Botas had originally forecast that Turkey would require 23.3bcm of gas in 2002, but the continuing economic crisis has forced it to revise its figures, although the company has yet to comment officially. Analysts say that even the revised figure of 21bcm is far too high and point out that Botas has consistently overestimated demand in Turkey, claiming that gas demand would have to grow five times faster than the economy this year. Early indications are that in 2001 gas demand stagnated at around 14.6bcm- the same as the previous year and still considerably higher than independent estimates.
Aside from the current economic crisis meaning that industrial production has slowed and that individual homeowners are being more careful with usage, construction of the gas distribution networks and of gas-fired power stations was interrupted by the 1999 earthquake. For example, towns and cities along the routes of pipelines are to have their networks receiving gas from the pipeline, but are not yet connected. The government has tried to urge private companies to get involved, but these have been unwilling because of the costs of such a project.
Last year Turkey bought 15bcm of gas from abroad, with around 14bcm of natural gas coming from Russia and most of the rest as liquefied natural gas (LNG) from Algeria and Nigeria. Meanwhile further projects to import gas to Turkey are moving ahead rapidly as Botas expects demand in 2010 to be 55bcm and in 2020 to be around 82bcm while supply will be around 56bcm in 2020. Despite analysts’ expectations that the 2010 figure may be as much as 40% too high, and even companies with a vested interest in supply such as the Italian energy firm Eni place demand at only 38bcm in 2010, Botas has not significantly revised its forecasts.
According to Cakan the pipeline from Iran began operations on December 10th. Initially Turkey will buy 3bcm per year, a figure that is to reach 10bcm per year by 2010, under the terms of a 25-year deal signed in 1996. The Blue Stream pipeline project to eventually bring 16bcm per year from Russia via the Black Sea should begin operations late in the first half of this year, according to the Executive Director Domenico Dispenza of the Italian firm Snam- a unit of Eni- that is jointly developing the pipeline with Gazprom of Russia. Official expectations are that this controversial project will deliver around 2bcm in 2002, rising to 4bcm in the following year. The Turkish connection from Samaun on the Black Sea to Ankara has already been completed according to Cakan on January 11th. The geo-politically important gas pipeline from Azerbaijan’s Shah-Deniz field to Turkey is expected to transport around 6bcm per year to Erzurum from 2005.
Turkey’s gas consumption is likely to grow in 2002, although probably slower than Botas expects. A number of power stations are due to be completed, mainly around the Marmara region, but these are unlikely to account for all of the projected growth in demand. Analysts foresee a need to build storage capacity in Turkey, which is unlikely to be built before 2005, as turkey has a “take or pay” contract with Russia’s Gazprom for the Blue Stream gas. Although Botas has been trying to bargain down the amount in its contract, according to December reports, analysts expect that the surplus will still leave Turkey liable to $700m a year.
Within Turkey a debate has arisen over the cost of natural gas to the consumer. As the price of gas is indexed to the US Dollar prices to home users have risen by almost 100% in the last year and on January 7th Cakan proposed reducing prices by some 15% following a meeting with Botas officials and mayors of five of the largest of Turkey’s cities. According to energy analysts Botas buys gas at around $70 per 100 cubic metres- the actual price in confidential as a condition of bilateral agreements- but costs home users $230 in Istanbul.
In Istanbul, Ankara and Izmit the gas is distributed to consumers by the respective municipalities, who take the revenue. Following the January 7th meeting Botas agreed to cut its prices to the municipalities by almost 7%- as a concession to the appreciation of the Turkish Lira compared with the dollar in recent weeks. Botas and the minister claimed that the municipalities were over-charging customers, persuading them to reduce prices. The mayor of Ankara Melih Gokcek did not agree to the conditions and although he conceded a total price reduction of almost 27% he still has further demands. He claims that Botas should make a total reduction of 18%.
Further to this problem is the issue of 18%Value-Added-Tax (VAT) on gas. Consumers are still not happy with the price and are demanding that the tax rate be cut to 8%, an unlikely proposition as this would probably cost the state a total of around TL100 trillion ($71m) per year in lost revenue. A boost was given to consumers at the meeting however, the implementation of a Fuel Consumption Tax on natural gas will be suspended until May this year.
