- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
With its geostrategic importance and proximity to major global oil and gas fields in the Middle Eastern and Caspian region, Turkey has become a major energy transit country in the region with diverse supply routes and sources as well as an established reputation in energy security. Indeed, operational oil and gas pipelines including the Baku-Tbilisi-Ceyhan, Baku-Tbilisi-Erzurum and the under construction Trans-
Anatolian pipeline, in addition to its two main straits in the Bosporus and
Dardanelles, gives the impression that Turkey is not merely an energy transit country, but is an energy hub in the making which is only likely to flourish and become more significant in future years.
Even though a substantial percentage of the world’s energy supplies have passed through Turkey in recent years, nonetheless, Turkey needs to overcome certain difficulties in order to become a genuine energy hub in the region.
Turkey’s very first natural gas reserves were discovered in 1976. Since then, overall consumption has increased for industrial and household consumption but also for natural gas utilized for electricity generation. This then necessitated the import of supplies. By 1984 Turkey had signed a memorandum of understanding with the U.S.S.R. to import natural gas, and in 1986, an agreement was signed between the Turkish Petroleum Pipeline Corporation and Soyuzgazexport, Russia’s state gas export company, later to become Gazprom Export, to carry gas through the Russia-Turkey West Pipeline for a 25 year period. Also in the same year, Turkey signed an agreement to import LNG and natural gas from Algeria via marine transportation.
With the aim of creating a framework for the natural gas sector which would prove competitive and encourage a transparent market structure, a new law was enacted in 2001. Following recent developments in the natural gas market law, the enactment of the Natural Gas Market Law in 2001 has brought liberalization targets to Turkey’s gas market. As a result, the Turkish natural gas market has opened up and has been a key component to guarantee energy supply security. Given the substantial increase in the consumption of natural gas in Turkey - reaching 48.4 billion cubic meters in 2015, according to the Energy Market Regulatory Authority’s figure - Turkey’s natural gas market has become more attractive for national and foreign investors reflecting the positive outcome in the progress achieved through regulation.
The diversification of energy sources and routes in addition to a secure energy supply has become an important issue for Turkey. To this end Turkey constructed its first pipelines between 1977 and 1987 at Kirkuk-Ceyhan on the Mediterranean coast.
It is important to distinguish the difference between an energy corridor and an energy hub in establishing the role that Turkey can play. Both roles have been used interchangeably often incorrectly and have been thoroughly debated.
As a common delivery point, a gas hub serves both the buyers and the sellers as an entry and exit point to trade and transfer gas. Turkey would need plentiful gas from numerous suppliers with volumes way above the country’s current consumption to create a gas surplus, which could then be re-exported through hub channels. An energy hub, therefore, requires a mixture of a variety of sources in which no party has the ability to override the wishes of any other party. Above all, an energy hub offers both financial as well as physical trading which covers LNG, pipelines and well-constructed storage capacity.
In the case of an energy corridor country, on the other hand, a variety of gas and oil pipelines pass between the hydrocarbon-rich East to the energy-hungry West as a natural bridge. However while corridor countries also receive transit fees, they have no right to re-export oil and gas that pass through their territory.
Turkey’s position as an energy corridor means that in energy negotiations it would remain a ‘price-taking’ rather than a ‘price-setting’ country, determining neither the prices charged nor quantities granted for energy importing countries.
Given Turkey’s strategic importance, the elevation of its status to that of an energy hub could potentially boost Turkey’s prospects to enhance the provision of energy security both at home and for the EU market. Since Turkey’s EU accession negotiations have reached stalemate and the EU’s energy acquis has not yet been negotiated, a carefully constructed framework for the designation of a gas hub in Turkey should be proposed. For Turkey to become an authentic energy-trading hub would be the best option to serve the country’s long-term interests.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.