Yazıcı’s Kerem Arıç explores three key areas of growth for the country’s energy sector
Due to its dependence on oil and natural gas imports, Turkey has been in need of structural changes in its energy sector. Although the share of natural gas in power generation was significantly reduced in 2019, the overall reliance on natural gas and oil imports creates major challenges both from a commercial and strategic perspective. To overcome these challenges and increase its energy security, the Turkish government made a fundamental decision to move from a role of investor to a role of policy maker and regulator. As a result, Turkey’s oil and gas policy has been mainly driven by the following ground rules:
Development of natural gas and oil pipelines
Turkey’s energy policy aims to increase its natural gas import and transit capacity with two projects: the Trans Anatolian Natural Gas Pipeline Project (TANAP) and TurkStream. With the completion of TANAP and the near completion of TurkStream, Turkey becomes an important natural gas road from Azerbaijan and Russia to Europe, and will almost double its total transit capacity. Both new pipelines will contribute to Turkey’s supply security and allow BOTAŞ (the national pipeline company) to receive and help mitigate demand surges related to seasonality. With respect to oil imports, Turkey and Iraq plan to build a new pipeline to transport Iraqi crude oil from the oilfield of Kirkuk to the Turkish port of Ceyhan. The construction of the new pipeline, running parallel to the existing Iraq-Turkey oil pipeline and expected to be completed in two to three years, will bolster continuity in oil imports from Iraq and can also position Turkey as an alternative to Basra for Iraq’s oil exports.
Development of upstream activities
The East Mediterranean region offers potential for natural gas supplies to Turkey. Israel and Cyprus are indeed potential natural gas producers in the region with possible exports of 12-16bn cubic metres through offshore pipelines, although proven reserves are much lower. Still, the estimated cost to develop the project will make it difficult to be commercially feasible. As an alternative, Turkey, through its national oil company Turkish Petroleum Corporation (TPAO), recently acquired two offshore drillships to carry drilling activities on its own along the Turkish coast and off the coast of Cyprus. TPAO drilled four deep sea wells and three shallow sea wells this year and the government is to conduct five offshore drilling rounds in 2020, especially for shale and methane gas exploration.
Development of LNG receiving terminals, FSRUs and storage facilities
With the aim of ensuring greater flexibility in importing and storing natural gas, Turkey is increasing its storage and compression capacity at existing liquefied natural gas (LNG) terminals and building new floating storage and regasification units (FSRUs). Having the highest regasification capacity in Europe, Turkey currently operates four LNG terminals, two of which are FSRUs and the remaining two being land facilities. BOTAŞ is currently developing a fifth FSRU. Also, the Turkish government is planning to more than triple Turkey’s underground storage capacity at its two facilities in Silivri and Tuzgölü from the current 3.4bn cubic metres to 10bn cubic metres by 2023.