Energy

Turkey To Benefit From Many Gas Supplies & Best Prices

Fuad Muxtarlı Analysis 6 March 2019
Turkey To Benefit From Many Gas Supplies & Best Prices

Turkey's geopolitical situation amid copious gas resources will ensure the country can avail of the most competitive pricing to renew its gas contracts, Richard L. Morningstar, the former U.S. ambassador to Azerbaijan and the director of the Atlantic Council Global Energy Center, said in an interview with Anadolu Agency.

Morningstar, commenting on issues ranging from U.S.-Turkey energy relations to the dynamics of the regional gas market, said that natural gas would play an important role in Turkey, while Russia would continue to be a major player in the market with its numerous gas feed options.

Some of Turkey's long-term natural gas contracts, which correspond to 16 billion cubic meters, will expire in 2021. Therefore, the country is considering its supply options in preparation for their renewal. The contracted capacity is around 30 percent of Turkey's natural gas consumption, equivalent to around 50 billion cubic meters annually.

Along with Russian options, he hailed Caspian gas to Turkey via the Trans Anatolian Natural Gas Pipeline (TANAP) as a great success and a supplier contender to Turkey. TANAP, the longest part of Southern Gas Corridor, is expected to carry 6 billion cubic meters of the Caspian gas per annum.

TANAP is set to connect to Europe through the Trans Adriatic Pipeline (TAP), which will transport 10 billion cubic meters of gas per year to southeast Europe. TAP, which is the European leg of the Corridor, is currently under construction, and completion is expected by 2020.

"The question for Turkey is from where the gas will come. East Mediterranean gas could hopefully be a contributor to the Turkish gas market once the political issues are solved. I think that East Mediterranean gas is very possible technically and feasibly," Morningstar explained, adding that the main hurdle to overcome is in how to resolve the various political difficulties.

The natural resources in the Aegean and the Eastern Mediterranean Seas, as well as Cyprus, are "strategic goals and national issues" for Turkey.

Turkey has consistently contested the Greek Cypriot administration’s unilateral drilling in the Eastern Mediterranean, saying Turkish Cypriots also have rights to the resources in the area.

Morningstar noted that gas from the Kurdish Regional Government (KRG) in Iraq is also a potential resource for Turkey. Iran to a certain extent can also be considered although with limited volumes.

"There is Russia, the Caspian and some gas from Iran," he said, but he also highlighted LNG as a resource that should play a role in Turkey, as some of the other sources could be difficult to realize.

"Thus, Turkey is in a good situation as there are a lot of potential resources of natural gas that will allow Turkey to negotiate for the best and competitive prices while renewing its gas contracts," Morningstar noted.

Morningstar recommended that Turkey use a strategy to maximize its supply demands while negotiating for the best possible prices.

Turkey-US has 25-year history in energy cooperation

He also suggested that U.S. LNG could also be a source for the Turkish gas market even though U.S. LNG pricing is relatively higher than its competitors.

Morningstar said the energy relationship between the U.S. and Turkey has always remained strong with bilateral cooperation over the last 25 years. This, he said, is despite the many difficulties that have emerged, whatever administration is in Washington, and whoever has leadership of Turkey.

"The U.S. has been a prime advocate of energy sources coming from the Caspian and Central Asia. That is something that has been in Turkey's interest for both geopolitical and economic reasons. Supporting those goals has remained the same for both countries for the last 25 years and it enabled us to work together to further those goals," he said.

The projects making economic use of resources in the Caspian and in Central Asia have helped Turkey's relationships with other countries like Azerbaijan and Georgia, while also enabling Turkey to gain influence in these regions, Morningstar stated.

Turkey has already received some LNG from the U.S., he said, even if U.S. LNG is not purchased, its availability helps keep Russian gas or other LNG supplier prices down.

Turkey's LNG imports from the U.S. in December 2018 were 66.4 percent higher compared to the same month of 2017, according to the Energy Market Regulatory Authority statistics. The share of U.S. LNG in the country's gas imports in December reached 2.7 percent, up from 1.6 percent in December 2017.

TurkStream poses risk for Southern Gas Corridor expansion

Morningstar, however, did not endorse the TurkStream pipeline as a positive supply source and said any new potential resource either from the Caspian, East Mediterranean or the KRG to be delivered via the Southern Gas Corridor will have to compete with Russian gas to southeast Europe.

"TurkStream will ultimately make the expansion of Southern Gas Corridor more difficult for new gas," he said.

According to Morningstar, Turkey has always received a lot of Russian gas, which it will now get directly via TurkStream.

He said that the 10 billion cubic meters of gas that will come to Europe via TAP is already purchased, and will not be affected by gas from TurkStream, but the project could have an impact on further gas coming via TAP - the European leg of the Southern Gas Corridor.

"Thus, it [TurkStream] ultimately creates a risk for the expansion of the Southern Gas Corridor," he concluded.

TurkStream will deliver 15.75 billion cubic meters of Russian gas directly to Turkey while a second line of the project is planned to carry Russian gas to Europe.

Prepared by Fuad Muxtar-Aqbabali.

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