Turkey is one of the fastest-growing energy markets in the world, paralleling its economic advancement over the past 15 years. Endowed with significant resources, Turkey’s energy sector has become its most yielding and promising market attracting a growing list of private sector investments. The sector is gaining prominence within its geographical zone, making way for radical energy reforms by the Turkish government.
The energy resource market has been liberalized by the government within a transparent, open, and sustainable regulatory environment. To strengthen the Turkish economy, the Ministry of Energy and Natural Resources has expressed positive expectations of both onshore and deep-sea projects.
According to a recent announcement, Turkish President Recep Tayyip Erdogan revealed that Turkey has made its biggest ever energy resource discovery in the Black Sea in the form of natural gas. It has found 320 billion cubic meters of reserve and is planning to begin production by 2023. It is estimated that the scales of the reserves will potentially meet the energy needs of Turkey for more than 20 years.
Before the revelation, President Erdogan had stated that he would be disclosing a “very good” news which would usher in a “new era” for the nation.
Shifting Market Sentiments
Before Erdogan’s revelations, shares in the petrochemical manufacturer Petkim Petrokimya Holding AS and the refinery company Turkiye Petrol Rafinerileri AS, or Tupras, jumped significantly by 9.9% and 7.6% respectively. The central bank also opted to tighten policies by stealth, avoiding any changes in the benchmark interest rates. The Turkish president further took the opportunity to reiterate his vow that the country would continue pursuing energy exploration in eastern Mediterranean waters.
The speculations had earlier led to the dominance of Lira against the dollar and traded with a surge of 1.2%. The benchmark Borsa Istanbul 100 index had also increased by 3%. However, after the official statements surfaced, the lira inversed the earlier gains against USD and went down by 0.3%. The Borsa Istanbul 100 index also plunged, giving up 1.8% of its gains, possibly because of the disappointment over the size of the find.
Last month, Energy Minister Fatih Donmez said that the drilling ship Faith had commenced exploration in the Tuna-1 zone, located on the offs of the Turkish town of Eregli. Some 150 kilometers from Turkey’s coast, Tuna-1 is in close proximity to areas where maritime borders of Bulgaria and Romania converge. According to a Turkish Navy website, the Faith has been successfully carrying out drilling operations since around mid-July in the Tuna-1 area.
In order to increase its market shares in Turkey and scale down Russia’s dependence on Ukraine, the Gas giant Gazprom PJSC has opened the TurkStream pipeline under the Black sea as a transit route.
Setting aside these drilling propensities, Turkey’s energy hub and security ambitions are further being analyzed in the proactive transformation of its natural gas storage infrastructure. The Tuz Golu underground storage expansion was termed as the ‘largest under-construction storage project in the world’ with capacities to reach approximately 20 percent of its annual consumption.
How will it affect the Turkish economy?
Turkey’s march towards greater energy resource independence has been on the right track. The scale of the Black sea reserves signals a major find in the territory and foreseen as the biggest source of natural gas in the country. After the production begins, Turkey’s natural gas import bill will drastically decrease, boosting government finances and easing global pressure on the Lira.
The energy resource will bring profound changes and benefits in the sector, improving the balance of value-added manufacturing and employment in the country. It has the potential to drive economic growth and incentivize Turkey’s local production capabilities in the coming years.