Turkey is preparing to become an energy hub

Turkey has dreamed of becoming an energy hub for decades, and as offshore energy projects in the Eastern Mediterranean expand, it looks like that dream is coming true soon. With the discovery of new offshore gases in the region, Ankara has stepped up its aggressive approach to become a true energy player.

In order to draw even more attention to the country’s possible gas reserves, the Turkish Energy Regulatory Authority (EPDK) has announced that Black Sea offshore gas volumes will be open for trading on the 1st. October in Istanbul on a gas futures market. To support this effort, Turkey will need to set up a gas futures market which, according to Mustafa Yilmaz, director of EPDK, will be connected to the existing energy exchange, EXIST. Turkey said the exchange is intended to reduce trade risks by giving more trade stability than the current spot gas market. Yilmaz said the 540 billion cubic meters (bcm) of gas, which is expected to have a market value of over $ 100 billion, will be opened for trade under the name of the “Black Sea gas contract” in the future. Turkish gas market. The move comes after Turkish President Erdogan announced last week of a new 135 billion m3 gas discovery in the Amasra-1 well in the Sakarya gas field in the northern Black Sea. In 2020, Turkey announced a discovery of 405 billion m3 in the Tuna-1 well off the Sakarya gas field. If these figures are correct and the quality of gas reserves is attractive to the market, the era of Turkish energy dependence may well be over. The announcement of these volumes would imply that the country’s dependence on gas imports would soon be reduced.

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Official statements indicate that the first 3-5 billion m3 per year will be commissioned by 2023, which could be increased to around 15-20 billion m3 per year. This would result in a reduction of around 30% in Turkey’s gas imports, officials said. Turkey’s energy hub strategy will be supported by diversified Black Sea gas supplies, in combination with the existing Trans-Anatolian gas pipeline and TurkStream pipelines.

For the domestic Turkish gas market, the discoveries are a godsend. In 2021-2022, around 30% of Turkey’s long-term and oil-indexed contracts will expire. This includes 6.6 billion cubic meters from Azerbaijan and 8 billion cubic meters from Russia, which is a financial burden on the country’s economy. Oil-indexed contracts are now more expensive than in 2020. Other supplies are also arriving, such as LNG from Algeria, Nigeria, the United States and Qatar, while pipeline volumes also come from Russia , Azerbaijan and Iran. . Holding vast offshore gas reserves that will come into service in 2023 will increase Turkey’s negotiating position in the months to come. 2022 will be a pivotal year for Turkey, as contracts will still have to be signed as long as no domestic supply comes on stream. It is expected that oil indexed contracts will no longer be feasible and that most new pipeline contracts will be based on spot contracts. In September last year, the EPDK concluded an import agreement by pipeline from the Malkoclar entry point on the border with Bulgaria. The country’s total imports are currently set at 48 billion cubic meters, while consumption in 2020 was 48.2 billion cubic meters. In 2020, the national gas production was 441 million cubic meters. The annual gas bill is around $ 44 billion.

It will be interesting to see if the current crisis in the Eastern Mediterranean will see any positive effects from this Black Sea windfall. So far, Turkish officials have reiterated that there will be further drilling operations in the Eastern Mediterranean region, with particular emphasis on disputed waters with Greece, Cyprus and others. Turkish Energy Minister Fatih Donmez said the country will carry out new drilling projects in the eastern Mediterranean. He reiterated that there is potential in the wells that have been drilled so far, adding that in the coming months the Yavuz drill ship will head to a new site. Further developments on this topic can be expected from US President Biden’s meeting with Erdogan in Brussels this week. A positive meeting could lead to a Greek-Turkish rapprochement.

By Cyril Widdershoven for Oil chauffage

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