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Turkey at Cusp Of Critical Gas Supply Decision Pre 2020s

Turkey will be offered a window of opportunity to regulate gas prices when the country's natural gas contracts expire at the beginning of the 2020s, Volkan Ozdemir, chair of the Institute for Energy Markets and Policies (EPPEN) said Thursday.

The Turkish-Russian Energy Experts Roundtable meeting, hosted by Anadolu Agency in cooperation with Russian news Agency TASS, started Thursday in Istanbul where a session entitled Natural Gas in Future Energy Mix was moderated by editor in chief of TASS, Maxim Filimonov.

Speaking at the session, Ozdemir said that Turkey has become a very significant gas player as the 6th biggest gas importer in the world. This was in part thanks to Turkey's increased liquefied natural gas (LNG) capacity because of floating LNG storage.

Projecting ahead, Turkey will have to consider if it will decrease natural gas prices in the renewed contracts after 2020s and take into account whether long-term contracts or spot market pricing would be the better option to feed the country's gas needs, Ozdemir said. Consequently, he surmised that Turkey is at the cusp of making significant decisions for its international gas contracts.

Ozdemir also drew attention to the TurkStream gas pipeline project to deliver Russian gas directly to Turkey. The TurkStream project is an export gas pipeline set to cross beneath the Black Sea from Russia to Turkey and also further extend to Turkey's borders with neighboring countries.

The TurkStream, consisting of two lines, will have a total capacity of 31.5 billion cubic meters (bcm).

Turkey will receive 15.75 bcm of the gas while the remaining capacity will be sent to Europe. "I can say that TurkStream has a serious strategic advantage for Turkey because Turkey will get rid of any transit risk while buying gas from Russia," he explained. Turkey currently receives gas from Russia via the Blue Stream and the West Line through Ukraine.

"Additionally, as it seems that the second line of the TurkStream will go to Europe through Bulgaria, and Turkey for the first time will be an intermediate user of Russian gas whereas Turkey is currently an end user," Ozdemir said.

- "December 31, 2019 refers to crisis date"

Sohbet Karbuz, director of Hydrocarbons at Mediterranean Observatory for Energy (OME), also underlined the importance of the TurkStream project as it removes transit risk for natural gas to Turkey.

Dec. 31, 2019 is a critical date for Turkey when its gas contract with Gazprom and Naftogaz will end. However, thanks to the first line of TurkStream, Turkey will be able to avoid any supply crises.

Nonetheless, although the TurkStream will plug any supply gaps, Karbuz said he considers the project will not offer economic advantages to Turkey and will not contribute to its efforts to become a natural gas hub.

"Having a number of natural gas pipelines does not mean that country will become a natural gas hub. Becoming a natural gas hub takes at least 10 years and oil-indexed pricing will not let a hub grow," he explained.

"Thus, I can say the TurkStream will contribute more to Russia. Europe will be more dependent on Russian gas because of both the TurkStream and the Nord Stream 2 but this dependency will not have any negative meaning because Europe will be using cheaper gas. Nobody can compete with Russian gas," Karbuz concluded.

The Nord Stream 2 is a 1,230 kilometer-long pipeline project that plans to carry 55 billion cubic meters of natural gas per year, enough to supply 26 million European households. It is set to be operational by early 2020.

(Anadolu Agency)

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