Turkish energy: not enough storage

by David O'Byrne | Financial Times


There is an oft-repeated mantra used to help explain Turkey’s perennially problematic current account deficit: “A $10 rise in the oil price adds $4bn to the current account deficit and half a percentage point to the inflation rate”.

It’s a simplification but it does neatly sum up Turkey’s position as a country with few energy reserves of its own. What it doesn’t tell you is the extent of Turkey’s dependence on imported gas and, given the country’s economic growth, how it is starting to look irreversible. Now the question is whether Turkey can get enough gas at the right time to avoid shortages.

Indeed, as successive speakers at the Gas to Power 2013 conference in Istanbul this week pointed out, the main challenge facing Turky’s energy sector is not how to reduce dependence on gas but rather how to get more of the stuff.

Despite official pledges to reduce the country’s gas burn, efforts to diversify have been slow-moving. Around 40 per cent of Turkey’s power is generated by burning imported gas.

There is an official target of 20GW of wind power capacity by 2023 – but few believe that anything more than a faction of the target is attainable. Incentives to encourage development of low-grade domestic lignite coal are only now being introduced.

More worryingly, new gas-fired facilities are still being developed, with around 9GW already licensed and expected to be commissioned by 2018, for which new gas supplies will have to be found.

But even before these come on stream, shortage of supply is a major threat.

At the conference, delegates were told by speakers from the private and public sectors that it was only thanks so abnormally mild weather this winter that Turkey avoided a repeat of the shortages experienced a year ago. Back then, abnormally cold weather coincided with cuts in supply from Iran and Azerbaijan. Despite gas and power cuts there was an 18 per cent spike in consumption.

This winter’s mild weather helped avoid cuts and peg consumption for 2012 at 45bn cubic meters. It is expected to limit demand this year to the 48bn cu m previously predicted for last year.

But that is still worryingly close to the 52.5bn cu m a year maximum Turkey currently has available. Another 2bn cu m of Algerian liquefied natural gas is expected from 2015 onwards. Otherwise, barring the unlikely event of Turkey importing gas from northern Iraq, no more new gas will be available to Ankara until the planned completion of the TANAP pipeline from Azerbaijan in 2018.

Until then Turkey will have to muddle through with a combination of extra imports of expensive spot LNG and making the best of its existing infrastructure.

The main factor limiting imports through existing pipelines is the big difference between daily maximum demand in peak periods in winter and low demand in summer.

While the current volume of gas available is an annual 52.5bn cu m, the daily maximum Turkey’s grid can handle is 185m cu m, which translates to 67.25bn cu m per year at maximum capacity – more than enough to meet demand.

The difference becomes more apparent when looking at Turkey’s main western import line, the Transbalkan pipeline. It consists of two parallel pipelines carrying a total of 14bn cu m/yr of gas. But it has a maximum capacity of 50m cu m/day, or 18.25bn cu m/yr, and could be used to import extra gas from Russia.

What Turkey lacks, and what planners have failed to allow for, is enough storage capacity to allow the import of more gas during low demand summer months to feed extra demand during the winter peak period.

Currently, the country has only one storage facility, in a disused gas field under the Sea of Marmara. Plans are afoot to increase capacity of this facility and to construct a second facility under a salt lake in central Turkey. It is unclear whether this increased capacity will be available in time to help alleviate any future shortages.

Source: http://blogs.ft.com/beyond-brics/2013/03/15/1214832/#axzz2Nu1torrd