- The Writer holds聽an MSc in Eurasian Political Economy & Energy聽from King鈥檚 College London and聽also an聽MA in European Studies from Sabanc谋 University.
To utilize its unique geographic position and establish a natural gas hub in the region, Turkey needs to take measures to improve its status and move further away from being an energy transit corridor towards becoming an energy hub. Firstly, among all other measures, Turkey鈥檚 regulatory environment is a major hindrance to Turkey鈥檚 ambition of becoming an energy hub.
As a vertically-integrated company, the Petroleum Pipeline Cooperation (BOTAS) has dominated the market structure and has been responsible for a variety of operations including; transmission, importation, wholesale distribution, gas storage as well as LNG operations. Since the enactment of law 4646 in 2001, private companies have been allowed to import gas and this encouraged market liberalization. Currently, seven private companies import natural gas, accounting for 20 percent of overall consumption, and the remaining 80 percent of natural gas sales to end users are still controlled by BOTAS.
Currently, no clear timeframe has yet been identified as to exactly when the government will fulfill market liberalization requirements. The fact that BOTAS determines the reference price for gas, and comes under the control of the public authority, Energy Market Regulatory Authority (EMRA), leaves no doubt that significant steps need to be taken regarding transparency. If such steps are taken, it would demonstrate Turkey鈥檚 desire to open its gas market to fair competition. The establishment of EMRA has brought about some new developments to the regulatory environment, especially to the secondary legislation which is helping the formation of sophisticated market conditions.
Through defining the main problems in the regulatory framework and the current status of BOTAS, as Atlantic Council鈥檚 Senior Fellow John Roberts notes, 鈥渟hould the Turkish gas market evolve into an open market, in which suppliers are free to strike their own deals with consumers, then, indeed, Turkey would become a true hub鈥�. Therefore, once the long-planned liberalization of the Turkish gas market is implemented, in line with the development of free pricing and gas-to-gas competition, many more players will be able to join the gas market, resulting in the creation of hub pricing in the long-term similar to the U.K.鈥檚聽National Balancing Point, commonly referred to as the聽NBP, or the Netherlands鈥� Title Transfer Facility (TFF) gas hub.
One prominent example of market liberalization which BOTAS could emulate is in Italy where an already-initiated successful market is in place. There, the transmission system operators such as Snam Rete Gas, Societa Gasdotti Italia and Infrastrutture Transporto Gas determine and are responsible for external supplies, while the domestic market is left in the hands of various gas providers.
According to corporate analyst Kivanc Zaimler, the gas industry would need approximately ten years to change its market structure on condition that 鈥済as companies in the domestic market have to have greater independence from the gas supplier.鈥�
Currently, the current vertically-integrated gas market structure in Turkey has created a situation in which no price can be determined by other smaller suppliers, preventing competition in gas pricing. Therefore, a major regulatory overhaul needs to be implemented, starting with the opening up of markets to various prospective investors and the lowering of BOTAS鈥� market share which is currently approximately 80 percent.
聽It should also be noted that the gas market can only be liberalized, become transparent and competitive when BOTAS unbundles into four bodies -- imports, transmission, storage and sales 鈥� as envisaged by the natural gas law 4646. Once this unbundling is completed, the currently established competition structure and private companies鈥� access to the gas market will be significantly improved, paving the way for a better prepared energy market for Turkey, which in turn would ease transition from being a corridor to a genuine energy hub.
This unbundling was planned to be completed years ago, but there has still not been any significant step taken towards adjusting the gas market structure. The model used in Italy could offer a promising example for the Turkish market.
- Opinions expressed in this piece are the author鈥檚 own and do not necessarily reflect Anadolu Agency's editorial policy.聽