Energy: Oil & Gas 2023 - Part 4

Trends and Developments

Advancing Türkiye in the Energy Market

Türkiye relies on imported resources to meet its primary energy demand, despite being located adjacent to approximately 60% of the world’s entire proven oil and natural gas reserves. At the same time, since 2000, Türkiye has been the second-largest economy after China in terms of increase in natural gas and electricity demand.

Türkiye’s energy strategy over the past few years has been shaped around diversifying resource availability in an attempt to strengthen its energy security. In conjunction with this objective, Türkiye has focused on increasing the capacity of its transmission, distribution, and storage facilities, establishing new floating storage regasification units (FSRU), and prioritising cross-border crude oil and natural gas pipeline projects such as the Baku–Tbilisi–Ceyhan (BTC) oil pipeline and TurkStream natural gas pipeline coupled with the opening of Silivri Natural Gas Storage. These are projects that complement Türkiye’s policy vision of becoming an energy hub, bridging natural gas from the Caspian Basin, Central Asia, the Middle East, Iran, and the Eastern Mediterranean Basin to Europe.

As per the strategic plan for 2019–23 announced by the Ministry of Energy and Natural Resources (MENR), Türkiye also envisions becoming an energy trade centre as opposed to simply remaining a bridge or crossroads of converging energy markets. The Energy Markets Operator Company of Türkiye (EPİAŞ) launched its natural gas futures trading platform on 1 October 2021, building on its know-how and experience as an operator of natural gas and power exchanges.

Türkiye starting to benefit from its Black Sea natural gas resources

Türkiye is also looking to improve its position as an energy producer and investing in offshore exploration, an ambition that has been rewarded by the discovery of natural gas in the Black Sea. As Türkiye’s oil and natural gas demand is met through imports, the country has focused on oil and natural gas exploration activities to increase domestic production.

Türkiye announced that it will provide state support for a large scale project to develop the Sakarya natural gas field it discovered in the Black Sea. The investment value of the Turkish Petroleum (TPAO) project is estimated at TRY145.1 billion and the project duration is 11 years. Government support for the development of the gas field will include a customs duty exemption, VAT exemption, and a tax reduction. The project is expected to increase its annual production capacity to 14 billion cubic metres (bcm) with investments over the next 10 years. The maximum annual production from the field is expected to meet about 30% of the country’s annual gas consumption.

In 2023, Türkiye started to deliver the country’s first natural gas to an onshore plant from the reserve discovered in the Black Sea. The natural gas is brought to the Filyos Processing Plant via a 170-kilometre pipeline and will be connected to the national system with pipes.

The goal is to start daily production with ten million cubic metres (mcm). Production in the field will be increased up to 40 mcm within three years. The natural gas extraction process will proceed in phases. Five of the ten wells planned within the scope of Phase-1 have been activated, and the remaining five wells will be activated at the end of September 2023. Phase-2 production is expected to start in 2026, and Phase-3 is expected to start in 2028 with the inclusion of the Amasra Field. Daily natural gas production will be ten mcm in Phase-1, reaching 40 mcm in Phase-2, and 60 mcm in Phase-3. In Phase-2, it is aimed to meet the entire need of residences located in Türkiye with domestic natural gas.

Currently, the Turkish Petroleum Pipeline Corporation (BOTAŞ) imports natural gas to Türkiye through two methods. Liquefied natural gas (LNG) is imported from Algeria and Nigeria and natural gas is imported from Russia, Azerbaijan, and Iran through pipelines within the framework of long-term contracts. BOTAŞ also imports spot LNG from the US and Qatar

Türkiye continues to expand its floating storage and regasification units

Ertuğrul Gazi, Türkiye’s first publicly owned FSRU, delivered approximately 2.1 bcm of gas to the national transmission grid. The first LNG floating ship had a storage capacity of 139,000 cubic metres and could supply 14 mcm of gas per day to the Turkish natural gas grid. Türkiye is getting ready to integrate its third FSRU in 2023. The ship, Vasant, which will operate at the facility, is en route to its final destination of Saros, which is planned to commission the new FSRU LNG import terminal in north-western Türkiye in addition to the two existing FSRU import terminals in İzmir and Hatay.

Türkiye will become a natural gas hub

In late 2022, Türkiye expanded its Silivri Gas Storage Facility increasing the storage to 4.6 bcm of gas at the Silivri Natural Gas Storage Facility, up from an earlier capacity of 3.2 billion. The site’s daily withdrawal capacity has increased from 28 mcm to 75 million. With the completion of the expansion works, the Silivri Natural Gas Storage Capacity has become the largest underground gas storage facility in Europe.

The sanctions against Russia resulted in Türkiye playing a pivotal role in the transportation of natural gas. The development of trans-shipment and exchange terminals for Russian gas has been proposed, potentially making Türkiye a significant centre for the sale of Russian gas to third countries. Türkiye has extensive LNG import infrastructure and believes it can leverage its existing and new trade relations to become a natural gas hub.

BOTAŞ and its Bulgarian counterpart, Bulgargaz, began the first gas shipment from Türkiye to Bulgaria under a 13-year agreement on April 2023. The general manager of BOTAŞ explained that Türkiye’s daily LNG gasification capacity is 161 mcm and is planned to be further expanded. This gas infrastructure will benefit neighbouring Bulgaria and other European countries, processing over 50 bcm per year.

Oil and gas discoveries continue

While Türkiye is advancing in energy infrastructure, it has increased its search both offshore and onshore. In early May 2023, Türkiye announced the discovery of one billion barrels of oil in a field located in the southeast province of Şırnak, the largest onshore oil find in the country. The stateowned company, TPAO, has drilled 2,771 metres deep so far and found an oil-bearing reservoir over 162 metres in thickness, with further prospects to be explored in the area. The well, called Martyr Aybüke Yalçın-1 and located 20 kilometres (12 miles) to the north-west of Cizre town, currently produces approximately 10,000 barrels of oil per day. This was the second discovery of oil since December 2022, when Türkiye found an oil reservoir with a production capacity of 150 million barrels in the south-east’s Mount Gabar area. After these recent discoveries, the production target was set for 100,000 barrels per day, which doubles Türkiye’s existing oil production.

On the other hand, TPAO announced the discovery of a potential natural gas field in the South Akçakoca Sub-Basin (SASB) area off the shore of the Turkish Black Sea. The SASB gas field encompasses a total licence area of 12,385 hectares. Natural gas was found in the field in the sandstone reservoirs lying at a depth of between 1,100 and 1,800 metres.

Conclusion

While Türkiye has experienced its share of problems following the global lockdowns in response to the fight against COVID-19 and the global tensions caused by the invasion of Ukraine, the energy market is, and will remain, a top priority from Türkiye’s strategic perspective. Considering the country’s potential for growth, it is expected that Türkiye’s energy use will grow by 50% over the next decade. The Turkish market is eager and eligible for new investments that will feed into the country’s increasing energy demand. This need, coupled with the Turkish government’s appetite for converting the country into an energy hub, will accelerate developments in the oil and gas sector in Türkiye.

* First published by Chambers and Partners.

** The original version of the Article can be found at this link