Turkey holds a strategic role in natural gas—between the world’s second largest natural gas market, continental Europe, and the substantial gas reserves of the Caspian Basin and the Middle East.
However, rapidly increasing domestic demand will make it difficult to meet re-export commitments.
Gas exploration and production
As of January 1, 2009, the Oil & Gas Journal estimates Turkish reserves at 300 billion cubic feet (Bcf). Turkey produced 32 Bcf of natural gas in 2006, well below domestic consumption.
The largest of Turkey's 14 gas fields is Marmara Kuzey, an offshore field in the Sea of Marmara in the Thrace-Gallipoli Basin.
Gas production is mainly carried out by three companies: TPAO, BP, and Shell.
Most domestic gas production is used for re-injection into Turkey's oilfields as part of Enhanced Oil Recovery (EOR) projects.
Gas consumption
Consumption has increased rapidly, hitting a peak of 1.1 trillion cubic feet (Tcf) in 2006 up from 122.5 Bcf in 1990.
The bulk of Turkey's gas imports come from Russia, with Gazprom sending gas to north-west Turkey via the Balkans as well as to central Turkey via the Blue Stream pipeline that links Russia to Turkey across the Black Sea.
Turkey also imports gas via pipeline from Iran and Azerbaijan, as well as liquefied natural gas (LNG) supplies under contract with Algeria and Nigeria.
Turkey began receiving gas from Azerbaijan's Shah Deniz field in 2007 to help offset rising consumption.
Rising demand combined with often erratic deliveries of gas from Iran in early 2007 and 2008 have periodically forced Turkey to request additional deliveries of gas from Russia to meet domestic demand requirements.
Gas sector organization
The Turkish gas sector is regulated by the Energy Markets Regulatory Authority (EMRA).
The sector is dominated by state-owned Petroleum Pipeline Corporation, better know as BOTAS, although 78 percent of the market is legally open to competition.
BOTAS owns the domestic transmission network and has a monopoly over domestic distribution and supply.
In 2009, BOTAS is required to transfer its import contracts to the private sector and unbundle its natural gas services.
Gas prices in Turkey remain capped by EMRA well below the market level.
Natural gas pipelines
With the 2007 launch of Azerbaijani gas exports to Europe through the Turkey-Greece gas pipeline interconnector, Turkey has begun to realize its goal of becoming an energy bridge for gas supplies from the Caspian region to Europe.
Turkey is positioned to play an even bigger role linking gas producers in the Caspian and Middle East to consumers in south-eastern and central Europe with the proposed Nabucco gas pipeline project and a potential Iranian gas transit deal. The Nabucco project is geopolitically significant as it will secure access to new gas supplies from new sources in the Caspian region as well as the Middle East.
For this reason it has been regarded as vital for the EU’s long-term strategy to boost supply security.
Natural gas imports
For Turkey to function as a gas transit state, it must be able to import enough gas to satisfy both domestic demand and any re-export commitments as well as provide enough pipeline capacity to transport Caspian and Middle Eastern gas across Turkey to Europe. At the moment, Turkey enjoys considerable excess import capacity. However, as Turkish demand increases, surplus capacity is expected to decline; it could disappear altogether within the next decade without additional investment.
To account for this expected shortage, TPAO and BOTAS are pursuing several gas storage projects in Turkey. With greater storage capacity, Turkey will be better able to meet peak gas demand, cope with shortfalls from suppliers, and develop transit capacity and maintain the flow of reexports to Europe. Access to BOTAS and TPAO’s storage facilities is expected to open to new importers in 2011, allowing them the opportunity to fulfill storage obligations.
Liquefied natural gas
Turkey imports liquefied natural gas (LNG) from Algeria and Nigeria to its only regasification plant at Marmara Ereglisi, which is owned by BOTAS. LNG imports have continued to rise as Turkey seeks to diversify its sources of gas imports. Turkey is also taking steps to increase regasification capacity at two of its ports.
