We Aim to Be the Trade Actor of Natural Gas

Among the top six natural gas importers in the world, Turkey aims to be the trading hub of natural gas in its region.

The natural gas sector in Turkey is going through a major transformation. With the increasing gas demand in the past 20 years, Turkey has entered among the top six natural gas importers of the world and now aims to be the trading hub of natural gas in its region.

Turkey Is Speeding Up Its Efforts to Be the Trading Hub of Natural Gas

Turkey has made significant progress in recent years in natural gas infrastructure and legislation. The rapid development of storage capacities, diverse routes of suppliers, and major infrastructure investments strengthened Turkey’s hand in an environment of increased global demand. It also increased the endeavours to become the trading hub of natural gas in the region. The fact that Turkey can import natural gas and liquefied natural gas (LNG) from entry points around the country and that people can do electricity and gas trade on Energy Exchange Istanbul (EXIST) also contribute to these endeavours.

European gas markets revealed to the Turkish businesses and energy sector the importance of the sector in strengthening a country’s economy. We can reach around $40 billion lower costs with the high level of competition between buyers and sellers and a better pricing mechanism. The timing for this is also very convenient. And with the finalisation of Turkey’s existing long-term natural gas contracts with traditional suppliers such as Russia, Iran, and Azerbaijan, which revolve around “take-or-pay” provisions, current conditions in the global gas market have also given great leverage to the country.

Besides, despite longer voyage times (and thus higher shipping costs) to Europe and Asia, Henry Hub-indexed American LNG prices present a competitive advantage edge for our region, which is indexed mostly to oil prices.

The Gas Market In Turkey Is Going Through A Radical Transformation

Considering this background, we can say that Turkey is going through a fundamental shift in the first half of 2020. Now almost half of the gas we import is LNG. And Algeria is the country with the biggest share of this import. However, the USA has leaped forward remarkably and become one of the three major suppliers of Turkey with a 174 per cent increase compared to last year between January and June. Moreover, we are working on a project initiated by Turkey-USA Business Council (TAİK) members to increase the USA’s LNG exports to Turkey and make Turkey a regional centre for the American natural gas. A deal that is involving a group of US energy firms is proposing to ship gas from multiple terminals based in the US. Turkey’s recent world-class Sakarya gas discovery can reshape the energy potentials of the region. And the deep-water potential in the Black Sea can be revealed again. It is very important as it is Turkey’s largest-ever find and the second-biggest globally in 2020 so far. Current dynamics in the natural gas market, steps to reinforce the LNG infrastructure, increasing its transmission, storage, and regasification capacities, the expiration of the current natural gas contracts with Russia, Iran and Azerbaijan are all great opportunities for the natural gas sector in Turkey. I also want to point out the hidden competition among the countries in the region to become a trading hub of natural gas and to be able to determine the reference price of the gas. Turkey cannot miss this opportunity.

An Istanbul natural gas trading hub can make use of the American natural gas liquidity in the region as leverage. If more US LNG volumes are traded in the region via EXIST in Istanbul, a major step will be taken towards the goal of $100 billion worth of mutual trade volume agreed upon by President Donald Trump and President Recep Tayyip Erdoğan. And we will be able to export gas to the countries of the region with more competitive prices.

With the recovery of the global economy and Turkey’s plans to be the trading hub of natural gas in the region, the message is clear: We cannot miss the chance to benefit from current global energy opportunities.

Merih Kepez, Deputy Secretary General at DEİK