September 2017, Vol. 244, No. 9

Features

Turkey’s Gas Pipelines at Major Crossroad

Turkey’s close proximity to over 75% of the world’s proven oil and gas reserves makes it  a vital conduit for piped oil and gas from Russia, central Asia and the Middle East to European countries. Oil and gas from Azerbaijan, Iran, Iraq and Russia flow through Turkish pipelines, ports and waterways to Turkey’s gas power stations, industry and households and to markets further afield.

Despite some market liberalization, state-controlled BOTAŞ Petroleum Pipeline Corp. (BOTAS) imports 78% of all the natural gas consumed in Turkey. It owns and operates the country’s oil and gas transmission networks, two of the four refineries, some storage facilities, one of two LNG import terminals and has a stake in the first gas transit pipeline currently under construction, the Trans-Anatolian Pipeline.

Source: www.geni.org

Market for Gas

Turkey is one of the world’s fastest growing energy markets, behind China, in terms of natural gas and electricity demand growth. Imports account for nearly  99% of its gas consumption, according to the Ministry of Energy and Natural Resources. Gas imports of 48.4 Bcm in 2015 came by pipeline from Russia (55.3%), Iran (16.2%) Azerbaijan (12.7%) and by LNG tanker from Algeria (8.1%) and Nigeria (2.6%), reports BOTAS. Turkey is Russia’s second-largest gas market after Germany and was valued at $10 billion in 2016, reports Gazprom.

Almost 50% of all natural gas is consumed by the power sector’s  about 230 gas power plants that  serve Istanbul, Ankara, Izmir, Adana, Gaziantepas and other cities. With maximum import capacity of 196.5 MMcm/d and a peak winter demand of 230 MMcm/d, there is a need to increase energy supplies.

Future rapid population growth and industrialization could double demand for gas to 11-12 Bcf/d by 2025. As Europe’s third-fastest growing economy, the Ministry of Energy and Natural Resources is forecasting  a rise in  electricity demand from 264 terrawatt hours (TWh) in 2015 to 416 TWh in 2023.

Domestic Grid

Domestic industry, households and power-generation sectors are served by BOTAŞ, which operates 9,555 km of transmission pipelines and the distribution grid of 2,735 km. Four international gas import pipelines, with annual capacity of 46.35 Bcm, bring natural gas from Russia, Azerbaijan and Iran to markets in Turkey and South East Europe, including Bulgaria and Romania (Table 1).

Table 1: Existing international pipelines.

Facility	Status	Capacity (Tcf)	Total length (miles)		Supply regions	Markets	Details
Trans Balkan natural gas pipeline	Operating	0.5	more than 600		Russia	Southeast Europe and Turkey	first deliveries to Turkey in 1987; transits Ukraine, Moldova, Romania, and Bulgaria
Tabriz-Dogubayazit	Operating	0.5	1,600		Iran	Turkey	started operations in 2001
Blue Stream	Operating	0.6	750		Russia	Turkey	started operations in 2003
South Caucuses Pipeline (SCP)	Operating	0.3	430		Azerbaijan	Georgia and Turkey	first deliveries to Turkey in 2007. It follows the route of the BTC oil pipeline from Azerbaijan, through Georgia, and connects to Turkey’s domestic transmission pipeline system

Source: IEA

Domestic gas production is negligible at 0.4 Bcm in 2015, representing less than 1% of domestic gas demand. Two LNG terminals accept LNG under long-term contracts with Algeria and Nigeria and shipments from the spot market. In anticipation of increasing demand and supplies, Turkey aims to construct four underground gas storage facilities, the first of which, the 1 Bcm storage site under Lake Tuz in central Anatolia, will  become operational by 2019. The domestic transmission grid is being expanded to serve the needs of markets along the frontier region with Syria and Iraq, which might eventually mean linking up with a proposed gas pipeline from Kurdistan and Iraq.

The current and  prospective glut  in world supplies of  LNG, combined with the termination in 2021 of  existing  pipe contracts with Russia, may provide an opportunity to expand LNG tanker imports which could threaten the viability of Turk Stream pipe projects (Table 2). Increasing uptake of LNG would significantly reduce the import bill.

Turkey pays about $12 per MMBtu and $14 per MMBtu for gas imports from Russia and Iran, respectively. This compares to an LNG delivery price of $5.46 in Europe in January 2017, reports data research platform YCharts. With LNG supply from Australia and the U.S., as well as others, set to increase by nearly 50% in 2020, prices could be depressed for some time. Moreover, Turkey has invited ExxonMobil, Perenco and Shell among others, to explore for oil and gas in the Black Sea, Aegean and Mediterranean.

Transit Projects 

To secure affordable and secure energy, Turkey is diversifying its energy supply routes and source countries (Table 2). The foreseeable LNG glut and political difficulties associated with many proposed routes could undermine many of these proposals. However, two projects are underway.

Construction of Turkey’s first transit pipeline, the $8.5 billion TANAP which has been under construction since 2015, will bring natural gas from the Shah-Deniz Phase II field in Azerbaijan to Turkey by 2019 and into Europe by 2020 when it will connect with the $4.7 billion Trans Adriatic Pipeline (TAP), also under construction.

TAP will carry mainly Azerbaijan gas to southern European countries including Greece, Albania and Italy and will have eventual bidirectional capacity of some 20 Bcm per year. Unlike Gazprom’s failed South stream pipeline proposal, TAP is being developed on an open-access basis. It could be used by  Gazprom to deliver up to 10 Bcm per year. of gas to customers in southern Europe, suggests Natural Gas World in January.

Table 2: Planned or under construction gas transit pipelines.

Facility	Status	Capacity (Tcf)	Total length (miles)	Supply regions	Markets	Details
Trans-Anatolian Pipeline (TANAP)	Under construction	0.6	1,150	Azerbaijan: Shah Deniz II and other Caspian fields	6bcm for Turkey  and 10bcm for Europe	Backbone of the Southern Corridor and key to establishing Turkey as an energy distribution hub. Expected  start of operations in 2019; will receive natural gas from the SCP expansion at Turkey’s border with Georgia and deliver natural gas to Turkey’s borders with Greece; follows the route of Turkey’s existing domestic transmission pipeline system
Trans Adriatic Pipeline (TAP)	Under construction	0.4	550	Azerbaijan via TANAP and SCP	Italy and Southeast Europe	Expected to start operations by 2020; expandable to 0.7 Tcf; built mainly to carry natural gas from Azerbaijan via the SCP expansion and TANAP, but could carry natural gas from Russia or any other source transiting Turkey
Turk Stream	Proposed	up to 1.1	more than 500	Russia	Turkey and southeast Europe via the Black Sea	First phase could start in late 2019 at the earliest
Eastring	Proposed	up to 1.4	more than 500	Bi-directional southeast Europe, and Turkey		EU open – access pipeline linking Slovakia, Hungary and Romania, to upgraded Trans Balkan line in Romania or Bulgaria
Iraq-Turkey	Proposed	0.4 – 0.7	?	northern Iraq	Turkey and southeast Europe	Turkey has negotiated with both the Kurdish Regional government and the Iraqi government; no agreement to date
Israel Turkey	Proposed	?	?	Israel and Cyprus	Turkey, EU	Details including route to be determined
SudStream (Southstream)	Canceled	2.2	560 (offshore)	Russia	Turkey and southeast Europe	Canceled in late 2014 and replaced with Turkish Stream

Another project, the Eastring open access pipe, an alternative to the canceled Southstream, would connect existing gas infrastructure between Slovakia and Romania/Bulgaria and transport gas from the Black Sea area, Caspian region and Middle East to southern, central and eastern Europe.

It would meet all EU requirements and could satisfy Balkan demand, making it likely to be built. Another likely project is the Turkish Stream pipeline which would allow Russian gas to bypass Ukraine to reach customers in South East Europe including Greece, Hungary and Slovakia. The project could inaugurate at least 30 years of Russian-Turkish collaboration on the 1,100-km pipeline, including construction of the conduit, which will transport Russian natural gas across the Black Sea into Turkey and then into southern Europe.

Three other projects, the Israel Turkey subsea pipeline, the Turkmenistan-Turkey-Europe natural gas pipeline and the Iraq-Turkey gas pipeline, could be built if the complex politics can be resolved.

The Israel-Turkey subsea pipeline project would reduce Turkey’s reliance on Russian gas while providing a ready market for gas from the Leviathan, Tamar and Zohr gas fields. A pre-condition would require Cyprus and Turkey to resolve their disputes  over territorial waters as well as a rapprochement between Israel and Turkey.

Likewise, progression on the Turkmenistan‐Turkey‐Europe natural gas pipeline proposal to transport 30 Bcm of Turkmen gas to Turkey (16 Bcm) and 14 Bcm onward to Europe, is delayed by disputes over maritime boundaries in the Caspian Sea. Lastly, construction of the Iraq‐Turkey natural gas pipeline in parallel to the existing Kirkuk‐Ceyhan crude oil pipeline awaits a major change in the security situation.

With prospects of further market liberalization, new pipeline gas supplies and a glut in LNG, Turkey – at the crossroads between Asia, the  Middle East and Europe, could very well become a regional energy trading hub.

 

 

 

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