Turkey goes gas shopping

It is always dangerous to become overly dependent on one gas source, particularly when the owner of that source uses it as a political tool. For a few days in 2009, Russia cut gas exports to Europe by 60 percent, plunging the EU into an energy crisis when a dispute between Moscow and Kyiv escalated. It left many homes and businesses in dire straits in the midst of a freezing winter.

This incident made EU leaders reflects on their short-sighted energy policy. Not only had the EU become too dependent on Russian gas, it had also failed to build an internal energy market. This meant that in emergency situations it was often impossible to send gas from one part of the EU to another, simply because there were insufficient interconnectors. Indeed, some countries were isolated islands. Ideally a country should have at least three different energy sources and routes.

Nowadays Turkey finds itself in a very vulnerable situation. İstanbul, for example, is almost entirely dependent on Russian gas imports through the Trans-Balkan Pipeline. While Russia has promised to adhere to its contractual supply obligations, the incident has left Turkey exposed. Turkey needs to reduce its dependence on Russia to a maximum of 30 percent and Turkish officials have rushed to secure alternative sources of energy. Last Saturday President Recep Tayyip Erdogan vowed to break Turkey’s dependence on the Kremlin’s gas and oil (10 percent of Turkey’s oil comes from Russia). Given that only a short time ago Turkey was planning to strengthen energy cooperation with Russia including possibly cooperating on “Turkish Stream,” which would have brought even more Russian gas to Europe, this situations represents a complete turnaround.

Clearly, escaping the Russian bear will not be easy. First, getting alternative gas supplies is not a simple or short process and there is little chance that Turkey will be able to significantly reduce its dependence on Russia in the short term. Furthermore, Turkey has long-term energy contracts including a take-or-pay clause that tie Russia and Turkey for at least 10 more years.

Nevertheless, Turkey is actively shopping. While Iran currently supplies about 30 percent of Turkey’s gas needs, it is unlikely this will increase in the near future. While the recent nuclear deal signed with Iran means international sanctions on its energy sector will be lifted, not only is Iran’s energy sector in significant disarray, Tehran will have an oil-first approach. Furthermore, it has many other markets to choose from. Turkey’s leaders have travelled to both Azerbaijan and Qatar in the last week.

Turkey already receives gas from Azerbaijan via the Baku-Tbilisi-Erzurum (BTE) pipeline and this is set to increase in 2018 when it will get an additional 6 billion cubic meters (bcm) from Azerbaijan’s Shah Deniz II field. However, beyond this it is unlikely Azerbaijan will be able to provide further gas until firm investment commitments are made for new fields and this will depend of commercial viability and the state of the global energy market.

During the visit to Qatar, Erdogan met Qatari Emir Sheikh Tamim bin Hamad Al Thani and an agreement was signed for liquefied natural gas (LNG). However, Turkey currently has only limited LNG storage, while its gasification capacity is not sufficient for the amount of Qatari gas Turkey would need to replace the 27 bcm LNG it gets from Russia. Ankara also wants to cut imports of liquefied petroleum gas (LPG) from Russia by a quarter next year. Turkey has the most gas-powered motor transport in the world, with 40 percent of its vehicles running on LPG. New supplies could come from Algeria, Nigeria or even the US, although it would not be cheap. Ankara also hopes to get gas from northern Iraq, but again this would not be a quick process.

However, looking on the bright side, given that the Russian economy is in poor health due to international sanctions and the low oil price, Russia cannot afford lose the Turkish market.

SOURCE: TODAY’S ZAMAN