Gas Demand in Turkey!
The ongoing tension between Turkey and Russia makes Turkey’s dependence on foreign energy perhaps the country’s biggest concern. Turkey imports 99% of its gas, and Russia pipes in nearly 60% of Turkey’s total gas use.
Turkey is the second largest consumer of Russian gas and paid Gazprom some $10 billion last year.
More gas has been a strategic choice in Turkey (and around the world) because it’s cleaner, more flexible, and highly reliable. For example, gas generates over 50% of Turkey’s electricity, but accounts for only 30% of installed capacity, illustrating gas’ ability to “punch-above-its-weight,” accounting for more actual power generation than its share of capacity would suggest.
Even in 2022, per average capacity factors, gas will be available 87% of the time, compared to 20-36% on even the best days for wind and solar. So, regardless of what others keep telling you, know this: sources like wind and solar will never displace it.
Turkey is a Natural Gas-Based Economy. It's natural gas imports are surging.
From 2012-2015, Turkey slowed a bit from “Europe’s ‘fastest growing economy“ to “Europe’s third-fastest growing economy.” One of the many things that the anti-coal, anti-oil, and anti-natural gas movement regularly fails to understand (or more likely chooses to ignore) is the direct relationship between more economic growth and more energy demand, working in tandem to drive each other upwards (really underscoring why we need investments in all sources and fields of energy!).
Turkey’s gas from Russia and Iran is under long-term contracts at relatively high prices. And business relations have been strained due to the penalties Turkey has had to pay under onerous contracts, enabled by the inflexible nature of piped gas infrastructure (a problem that LNG cargoes are helping to alleviate).
Meanwhile, the entrance of the U.S. on the rapidly expanding LNG market, perhaps the fastest growing energy market of them all, could help Turkey diversify most, helping the U.S. to “Fulfill Its NATO Treaty Obligations.” In the Fall, Turkey was importing natural gas at $12 per mmBtu and $14 per mmBtu from Russia and Iran, compared to gas futures for April delivery in the U.S. now trading at around $1.67 and projected to stay under $7 for decades.
With just two import terminals, Turkey needs more LNG import capacity for flexibility. While the European Union has wisely been installing specialist terminals to receive gas from the U.S. and Qatar, Turkey hasn’t been so responsive. This is becoming an even greater gas security issue in growing Turkey since the country’s gas demand is up 45% since 2010 while the European Union’s gas demand has been falling. Turkey’s “regasification capacity [is] insufficient to satisfy large amount of imports.”
There are other commercial risks and challenges in Turkey that need fixed. Although gas demand can double in winter months, Turkey still has one of the weakest gas storage systems, capable of meeting less than 10% of total consumption, compared to a nearly 80% capability for Ukraine, also highly dependent on more politically risky Russian energy. Unlike oil, gas emergency stocks to buffer crises is not a requirement under IEA rules, although it’s long been recognized it should be.
To be sure, U.S. LNG will face competition reaching Turkey, but the opportunities are still great. In December, Turkey’s state-owned energy company, BOTAS (which has an 80% market share in import contracts), signed a preliminary agreement with Qatar’s national petroleum company to purchase LNG over a long-term period – yet, no such infrastructure currently exists.
Qatar is routinely jammed at 100% or above liquefaction utilization rate, and the country’s role as the driver of liquefaction capacity growth is being passed to the U.S. and Australia. Qatar’s overall shift toward supplying developing Asia (“Qatar slashes gas price for India, waives penalty“) mirrors broader trading patterns in the oil industry.
Turkey says “Azerbaijani gas ‘not an alternative for Russian” (here). And due to political tensions between Baghdad, the Kurdish region, and Ankara, it’s not clear whether Iraq gas will start to flow to the Turkish market. In any event, Iraq has insignificant gas output, yielding in a year half of what the U.S. does in a single day.
Turkmenistan seeks to supply Turkey gas via TANAP, but numerous contracts with China challenge that. And to join the pipeline, Turkmenistan will have to lay another pipeline across the Caspian Sea, complicated by debates around the legal status of the area. And with 50% of its population age 24 or younger (i.e., domestic needs are rising), Algeria has had nine straight years of declining oil and gas production, with annual gas exports plunging nearly 20% (here).
Continuing, as a “Newly Industrializing & Less Developed Country,” Iran has nearly 45% of its population age 24 or younger, so the country will surely need to keep more of its own gas; leveraged to supply nearly 65% of all energy, to generate 70% of electricity, for huge enhanced oil recovery projects (Iran will lean on gas to double its very low oil recovery rate to 40%), and to fuel the world’s largest natural gas vehicle fleet.
