Turkey pursues rational energy policies

Turkey has just discovered another 135 billion cubic meters (bcm) natural gas in what is proving to be a prolific Sakarya gasfield in the Black Sea, raising the total discovered so far to 540 bcm. Even though these gas quantities still have to be verified, Turkey is racing ahead with its plans to develop it, targeting to achieve first gas by 2023.

This brings Turkey’s energy security and self-sufficiency into focus, especially as earlier in the year the International Energy Agency (IEA) highlighted energy security as one of Turkey’s key vulnerabilities.

According to the International Energy Agency (IEA), in 2019 Turkey’s  total energy consumption was about 147 million tonnes oil equivalent (mtoe), with just under 70 per cent of this imported. About 83 per cent was provided by fossil fuels: close to 29 per cent oil, 29 per cent coal/lignite and 25 per cent natural gas. The rest was provided by clean energy: 7 per cent geothermal, 5 per cent hydro and 5 per cent renewables, with the latter growing at a fast rate.

Renewable/clean energy electricity generation has nearly tripled in the last decade, with its share in total power generation reaching 44 per cent in 2019, and still increasing. This is also helping Turkey reduce its high carbon dioxide emissions. But air pollution in cities still remains a serious concern.

Turkey is highly dependent on oil and gas imports – 93 per cent and 99 per cent respectively. But it has been pursuing energy relationships with an increasing of international partners in order to improve security of energy supplies. It has also been taking steps to increase production and use of domestic energy sources, including clean energy and coal/lignite – and soon nuclear with Akkuyu nuclear power plant becoming operational in 2023 – in order to increase self-sufficiency.

Turkey has also been investing in energy efficiency in order to slow-down and reduce the rate of energy consumption, with some success. Until 2017 the country’s total energy consumption was growing at an average rate close to 5 per cent per year. Since then it has not increased.

Security of energy supplies

But it is Turkey’s high dependence on oil and gas imports that gas been identified by the IEA as a key concern. As a result, security of energy supply has been prioritized by the country as one of the main pillars of its energy strategy. It has adopted policies based on boosting domestic oil and gas exploration and production, and diversifying oil and gas supply sources and associated infrastructure.

Particularly successful was the diversification of natural gas supplies through three Floating Storage Regasification Units (FSRUs), supported by expanded gas storage facilities. These have enabled the country to increase its LNG imports from Nigeria, Algeria, Qatar and the US, thus adding to the security of gas supplies. LNG provided about 30 per cent out of 48 bcm gas imports in 2020.

In contrast, gas imports from Russia comprised about a third of the total, with 24 per cent from Azerbaijan and 11 per cent from Iran. As recently as 2015, Turkey relied on Russia for over 55 per cent of its natural gas needs. Evidently, the country has been quite successful in diversifying its gas supplies, thus improving energy security.

At a price of $5.60/mmbtu at the point of delivery, Russian gas is quite cheap, even cheaper than current gas prices in western Europe. And with an opportunity to renegotiate its Russian gas contracts – due for renewal soon – Turkey is in a good position to secure even more competitive prices in the light of its recent gas discoveries in the Black Sea. As a result, Turkey’s mutually-beneficent energy relationship with Russia is expected to continue in the longer term.

The discovery of more gas at the Sakarya gasfield early June has sparked a frenzy in drilling activity in the Black Sea, to the extent that Turkey’s national oil company, TPAO, is now considering to acquire a fourth drilling ship from Norway.

Even though the exact gas quantities still need to be verified, engineering studies are progressing fast, with first gas planned in 2023 – the year the country celebrates 100 years of being a republic.

When production reaches a plateau, expected in 2027-2028, the contribution from this gasfield to Turkey’s gas consumption could exceed 15 bcm/yr, equivalent to about 30 per cent of current consumption.

Turkey’s aggressive pursuits in the East Med

Turkey’s aggressive pursuits in the East Med have often been attributed to gas discoveries there and Turkey’s determination to secure a share, almost by any means.

But this is not supported by facts, given the country’s energy policies, its diversification of energy supplies and its determination to bring energy costs down.

Turkey’s future energy and natural gas needs are well covered, especially after the discovery of the Black Sea gas, and at competitive prices. Any new gas imports will have to beat these low prices if they are to gain any inroads into the Turkish energy market.

As I said before, “this gives credence to the view that Turkey’s aggressive actions in the East Med over the last few years are not energy-driven, particularly as the areas it claims to be part of its continental shelf have low probability of gas presence. The drivers behind these actions are geopolitical – pursuit of maritime control and hegemony in the East Med.” But hopefully aggression will be avoided in future. The EU and the US are determined to maintain pressure on Turkey to refrain from aggressive actions and rely on negotiations based on international law.

With the addition of the TANAP and TurkStream 2 gas pipelines, Turkey’s strategic importance as a regional energy trading centre is in ascendance. The country has had a long-standing ambition to become the energy corridor between central Asia, Russia and Europe and it is achieving it. These two pipelines, can transport close to 26 bcm gas annually from Russia and Azerbaijan to Europe. In addition, the Kirkuk-Ceyhan oil pipeline, with a usable capacity of 600,000 barrels/day, allows exports of Iraqi and Kurdistani oil to customers in Europe.

In comparison with its currently irrational economic policies, Turkey’s energy policies have been paying off. And with the development of the Sakarya gasfield between 2023-2028 for domestic use, its energy security and balance of payments will improve even further.