Prepare for Gas Market Liberalization in Turkey
Investors, contractors, entrepreneurs beware! A long awaited natural gas market liberalization in Turkey appears on the horizon. A draft bill with 14 clauses regarding natural gas market liberalization has been submitted to the Turkish Parliament.
The key points for the submitted bill can be read below:
- Petroleum Pipeline Corporation or BOTAS, state-owned natural gas import and distribution company established in 1974 will be divided into three. The new entities will be natural gas distribution, operating of LNG terminals and storage facilities and other service activities. Currently, all the pipeline operations in Turkey are handled by BOTAS, as well as natural gas imports
- BOTAS will not be allowed to engage in new natural gas import contracts or renew expiring contracts until its natural gas imports drop to 20% of national gas consumption.
- The Privatization Authority of Turkey will determine the terms of privatization of Istanbul Gaz Dagitim AS or IGDAS, natural gas grid of the Municipality of Istanbul.
In January 2013, the Privatization Authority sold the natural gas distributor Baskent Dogalgaz Dagitim AS - Baskent Gaz (Ankara, Turkey), the second-largest natural gas grid company after Istanbul's IGDAS. Torunlar Gida, which has interests in construction, real estate and agriculture businesses, had given the highest bid of $1.16 billion.
Currently, Turkey imports 58% of its natural gas needs from Russia, 19% from Iran, 13% from Azerbaijan and 8% from Algeria. The remainder comes from such as Nigeria and LNG imports from Qatar. Last year, Turkey imported 39.8 BCM of gas for its natural-gas dependent electricity generation. The share of natural gas powered power plants of total electricity production is currently above 50%.
PACE OF REFORMS?
Reducing the share of BOTAS in the cumulative natural gas imports of Turkey has been a long-standing goal, but the results will be limited due to the long duration of the existing gas import contracts, market participants said.
"Turkey needs to increase its pace of reforms to liberalize the natural gas market. The different natural gas sources must compete with each other after the liberalization," a C-level executive of Turkish energy company said on condition of anonymity.
"BOTAS need to be concentrate and focus its efforts on gas distribution. If natural gas distribution in the country will not be enough to satisfy consumers, Turkey's natural gas and energy sector could not be strong," the executive said.
"If this (liberalization) will not be done properly, Turkey's 'energy hub' dream may fade in a second."