Natural Gas

84 Figure 4: Crude Oil Consumption of Turkey (Million Tons)

Resource: WEC, 2013

85 natural gas and Russia. This situation creates very big risk for the security of energy supply.

Turkey has nine natural gas and LNG purchase agreements with six countries. According to these agreements, Turkey contracted 63.65 billion m³ natural gas supply agreements with these countries. After the first agreement, signed with Russia in 1986, to diversify energy supply and to increase the energy security, Turkey signed LNG and natural gas purchase agreements with Algeria, Nigeria and Iran. However, since the demand of natural gas increased rapidly, in order to meet the demand, Turkey increased the capacity of west line and added Blue Stream Line to its supply resources. Under the scope of purchase agreement, signed on 03.12.2001, Turkey has started to purchase gas from Azerbaijan since 2007. Turkey signed another long term purchase agreement with Turkmenistan in 1999 but it is not enabled yet. Today, natural gas supply was provided from 5 different countries but significant part of this import has been done from Russia. When we examine the distribution of natural gas, we see that nearly 58 % of natural gas was provided from Russia, 19.3 % from Iran, 9 % from Azerbaijan and rest of them from Algeria, Nigeria and spot market (MENR, 2014).

Table 30: Natural Gas Purchase Agreements Existing Agreements Amount

(billion m³)

Signing Date

Status End Date

Algeria 4.4 1988 Enabled 2024

Nigeria 1.3 1995 Enabled 2021

Iran 9.6 1996 Enabled 2026

Russia (Blue Stream) 16 1997 Enabled 2025

Russia (West) 4 1998 Enabled 2021

Turkmenistan 15.6 1999 - -

Azerbaijan I 6.6 2001 Enabled 2021

Azerbaijan II 6 2011 2017/2018 2032/2033

Azerbaijan 0.15 2011 Enabled 2046

Total 63.65

Resource: BOTAŞ, Yearly Report, 2014

Before the liberalization of the market, BOTAŞ was monopoly in the importation of the natural gas. However, after the end of the some contracts, the government started to transfer import rights to the private sector. Since Russia did not accept the desired discount

86 rate, West Line contract was not renewed with Russia and the first import right transfer was made from this line in 2011. Today, nearly 6 billion m³ natural gas, which was previously imported from Russia by BOTAŞ, was imported by private sector. The main reason of this transfer is to get rid of the take or pay obligation that may cause serious problems especially while the economy is in depression.

Table 31: Natural Gas Imports by Country

Years Russia Iran Azerbaijan Algeria Nigeria Spot LNG

Total

2003 12.460 3.461 3.795 1.107 20.823

2004 14.102 3.498 3.182 1.016 21.798

2005 17.524 4.248 3.786 1.013 26.571

2006 19.316 5.594 4.132 1.100 79 30.221

2007 22.762 6.054 1.258 4.205 1.396 167 35.842

2008 23.159 4.113 4.580 4.148 1.017 333 37.350

2009 19.473 5.252 4.960 4.487 903 781 35.856

2010 17.576 7.765 4.521 3.906 1.189 3.079 38.036

2011 25.406 8.190 3.806 4.156 1.248 1.069 43.874

2012 26.491 8.215 3.354 4.076 1.322 2.464 45.922

2013 26.212 8.730 4.245 3.917 1.274 892 45.270

2014

(End of Sep.)

20.489 6.537 4.323 3.064 983 772 36.168

Resource: MENR, Energy Resources, 2014

Total producible domestic natural gas reserves of Turkey is 6.84 billion m³ and 561.5 million m³ natural gas were produced from 54 fields in 2013. So far, Turkey produced at about 14 billion m³ natural gas from domestic resources. Unless new reserves were discovered, natural gas reserves have 10.3 years life span with the current production level (MENR, 2014).

87 Table 32: Natural Gas Production and Consumption in 2003-2013 Period

Years Total Production

Production of TPC

Consumption Production / Consumption

2003 560,6 353,3 21.384 0,026

2004 707,0 432,8 22.505 0,031

2005 896,4 566,9 27.467 0,033

2006 906,6 412,6 31.128 0,029

2007 893,1 421,5 34.600 0,026

2008 1.014,5 495,6 36.100 0,028

2009 729,4 277,3 34.400 0,021

2010 726,0 260,7 36.900 0,020

2011 793,4 312,5 43.800 0,018

2012 664,4 339,7 45.242 0,015

2013 561,5 307,6 45.270 0,012

2014 (End of Sep.)

226,3 111,7 32.790 0,007

Resource: MENR, 2014

According to the projection made by MENR, compared to 2011 data, total energy demand of Turkey will increase from 115 MTEP to 218 MTEP with the 90 % increase in 2023.

With the 32 % share, natural gas consumption is ranked in the first place in primary energy consumption in 2012. As of September 2014 nearly 48% of electricity was produced from natural gas. Its share in the installed capacity reached to 37 % in 2012. Because of the high dependency in electricity production, MENR prepared a strategic plan to evaluate the domestic natural resources (both renewables and non-renewables) and targeted to decrease the natural gas’ share both in the primary energy supply and in electricity production by the year 2023 (MENR, 2014).

If the strategic plan can be implemented successfully, the share of natural gas will be decreased from 32 % to 23 % in primary energy demand and decreased from 48 % to 30 % in the electricity production with the contribution of nuclear power, renewable energies and domestic coal. The sectorial distribution of natural gas consumption is shown in table 33. According to the this table, the share of electricity 48 %, industry 26.5 %, heating 25.5

% in the total consumption of natural gas in 2012. The largest demand comes from the electricity generation for natural gas.

88 Table 33: The Sectorial Distribution of Natural Gas Consumption (%)

Electricity Generation

Industry Heating Sectorial Consumption Share in 2011 47.89 26.46 25.65 Sectorial Consumption Share in 2012 48.10 25.40 26.50

Resource: EMRA, Yearly Report, 2013

Along with the widespread use of natural gas, underground storage of natural gas came on the agenda. Nearly all countries using natural gas have the natural gas storage. For example, Germany has 75-day, England has 90-day storage facilities. Because of the natural gas cuts encountered with Iran in recent years and Russia-Ukrainian crisis, the necessity and importance of the storage was understood very clearly.

Beside natural gas cut from the supplier countries, take or pay obligation of the natural gas is also necessitates the storage. Turkeys’ demand for natural gas reaches peak in winter but decreases in summer. In other words, the supply and demand of the natural gas cannot be in compliance every time. Therefore, in order to harmonize the supply and demand, the natural gas storage is needed. Otherwise, although you do not use them, you have to pay the bill of the gas. This obligation is one of the main reasons of widespread of the power plants based on natural gas in Turkey. Because, especially in the economic crisis, the natural gas demand decrease sharply and Turkey had to pay the non-used natural gas bill to the supplier countries. To prevent this, Turkey supported the new electricity plants based on natural gas in 1990s.

As mentioned, like being in electricity consumption, harmonization of natural gas supply and demand very important for our country. Because of the increasing heating needs, the natural gas demand increases in winter but decreases in summer. In case of any supply cut of natural gas, Turkey can easily fall into the dark because of the high dependency on electricity production to the natural gas. Therefore, storage of natural gas is very important to sustain energy security and harmonization of demand. For these reasons, Turkey built an underground storage facility in Silivri having 2.6 billion m³ capacity. Since the reproduction capacity of this facility is low, the TPC has been trying to increase reproduction capacity of Silivri storage.

89 Apart from Silivri, another storage facility has been building in Salt Lake having 1.478 m³ capacity. When the storage fields are finished in 2018, excess supply can be stored in summers and totally 115 million m³/per day natural gas can be injected from these storages (75 million m³/per day from Marmara and 40 million m³ per day from Salt lake). Turkey targets to balance the supply and demand of natural gas, particularly to meet the peak traction, and to bring a solution security problem of the country with these two underground storage projects.