Turkey consumed 748 billion cubic feet (Bcf) of natural gas (nearly all imported) in 2003, up from 150 Bcf consumed in 1991. In 2003, the Turkish power sector accounted for about 65 percent of total Turkish gas demand, with the industrial and residential sectors accounting for 19 percent and 14 percent, respectively (fertilizer production took the remaining 2 percent). Prior to Turkeys severe economic problems (plus price deregulation moves) in 2001, Turkish natural gas demand had been projected to increase very rapidly in coming years, with the prime consumers expected to be natural gas-fired electric power plants and industrial users. In the aftermath of that crisis, however, state natural gas and pipeline company Botas revised its natural gas demand growth projections down sharply, from about 1.6 trillion cubic feet (Tcf) in 2005 to under 0.9 Tcf in that year, a 45 percent downward revision (see graph). Many analysts now believe that, given lower Turkish natural gas consumption forecasts, only one of the main import options under development (i.e., Blue Stream, Trans-Caspian Pipeline - TCP, Shah Deniz) -- can be supported for some time.
This sharp downward revision in Turkeys projected natural gas demand means that Turkey has signed contracts for far more natural gas than it is expected to need. To date, Turkey has signed deals for around 1.8 Tcf per year of natural gas imports in 2010, more than 25 percent above the Botas forecast for Turkish gas consumption (1.4 Tcf) in that year. Currently, about 1.1 Tcf of gas comes from Russia (0.7 Tcf), Iran (0.2 Tcf), plus Algeria and Nigeria combined (0.2 Tcf) in the form of liquefied natural gas (LNG). Turkey has one 112-Bcf/year capacity LNG terminal, adjacent to the existing Marmara Ereglisi combined cycle gas turbine power station. By 2010, over 31 percent of Turkeys gas imports are to be supplied from Russia via the Black Sea , more than 27 percent from Russia via Bulgaria, about 19 percent from Iran, about 13 percent from Azerbaijan, and the remainder from Algeria and Nigeria. Under the take-or-pay provisions of natural gas supply contracts with countries like Iran and Russia, Turkey theoretically could be forced to pay cash penalties of up to $1 billion per year if it fails to purchase contracted gas. In this context, Turkish energy officials have discussed the possibility of storing surplus natural gas in underwater depots beneath the Sea of Marmara or under the Salt Lake (Tuz Golu) in central Anatolia.If Turkish demand does not support the level of natural gas imports for which it has contracted, Turkey could become an important transit center for natural gas exports to Greece and beyond. Along these lines, Greece and Turkey signed a binding agreement in December 2003 which calls for extending an Azerbaijan-Turkey natural gas pipeline into Greece. Reportedly, the 177-mile-long pipeline would connect Ankara to Alexandroupolis in northern Greece, would supply around 18 Bcf of gas per year starting in 2006, and would cost around $250 million. After that, natural gas could be transported to Central and Western Europe via Bulgaria or via an undersea pipeline to Italy, where gas demand -- especially for electric power generation -- is expected to grow rapidly in coming years.
Turkish natural gas production in 2002 (13 billion cubic feet -- Bcf) met just 2 percent of domestic natural gas consumption requirements. Marmara Kuzey (North Marmara), which came onstream in May 1997, is the countrys largest non-associated gas field. Marmara Kuzey is located offshore in the Thrace-Gallipoli Basin of the Sea of Marmara. In March 2002, the Gocerler natural gas field was officially opened, 16 months after its discovery in the Thrace basin. Production potential is estimated to be as high as 6.6 Bcf per year. Also, in July 2001, TPAO announced that it had found gas in the Mersin and Iskenderun Bays in Turkish areas of the Mediterranean. In September 2004, TPAO said that it had found a viable gas deposit at the Ayazli-1 well off the Turkish Black Sea coast. Currently, most Turkish associated gas is reinjected into oilfields as part of an Enhanced Oil Recovery (EOR) system. Natural gas is Turkeys preferred fuel for new power plant capacity for several reasons: environmental (gas is less polluting than coal or oil); geographic (Turkey is located near to huge amounts of gas in the Middle East and Central Asia); economic (Turkey could offset part of its energy import bill through transit fees it could charge for oil and gas shipments across its territory); and political (Turkey is seeking to strengthen relations with Caspian and Central Asian countries, several of which are potentially large gas exporters). The United States, among others, has been encouraging Turkey to utilize its unique geographical position to become a major transit center for natural gas from the Caspian/Central Asia to Europe. At the same time, however, Turkeys reliance on Russia for gas imports could reach 70 percent or higher, seemingly undercutting Turkeys goal of diversifying its fuel suppliers. In April 2003, Turkish Energy Minister Hilmi Guler told Parliament that the government had a strategic goal of sharply reducing Turkeys reliance on Russian natural gas -- from 70 percent now to 30 percent within five years. This goal appears to conflict, however, with the volume of Russian gas already contracted for via Bulgaria and Blue Stream.
In October 2002, a twin 866-mile natural gas pipeline running from Russia under the Black Sea to Turkey was completed, with natural gas flows starting in February 2003, about one year behind the original schedule. The $3.2 billion Blue Stream pipeline runs from Izobilnoye in southern Russia, to Dzhugba on the Black Sea, then under the Black Sea for about 247 miles to the Turkish port of Samsun, and on to Ankara. In March 2003, Turkey halted gas imports from Blue Stream for six months, with a Botas official stating simply that we dont need the gas right now. In November 2003, Russias Gazprom announced that it had resolved its dispute with Turkey, reportedly agreeing on a new, competitive price for Blue Stream gas somewhere between the old price ($3.20 per million Btu) and Botas desired price ($2.08 per million Btu). By 2009, Blue Stream had been expected to reach peak capacity of 565 Bcf per year, but this is now somewhat doubtful given Turkeys lower gas demand forecasts. Over the course of the 25-year agreement signed in December 1997, Turkey was to import 14.1 Tcf of natural gas from Russia via Blue Stream, with the pipeline eventually extended to other Mediterranean countries, including Greece.