Turkey’s Energy Game

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By Giulia Miraglia

Located strategically between two continents, Turkey has always had a desire of becoming an international physical hub and transit corridor for natural gas. The likelihood of becoming a significant player in this transit depends simultaneously on development of the domestic political situation and of the political uncertainties in its neighbourhoods.

On 21 August 2020, Turkish president Recep Tayyip made the announcement of the end of Turkey’s unsuccessful quest for domestic oil and gas. If the discovery of the largest-ever deposit of natural gas in the Black Sea is confirmed, a step forward partial independence on energy imports from other countries, including Russia, Iran and Azerbaijan, will enhance Turkey’s energy security. President Erdogan said that the Fatih, the Turkish drilling vessel, has discovered 320 billion cubic meters of natural gas reserve during its drilling in the Tuna-1 Zone.  

(Tuna- 1 gas field)

(Daily Sadah)

With a population of 82 million, Turkey has the highest rate of growing energy demand among Organisation for Economic Co-operation and Development (OECD) countries over the last 15 years. It annually imports almost 41 billion dollars of energy which amounts to 99% of the country’s gas needs. This discovery is expected to reduce the imports and improve the trade balance deficit. In fact, two months ago, the Turkish lira tumbled to its lowest record to 7.3677 against the dollar. The overall impact on the economy could be positive. If market developments allow, Ankara’s long-time aspiration of diversifying sources and becoming a strong transit hub for oil and natural gas supplies from Central Asia, Russia and the Middle East to Europe and other Atlantic markets, may be real. 

The Turkish government has the goal of reducing the share of natural gas in the electricity generation sector, replacing it with domestically produced lignite coal, renewable energy and nuclear. This policy has been driven by high oil prices and expensive contracts for natural gas imported from Russia and Iran useful to improve the country's energy security. The major events since 2014 in the Middle East have brought Turkey’s growing energy import dependency and resulting risks into an uneasy state about its energy security. Especially after Turkey’s downing of a Russian jet fighter at the Turkish border with Syria on 24 November, 2015, policy makers began reconsidering Turkey’s diversification of gas supplies.

Turkish gas pipelines

The Russian South Stream project, announced in 2007, was seen as a competitor to Nabucco, bypassing Turkey from Novorossiysk through the Black Sea directly to Bulgaria.

After South Stream was cancelled in December 2014, partly due to EU legislation, TurkStream (also through the Black Sea) became the Russian alternative. Russian gas now reaches the Western part of Turkey, rather than Bulgaria, continuing to compete not only for EU markets, but also directly for the Turkish market itself. In October 2016, the governments of the Russia Federation and of the Turkish Republic signed the Agreement on the project. Two-years-after, the pipeline crossing the Black Sea was completed. On January 8 2020, Vladimir Putin and Tayyip Erdogan officially launched the TurkStream natural gas pipeline in Istanbul.

The first break-through for an alternative route to Russia was reached with the signing of the Nabucco agreement in 2009. After the cancellation of Nabucco in 2013, Caspian natural gas should have been transmitted from Azerbaijan to the Italian market via Turkey, Greece and Albania. The initiative taken by the European Commission, referred to as the “Southern Gas Corridor” (SGC), aimed at diversifying the routes and sources of gas imported into Europe. The SGC would have also served Azerbaijani and Turkish interests in future relations with the EU.

Nowadays, it crosses sever countries for 3,500 kilometres and is constituted by three pipelines: the South Caucasus Pipeline (SCPX) from Azerbaijan and Georgia; the Trans Anatolian Pipeline (TANAP) across Turkey and the Trans Adriatic Pipeline (TAP), crossing Greece, Albania and Italy.

After four and a half years since the start of construction, the TAP is almost complete. By the end of the year, gas supply from Azerbaijan to Europe will be set and Turkey will receive an additional 6 million cubic metres (bcm) of gas per year. It allows gas transportation from the Greek-Turkish border to southern-Italy (Puglia). Besides this, the total capacity of the TANAP, connected with TAP in Kipoi (Κήποι), that passes through 20 Turkish provinces, will increase from 24 to 32 bcm. Both TurkStream and the SGC involve substantial sunk long-term investments and large volumes.

The last, but not the least, source of natural gas comes from the recent total sign three-years Liquefied Natural Gas (LNG) contract in January 2020 by Botaş with the French energy giant Total. LNG is becoming an alternative fuel in many countries for its low import costs. The Energy Market Regulatory Authority (EMRA) has recorded that Turkey got almost 2.05 bcm of LNG for March 2020. To better understand, the share of LNG in imports was 29%  in 2019, and proportionally, less than ⅓ of the total.

Turkey has also been exploring for natural gas in the Mediterranean Sea provoking Greece and Cyprus response. Last week, the redeployment of the turkish survey ship in contested waters has been condemned by EU leaders as “provocative”. Though this, president Erdogan declared the will to continue energy exploration in the Black Sea and the Mediterranean. 

The rise of LNG and the progress made in the SGC connecting Turkey and the Balcans to the Caspian, might be changing the rules of the game which would be bad news for Russia. The Turkish “Giant” gas discovery in mid-August might simply be a feel-good domestic story to counter the estimated GDP contraction by 3.8% year-on-year. It might also be used as a political strategy to temporarily distract public opinion from economic problems. In a nutshell, Turkey is making progress in diversifying external energy links. But this might not be enough to realize the long-term and stable ambition of becoming an independent regional energy power.

Giulia is a political writer for La Tonique. You can follow Giulia on Twitter ⁦@gm_miraglia⁩.