Story of Turkey’s Natural Gas Peak Demand

Story of Turkey’s Natural Gas Peak Demand

Turkey’s natural gas history is quite old. The first gas was delivered in 1987 and the first LNG terminal was commissioned in 1994, a brilliant idea of the times, as one of the world’s first regasification plants. Turkey enlarged its natural gas network mostly parallel to the growth of its economy and electricity demand consequently.

After 2003, the demand profile was mainly shaped by 2 factors:

• Household winter consumption increasing due to new cities being tendered for green-field distribution investments which were rooted in the Natural Gas Market Law 4646. 
• More gas fired power production, both by state and independent power plants which mainly rooted to the liberalization of the electricity market by Electricity Market Law 4628.

Industrial consumption was growing almost steadily, except in economic disruption times. The expectation was that gas consumption would rocket-up in 2010s. Technological developments causing renewable costs to fall significantly caused a sudden halt in annual consumption increase after 2010. On the other hand, peak demand continued to increase tremendously due to household consumption increase in winter. An important problem of Entry Capacity hit both the gas market and electricity markets a few times in the beginning of 2010s, and solutions were considered to be vital only after forced interruptions to consumption became inevitable.

In 2012 the analysis of the Turkish gas network, and a comparative study with European major markets showed that Turkey needed additional gas entry without any additional Take or Pay liabilities.

UK, Spain, Germany had solved their possible problems with different tools. Underground Storage, LNG Terminals, interconnectors, and commercial incentives for market coupling. Just to emphasize importance of planning; UK-Europe Interconnector was designed as bidirectional whereas ITG, the interconnector between Turkey and Greece was only a westward design. Turkey needed a solution, an urgent one in 2012. Having spent years with curtailments in gas supply for both industry and power production and despite funds flowing into the country, Turkey did not take necessary steps to increase the entry capacity to the gas pipeline network. Until an even bigger risk was obvious: Russian gas being cut, due to political tension after the Russian aircraft strike in 2015. An FSRU project which had been officially proposed with an application to EMRA for a license in 2014 and which was not permitted by then, became a considerable idea. The need for fast action, and other reasons, another land-based LNG Terminal project was chosen to be replaced with an FSRU project.

After installing an FSRU in Cakmakli Bay in less than 6 months, Turkey proceeded with Egegaz and Marmara Ereglisi regasification capacity increases, a new FSRU project in Dortyol by BOTAS, the previously planned gas withdrawal capacity increase in Silivri underground storage and a totally new underground storage in Salt Lake region. The Russian-Turkish political tension did not last long, and more importantly, did not cause flows to Turkey being affected but Turkey had added a huge Entry Capacity to its gas pipeline network by the end of 2018.  On top of that came the Shah Deniz Phase 2 gas via TANAP, a Turkish company owned FSRU that replaced the chartered one in Cakmakli in the summer of 2019 and TurkStream is right in sight of us.

Today the total entry capacity has reached a total of around 327 mcm/day. Considering constraints in some regions the network is probably able to offtake around 300 mcm/day whereas the maximum daily demand was calculated as 270 mcm. We could easily suggest that the Turkish network is ready for n-1 cases even in Marmara region of Turkey, which could be considered as the heart of the economy and as consequently the heart of the gas network. Turkey with its recent infrastructure investments, has the potential bargaining power to change its gas supply mix significantly, whether by changing source country, or new or revised contracts with more flexible offtake terms and more market-based price formulas and revision clauses.

We will soon see what is there to change, and what is not.