2008. Fossil fuels account for 68% of the total installed capacity and hydro, geothermal, and wind account for the remaining 32%. Electricity demand in Türkiye has been above the average rate of GNP growth over the last few years. This, combined with the lack of investment in the sector, mainly due to the Government of Türkiye's (GOT) control over prices and slow progress in market liberalization, increased concerns regarding electricity shortages. Official data indicated that Türkiye would face electricity shortages as of 2009; however, the Government of Türkiye revised its projections after experiencing reductions in demand in late 2008, due to the global economic crisis. The Ministry of Energy declared a 4.5% annual growth in electricity demand in 2009, half the amount of demand growth in previous years. In 2008, the Government of Türkiye passed new legislation to encourage investment in the sector, which introduces incentives for companies bringing their facilities online by 2012. Türkiye was able to privatize four of its electricity distribution facilities in 2008, and intended to continue these privatizations in 2009. Privatization of the generation facilities is next in line. The speed of these privatizations will depend on investment appetite and availability of financing.

Oil provides about 43% of Türkiye's total energy requirements; around 90% is imported. Domestic production is mostly from small fields in the southeast. New exploration is taking place in the eastern Black Sea. In 2004, the Parliament approved a petroleum market reform bill that liberalized consumer prices and would lead to the privatization of the state refining company TUPRAS, which was privatized in 2005. Türkiye has a refining capacity of 714,275 barrels per day (b/d).

Türkiye acts as an important link in the East-West Southern Energy Corridor bringing Caspian, Central Asian, and Middle Eastern energy to Europe and world markets. The Baku-Tbilisi-Ceyhan pipeline, which came online in July 2006, delivers 1 million barrels/day of petroleum, and in 2007, the South Caucasus Pipeline (from Shah Deniz) started bringing natural gas from Azerbaijan to Türkiye. Türkiye's interconnector pipeline to Greece, an important step in bringing Caspian natural gas to Europe via Türkiye, came online in November 2007. In July 2009, Türkiye signed the Nabucco Intergovernmental Agreement, along with Austria, Bulgaria, Romania, and Hungary. Once completed, the 2,000-mile natural gas pipeline will stretch from Erzurum, Türkiye to Baumgarten, Austria and will have a 31 billion cubic meter capacity.

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Page last modified: 07-07-2022 18:50:59 ZULU