natural gas in Turkey

Oil and gas each supply over a quarter of Turkey's energy. As Turkey produces little oil and gas the country's imports cost more than its exports, which is a problem for the economy. However a large gas field in the Black Sea is expected to start production in 2023.

The country consumes 50 to 60 billion cubic metres of natural gas each year, almost half of which is imported from Russia. Gas storage capacity is being increased. Over 80% of the population have access to natural gas, and it supplies half of the country's heating requirements. Households buy the most gas, followed by industry and power stations. As the state owned oil and gas wholesaler BOTAŞ has 80% of the gas market, the government can and does subsidize residential and industrial gas customers. All industrial and commercial customers, and households using a lot of gas, can switch suppliers.

As only 7% of oil is produced locally, Turkey is almost completely dependent on imports of oil and oil products, such as gasoline and diesel. Over half is burned in the country’s road vehicles, and Turkey is the world's largest user of liquefied petroleum gas for road transport.

Unlike several European countries, which stopped buying or were cut off from Russian oil or gas, after the 2022 Russian invasion of Ukraine, relations with Russia are such that Turkey continues to buy both.

Oil sources

The energy ministry expects oil consumption to increase somewhat to 50.5 Mtep in 2025 and 54.5 Mtep by 2035 but to decrease slightly as share of primary energy from 28.5% in 2025 to 26.5% by 2035.

There are about 50 million tons of reserves, and about 3 million tons of oil is produced each year, about 7% of consumption. So almost all oil is imported: mostly from Iraq, Russia and Kazakhstan.

Most proved oil reserves and production are in Batman and Adıyaman Provinces in the southeast, and there is a little in Thrace. The largest field is Batı Raman, with extra heavy crude oil, other fields produce much lighter oil: domestic crude API gravity averages 28, and this medium weight is suitable for the Turkish market. Shale oil may be extractable from Dadaş, but well waste fluids would need to be properly handled to minimize the environmental impact of hydraulic fracturing. There are reserves of 150 million barrels in the area of Mt Gabar in Şirnak.

During the 2010s oil demand grew considerably, mainly due to increased demand for diesel. Oil demand is forecast to increase slowly to 2040. Over half of the imported oil and oil products are used for road transport. It is hoped that the locally manufactured electric cars and buses from Turkey's automotive industry will reduce the import bill. Most exports from the petroleum industry in Azerbaijan transit Turkey, as their light oil fetches a premium price on the world market. Turkey is almost completely dependent on imports of oil, as only 7% of oil is produced locally.

The Petroleum Market Law provides incentives for investors to explore and produce. There is some enhanced oil recovery at Batı Raman. As well as crude oil, the country imports oil products, diesel, liquefied petroleum gas (LPG) and petcoke (to make cement), and , the energy import bill closely tracks the price of crude oil. Tax on diesel is lower than gasoline and it has been suggested that taxes on diesel and petrol should be brought closer in line with each other to minimise imports as there is enough gasoline refining capacity.

TPAO, the state owned exploration and production company, which does most of the oil and gas exploration, increased offshore exploration in 2020. Turkey is the world's largest user of LPG for road transport. Sulfur content is generally high, so refineries are being upgraded to meet Mediterranean shipping sulfur limits, which may be cut from 0.5% to 0.1%, possibly in 2025. The Kirkuk–Ceyhan oil pipeline has a capacity of 1.6 mbd and the Baku–Tbilisi–Ceyhan pipeline 1 mbd.

Oil imports from Russia increased after the invasion of Ukraine and some claim that some is being refined and diesel sold on to the EU (the EU banned direct imports of oil products from Russia from Feb 23. Tankers from Novorossiysk deliver to Korfez and Aliaga. In October 2022 almost half of Russia’s Black Sea crude was sent to Turkey, but it was unclear whether the EU oil price cap would affect Turkey.

Gas sources

The energy ministry expects gas consumption to increase somewhat to 42.9 Mtep in 2025 and 46.2 Mtep by 2035 but to decrease slightly as share of primary energy from 24.2% in 2025 to 22.5% by 2035.

, almost all natural gas consumed in Turkey is imported, but production from Sakarya, a sweet gas field in the Black Sea, is due to start in 2023. In 2020 drilling ship Fatih, belonging to state owned oil and gas company TPAO, discovered the Sakarya Gas Field under the Black Sea near where Romania has also found gas reserves. Turkish Black Sea reserves are estimated at over 700 bcm: a pipeline is under construction and TPAO hope to begin production in 2023, with peak production of 40 bcm in 2026. According to some commentators, with this discovery, the Aegean dispute with Greece over exploratory drilling is now unnecessary. It is expected to eventually meet almost a third of national demand, with 15 bcm by 2030.

In 2021 gas imports totalled 58 bcm: a third of the 46 bcm which came by pipeline was from Russia, but one long-term contract expired at the end of 2021 and the other ends in 2025. Of the 58 bcm imported in 2021 26 bcm was from Russia, 9 bcm from Iran (US sanctions do not apply to pipeline imports of gas), 9 bcm from Azerbaijan, and also liquefied natural gas (LNG) 6 bcm from Algeria. Total spot import was 6.9 bcm in 2021: spot can also be imported by pipeline. Total entry capacity in 2021 was 362 mcm/day. After Bulgaria Turkey paid Russia the most for pipeline gas in July/August 2022. BOTAŞ imported 56 bcm in 2021; it would like to import from Northern Iraq, but completing the Iraqi part of the pipeline is mired in disputes between the Iraq central government and Kurdistan Regional Government. However some gas in Iraq is wasted by flaring so Iraq would benefit by selling that. Turkey suspects winter cuts in long-term low-price contracted supply from Iran are not technical faults but Iran keeping the gas for its own use.

In 2022 some LPG was also imported from Russia. In 2021 contracts with Russian energy company Gazprom were renewed and linked to the EU price; they included a four-year deal to the end of 2025 for 5.75 bcm a year through TurkStream (which has total capacity 31.5 bcm). The contract price has not been published but was reported (in 2022 by media opposed to the Turkish ruling parties) to be based on 70% of the LNG spot market price plus the Brent Crude oil price. This is much more expensive than the Blue Stream gas. In 2021 a contract was agreed with Azerbaijan to import 11 bcm more per year until the end of 2024. TPAO has a 19% share in Shah Deniz 1. Fracking shale gas might help with energy security.

Almost half of the country's gas is imported from Russia. , storage capacity was 5 billion cubic metres (bcm). Over 80% of the population, and all provinces in Turkey, have access to natural gas, which supplies half of the country's heating requirements. Households buy the most gas, followed by industry and power stations. All industrial and commercial consumers, and households buying over 75 thousand cubic-meters a year can switch suppliers.

Gas from Russia comes via the Blue Stream and TurkStream pipelines; and from Iran via the Tabriz–Ankara pipeline. Azerbaijan normally supplies Turkey through the South Caucasus Pipeline. Its gas flows onward through the Trans-Anatolian gas pipeline supplying Turkey and some continues across the Greek border into the Trans Adriatic Pipeline.

SASB is a small gas field.

China and Turkey import the most gas from Russia. Some analysts say that Turkey does not have enough gas storage or alternative supplies to resist pressure. In 2022 a gas shutoff by Iran caused problems for industry.

Processing, transmission and storage

There are many gas pipelines. The Tabriz–Ankara pipeline is a natural gas pipeline, which runs from Tabriz in northwestern Iran to Ankara in Turkey. Blue Stream, a major trans-Black Sea pipeline, has been delivering natural gas from Russia to Turkey since 2003. In Erzurum, the South Caucasus Pipeline, which was commissioned in 2006, is linked to the Iran-Turkey pipeline. The Southern Gas Corridor includes the Shah Deniz 2 gas field, the South Caucasus pipeline, Trans-Anatolian gas pipeline (TANAP), and the Trans Adriatic Pipeline: TANAP is being expanded to 31 bcm per year. As of May 2022 Turkey's transit pipeline had 3 to 5 bcm spare capacity. As gas imports cost $12 and $15 billion per year and the lira is weak; they are a significant part of the import bill. Turkstream has a lot of spare capacity as of 2022.

Tüpraş is the largest oil refiner with four refineries, the most recent being Izmit Aliağa with a capacity of 10 million tons. SOCAR Star Oil Refinery is also in Aliağa. It has over half the market for petroleum products. Total capacity of the 5 refineries is 815,000 b/d as of 2022. Although refineries prefer to produce diesl rather than jet fuel half of the country's diesel has to be imported.

A cheaper supply from Turkmenistan has been planned for decades, but a pipeline under the Caspian Sea has not yet been built partly due to lack of an agreement between Turkmenistan and Azerbaijan. Transit via Iran is technically possible as there is spare pipeline capacity. However this is said (by backers of a rival route between at sea installations) to be only 3 bcma. Liquefied natural gas (LNG) is imported from several countries including Egypt, Algeria and the United States. LNG can transit to Bulgaria. In 2021 there was about 5 billion cubic metres (bcm) of storage (underground in Silivri and Aksaray) which is planned to reach 11 bcm by 2023. , energy analysts doubt that Turkey will ever become a major gas transit country, and expect only Azeri gas transit to be significant. However a few European countries import Russian gas via Turkstream, such as Serbia and Hungary. In 2022 about 2 bcm from Turkstream was sent to Romania through the Trans-Balkan pipeline.

In the past oil and condensate was trucked. The Kirkuk–Ceyhan oil pipeline has a capacity of 1.6 mbd. Russian and Caspian oil passes through the Bosporus. In 2005 the Oil spill response law was passed, and in 2022 oil tanker insurance was made compulsory.

In 2023 Turkey has 3 floating storage regasification units (FSRU) including MT ''Botaş FSRU Ertuğrul Gazi''. FSRU may supply Bulgaria in future. Marmara Ereğlisi is a major LNG terminal.

Pipelines in bcm are:

Retail

There is a biennial trade fair in Istanbul.

Consumption

In some years electricity generation in Turkey burns half the gas, but this varies greatly depending on whether there is enough rain to produce hydroelectricity; therefore, when it rains, Turkey burns less gas. Peak demand is typically in mid-winter at almost 300 mcm/ day, and the Chamber of Engineers said in 2022 that there was not enough storage. In 2021 consumption included 27% households, 35% electricity production, 29% industry and 8% service sector. There are 72 distribution zones and 18 million households are supplied with gas. About half of residential energy demand is met by gas. The International Energy Agency predicted in 2021 that use for electricity generation will decline. However the national energy plan published in January 2023 forecasts over 12 GW more gas power by 2035, and says that is needed to balance VRE and for energy security.

Economics

Both national gas development and BOTAŞ are subsidised by the government. In 2021 households were subsidized 80 billion lira ($7 billion) for gas - about 4 times their electricity subsidy. Gas imports deplete foreign exchange reserves and many analysts say that imported oil and gas is a key weakness in the economy of Turkey. The country would like to become a hub to supply the EU, however EU gas consumption is expected to decrease, so analyst Kadri Tastan says this is unlikely in the long term due to the EU green transition. Although already somewhat of a physical hub for gas Turkey cannot become a trading hub as it does not have an internal free market in gas.

the annual gas import bill is around US$44 billion. But long-term contracts with Russia and Iran will expire in the 2020s. The contract to import from Iran expires in 2026. Private companies are not allowed to enter into new pipeline gas contracts with countries that have contracts with the state owned oil and gas wholesaler BOTAŞ. Although private companies can contract for LNG they cannot buy at the same price as BOTAŞ. Some imports from Russia are linked to the oil price, for example the BOTAŞ contract for import via Blue Stream, which expires at the end of 2025. Solar and wind prices are much cheaper than gas power.

According to BOTAŞ the price of gas for Turkish households was the lowest in Europe in April 2022, and they said residential customers were getting 70% price support from the government. Prices for industry and power plants are more than double the household price, and are often increased due to the fall in value of the lira. In 2022 BOTAŞ borrowed from Deutsche Bank to buy LNG. A quarter Russian gas will be paid for in rubles.

In late 2022 Turkey was reported to have asked Russia for a discount on gas. Gas prices are expected to remain high until the end of 2024.

Subsidies and taxes

There are many sources of supply in the region and enough liquefied natural gas import capacity in the country. Turkey's long-term contracts with Russia are due to expire at the end of 2024, and the natural gas import bill is expected to fall during the late 2020s due to the start of production from Turkey's part of the Black Sea. As well as drillships there are 2 seismic ships. 17 gas-fired power stations were eligible for capacity mechanism payments in 2023.

However, the wholesale gas market is not as competitive in Turkey as it is in the EU: some analysts say that this is because the government does not want to split up the state-owned gas company BOTAŞ, or give other power companies fair use of BOTAŞ' pipelines. They say Turkey has not joined the European gas network (ENTSO-G) because joining would require this unbundling. BOTAŞ controls over 90% of the natural gas market, and is the gas infrastructure regulator and the only operator of gas transmission.

Exploration for gas in the Eastern Mediterranean is subsidised,"Fossil Fuel Support – TUR"
, OECD, accessed August 2018. and is a cause of geopolitical tension because of the Cyprus dispute. The government says the purpose of capacity market payments is to secure national electricity supply. However, despite almost all natural gas being imported, some gas-fired power plants received capacity payments in 2021, whereas some non-fossil power firms, such as demand response, utilities could not.

Companies

Bosphorus Gaz, Bati Hat and Kibar Holding have applied to import from Russia through the 6 bcm a year Trans-balkan pipeline in 2022, but the agreement for Botas to import gas through that pipeline ends at the end of that year. Akfel Gas Group is state owned, and there are four private importers of gas. But not all the 10 bcm contracted from Russia is actually flowing, possibly due to debts due to Gazprom by the companies. There are 72 gas distribution companies.

In 2022 the Turkish Energy Minister said that Turkey and Algeria would create a joint oil and gas exploration company.

Environmental impact

Electricity generated from gas is estimated to emit almost 400 g eq./kWh, far less than coal at 1000 but far more than solar at 30 to 60. However, when oil and gas is produced in Russia (and Turkmenistan although little is imported from there as of 2022) a lot of methane leaks into the atmosphere. But as the international greenhouse gas inventory standard is production based this is accounted for in Russia's greenhouse gas emissions not greenhouse gas emissions by Turkey.

Some distribution companies are testing mixing up to 20% hydrogen with natural gas: their aim is that eventually some of the gas distributed will be green hydrogen.

Geopolitics

Turkey opposes some gas exploration by the Republic of Cyprus because of the Cyprus–Turkey maritime zones dispute. In 2019, the European Council objected to the Turkish drilling activities in the eastern Mediterranean.

Unlike several European countries, which stopped buying or were cut off from Russian oil or gas, after the 2022 Russian invasion of Ukraine, relations with Russia are such that Turkey continues to buy both. Thus Turkey can burn discounted Russian diesel: also it buys discounted Russian crude, refines it and sells legally (as of 2022 - in Feb 23 EU embargo of refined from Russian crude starts) as Turkish at the global price.

Some analysts say that Turkey does not have enough gas storage or alternative supplies to resist pressure, and when Russia says it is closing a gas pipeline for maintenance this is sometimes intended to put on political pressure, for example a 10 day shutdown of Bluestream in 2022 at 2 days notice.

In January 2022 a gas shutoff by Iran caused problems for industry.

It is said to sometimes be difficult for media in Turkey to report fully on energy geopolitics.

President Erdoğan said in 2022 that Turkey could not join sanctions on Russia because of import dependancy.

TPAO hopes to explore for oil and gas in Libyan waters.

The 2 Kurdish parties PUK and KDP would have to agree for a new pipeline to take the shortest route, as it would come form wells in area controlled by the PUK and pass through area controlled by the KDP. In 2022 the IRGC struck to stop a new pipeline.

Interaction with renewable energy

According to a May 2022 report from thinktank Ember wind and solar saved 7 billion dollars on gas imports in the preceding 12 months. It is hoped that further electrification, of sectors such as road transport, will reduce dependency on imported oil.

History

In late Ottoman times permission to explore for oil in the İskenderun area was granted to the Grand Vizier Kamil Pasha and later Ahmet Necati Bey. With the fall of the empire oil and gas fields in Mosul vilayet (of which Kirkuk was a part) were lost, and since then the country has had to rely on imports.

In 1926 the government took over oil exploration rights. In 2001 natural gas was legally separated from oil.

The General Directorate of Mineral Research and Exploration was formed. The first imports from Russia were in 1986, and from Azerbaijan in 2007. LNG was first imported from Algeria in 1994 and from Nigeria in 1999.

Since the late 1980s gas has been used a lot to generate electricity. In the early 21st century gas consumption increased a lot.

Between 2000 and 2020 the share of imported energy increased from just over 50% to 70%.

See also

*Natural gas pipelines in Turkey
* Durusu gas field
* Sakarya gas field

References

Sources

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External links

Energy Market Regulatory Authority

SHURA Energy Transition Center

Greenhouse gas from production and refining

Methane emissions

Hydrogen strategy (Turkish)

{{Europe topic, Oil in

Climate change in Turkey
Petroleum industry in Turkey