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Will Turkey get rid of energy dependence?

Will Turkey get rid of energy dependence?

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Date: 12 January 2016 08:07

Baku, Azerbaijan, Jan. 11

By Rufiz Hafizoglu – Trend:

Turkey began to actively work in order to get rid of energy dependence and diversify natural gas sources since the middle of last year. The deterioration of relations with Russia has pushed Ankara to actively seek alternatives to Russian gas as well.

One such alternative, according to experts, could be natural gas from Iraq (Kurdish autonomy), which will start to be delivered from 2018.

But it is unlikely that the Kurdish gas, if Ankara starts to receive it, will become an alternative to the Russian gas.

Ankara intends to deliver gas from Iraq in the amount of 10 billion cubic meters, while since 2020, the volumes of supplies will have to increase to 20 billion cubic meters.

A tender will be held Feb. 9, 2016 in Ankara for constructing a new gas pipeline between Turkey and Kurdish Regional Government (KRG). Both local and foreign companies are allowed to participate in the tender. The pipeline’s length will be 181.5 kilometers.

KRG and Ankara signed a contract for 50 years in 2013, to supply natural gas to Turkey. But for the investing in any project political stability is needed - something that is currently absent in Southern Turkey.

Given this, it is unlikely that foreign companies will participate in the tender for construction of a new gas pipeline, however, it doesn't mean that the project won't be realized. Most probably, only local companies will participate in the tender.

Meanwhile, according to Russian gas giant “Gazprom”, there are two contracts between it and Turkish Botas – one is for the supply of up to eight billion cubic meters of gas through the Trans-Balkan route, the second via the “Blue Stream” - up to 12 billion cubic meters. The validity of the first contract is through 2022, the second - at least until 2028.

In addition, up to four billion cubic meters of Russian gas through the “Blue Stream” are purchased by private traders (as part of the liberalization, a part of volumes has been re-registered on them). These agreements were signed for 20 years.

Also, a number of traders concluded long-term contracts with “Gazprom Export” to import a total of six billion cubic meters of gas until 2042 (instead of the first contract for the supply of Russian gas to Turkey, which expired in 2012).

Traditional level of volumes subject to the “take or pay” rule is 80 percent of the contracted volumes. Thus, at least until 2022, Turkey is obliged to buy 24 billion cubic meters of Russian gas and 17.6 billion cubic meters until 2028.

However, according to Botas, Russia is committed to annually supply gas to the country amounting to 20 billion cubic meters. The first contract to supply Turkey with 16 billion cubic meters of Russian gas was signed in 1997, and it expires in late 2025. The second contract, for the supply of four billion cubic meters of gas, was signed in 1998 and expires in 2021.

In 2014, Turkey was the second largest importer of Russian gas after Germany – Ankara purchased 27.3 billion cubic meters of gas from Gazprom.

Turkey consumed 52 billion cubic meters (bcm) of gas in 2015, according to the Office of Energy Market Regulation (OEMR), and the annual increase in gas consumption is five percent in Turkey.

That is, no matter how Ankara tries to get rid of energy dependence, due to increased consumption of natural gas in the country, it is unlikely to be succeed. The maximum that Ankara will be able to achieve - is to diversify sources of natural gas.

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