Turkish industry warns of falling production as Iran shuts off gas flow

Industry representatives have warned production will be hit as Turkey has ordered industrial sites and power plants to reduce gas use and also said it would have to cut power supplies after the neighboring Iran has temporarily suspended natural gas flows.

The timing of the shutdown adds to the woes, as it occurs when there is a significant increase in household gas consumption due to colder than normal weather.

Iran informed Turkey on Thursday that it would cut gas supplies for 10 days due to a technical failure, industry officials said. Talks are underway to start the streams earlier, the officials added.

The shutdown and significant increase in domestic gas consumption prompted Turkey’s state-owned gas pipeline operator Petroleum Pipeline Corporation (BOTAŞ) on Thursday to order gas-fired power plants to cut gas consumption by 40 percent.

Natural gas distributors have been told to cut supplies to 60% for large consumers, except for gas used for heating, Turkish sector officials told Reuters, adding that schools and hospitals would be exempted.

The reason for the technical failure remains unclear, but Iran is known to suffer from natural gas shortages in cold and hot temperatures when local consumption soars.

Power cuts in industrial facilities

Turkey’s Ministry of Energy and Natural Resources warned on Thursday that large industrial facilities and power plants will experience limited, pre-determined power outages due to the shutdown.

In a statement, the ministry added that it had taken precautions to ensure that other consumers would not be affected by the interruption in gas flow.

Istanbul Chamber of Industry (ISO) President Erdal Bahçivan said industrialists had to bear the greatest burden of rising costs in recent months, and it was unacceptable that industries now had to pay the price in terms of supply.

“This decision will affect our exports and cause very serious production and scheduling constraints for our factories,” he said in a statement.

He added that the shortage will have a domino effect as it will negatively impact productivity, production quality, delivery and many other areas.

The shutdown follows an interruption in the flow of crude oil through the Kirkuk-Ceyhan pipeline after an explosion near the pipeline in Turkey’s southeast Kahramanmaraş province earlier this week.

A senior security source later clarified that the explosion was not an attack but that a fallen electricity pylon (transmission tower) had caused the pipeline to burn near Kahramanmaraş.

The incident had aggravated global supply difficulties and pushed global crude prices to a seven-year high.

The flow of crude oil through the pipeline from Iraq’s Kirkuk region for export from the port of Ceyhan in southern Turkey resumed on Wednesday.

Gas consumption hits record high

Compounding gas problems, data showed daily gas consumption in Turkey hit a record high of around 288 million cubic meters (mcm) on January 19, according to BOTAŞ.

It broke the previous year’s record, set on January 19 last year, when consumption stood at 280 million cubic meters.

The increase stems from recent harsh winter conditions and consistent snowfall in many provinces across the country.

Turkey depends almost entirely on imported gas from Russia, Azerbaijan and Iran. According to the latest official data, Iran alone supplied 16% of Turkey’s natural gas needs in the first 10 months of 2021.

Energy prices have risen sharply in Turkey, driven by global increases and a 44% drop in the value of the Turkish lira against the US dollar last year.

Electricity prices have risen 125% for high-demand commercial users this month and around 50% for low-demand households.

Natural gas prices jumped 25% for residential use and 50% for industrial use in January, BOTAŞ said. The price increase was 15% for generators.

The inflow of natural gas into the Turkish gas network saw a year-on-year increase of around 23.2% to reach 61.6 billion cubic meters (bcm) in 2021.

As Turkey’s natural gas export volume is relatively small, total consumption is expected to be close to the incoming volume.

In 2020, around 50 billion m3 of natural gas was distributed through the Turkish natural gas system.

The number of gas subscribers reached around 18 million at the end of last year, equivalent to a population of 70 million, while the country’s natural gas storage capacity reached 3.84 billion cubic meters. .

Power outages and limited gas supply will not affect households, according to Turkish authorities.

Turkey also imports liquefied natural gas (LNG) to diversify supplies and optimize costs when spot prices are below the decades-old contracts BOTAŞ has with exporters in Azerbaijan, Russia and Iran.

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