Turkey Oil and Gas: Growing Demand

After Israel, Turkey is the only member of the Organization for Economic Cooperation and Development (OECD) in the MENA region. Within this advanced economic block, Turkey is forecast to see the highest growth in energy demand of all OECD countries. According to the International Energy Agency (IEA), energy use will continue to grow at an annual rate of around 4.5% from 2015 to 2030, approximately doubling over the next decade. The IEA expects electricity demand to increase at an even faster pace (electricity is discussed further here). Turkey’s petroleum product consumption increased relatively slowly overall in the past decade, though demand for automotive fuels and jet fuel rose more strongly. Taxes and changes from oil-fired to natural gas-fired power plants suppressed overall oil demand in this period. The modest change is illustrated by noting that total consumption in 2011 was 706,000bbl/d, up from 619,000bbl/d in 2001. In 2013, Turkey’s total liquid fuels consumption averaged 734,800bbl/d. More than 90% of crude oil consumption and significant quantities of petroleum products came from imports. Turkey has various crude oil pipelines that bring oil from neighbouring Iran, Iraq and Azerbaijan (more on pipelines in Turkey can be found in subsection 2.2.). Crude oil that is not used by Turkish refineries is transported to other countries via oil export terminals such as Ceyhan (see map 2).

As with oil, Turkey is a large consumer of natural gas but a small producer. The overall strong growth of the Turkish economy, as well as new power plants being gas fired rather than oil fired (about 60% of natural gas is used for electricity generation), is driving consumption. Consumption has increased by a factor of more than 10 in the past 20 years, and has nearly tripled in the past decade. In 2011, Turkey’s electric power sector accounted for just under half (48%) of the country’s natural gas use. The industrial and residential sectors each accounted for approximately 20% (with 6% going to commercial uses, 4% going to other uses and 1% going to transport). Natural gas demand peaks in the winter months, when natural gas use for power generation and space heating is highest. Demand during the winter months can be double the demand during the summer months, a common seasonal pattern in high gas use countries.

Most of Turkey’s natural gas imports arrive in the country via pipeline, including those from Russia (56%), Iran (18%) and Azerbaijan (8%). The majority of Russian gas arrives via the Blue Stream pipeline, although sizeable volumes also reach the large population centres in and around Istanbul via the Bulgaria-Turkey pipeline. Turkey received about 290BCF of Iranian natural gas via the Tabriz-Doğubayazit pipeline in 2012. An additional 118BCF arrived from Azerbaijan via the Baku-Tbilisi-Erzurum (BTE) pipeline in the same year. Turkey also imports liquefied natural gas (LNG) amounting to 16% of total imports, particularly from Algeria, Qatar, Egypt, Nigeria and Norway. LNG volumes arrive at the country’s two terminals, Marmara Ereğlisi in Tekirdağ and Aliağa in Izmir.

As of 1 January 2014, Turkey had six refineries with a combined processing capacity of 714,275bbl/d, according to Oil & Gas Journal (see map 2 for the locations of key refineries). The majority of this refining capacity was built up in the 1980s (see figure 3).

Tüpraş is Turkey’s dominant refining firm, operating more than 85% of the total refining capacity as well as controlling 59% of the total petroleum products’ storage capacity. Given demand – and demand growth – in Turkey, there is room for increased crude oil refining capacity. Currently, Turkey imports some products, particularly diesel, to make up for inadequate refinery output. A smaller amount of products for which refinery output exceeds local demand is exported (mostly gasoline).