Strategies for the Turkish Gas Market

"Let’s cooperate for establishing a sustainable and international energy Hub in Turkey for a sustainable energy future of Euro-Asia".

GTF: Mr. Baltaci, could you tell us about DIVID and its operations?

Divid was established by private natural gas importer companies in 2006 in order to contribute to liberalisation of Turkish natural gas market according to Law 4646 which was enacted in 2001. Divid, alongside its member companies, creates cooperation with all the active natural gas companies to add value to the market. As Divid our mission is to help creation of a liberal, competitive, fair and transparent natural gas market. In this regard, we study the current problems and try to develop future strategies for the Turkish gas market.

Our studies and findings are presented to the government and other public bodies through working papers, forums and bilateral discussions.

GTF: What are the opportunities and challenges in the Energy market in Turkey?

Turkey is a bridge between resource rich countries such as Azerbaijan, Iraq, and Europe where the demand for natural gas is very high with declining indigenous production. Moreover with its growing economy, Turkey is very attractive for natural gas producers mainly due to its increasing energy demand forecasts whereas it is declining in the European countries. Turkey is ambitious to become an energy hub in the region.

In order to do that, Turkey is improving its infrastructure and establishing an energy exchange. Energy exchange, called Epiaş will play a vital role in price determination according to the country’s dynamics as well as international conditions. The prices will be set by the relationship of supply and demand. Thus the investors will take a future price signal. The predictable prices will ease the investment decisions for international players. Moreover, an energy exchange will enhance the liquidity, transparency, and sustainability. This would give Turkey an edge in its region to become an energy hub. While the establishment of Epiaş, Turkey will need the experience of international communities. Due to the lack of relevant know-how Turkey will need to create collaborations with international partners. The other challenge which by the way is a major obstacle for liberalisation is the failure of unbundling of BOTAS. It remains as both the transmission system operator and trading activities under the same roof.

GTF: How do we find solutions for these challenges?

Most of the problems in the Turkish natural gas market are legislational. Therefore the Ministry Energy and Natural Resources is expected to change the legislation in order to solve these problems with the help of Energy Market Regulatory Agency (EMRA). Turkey needs to increase the number of market participants in the energy industry. Creation of Epiaş will help to accomplish it. As Divid, we are fully in line with governmental bodies in every aspect. And we believe that the future of Turkish energy market is very prosperous.

GTF: What about the liberalization of Turkish natural gas market?

The liberalisation process of Turkish natural gas market started in 2001 with the law 4646. Unfortunately some of the objectives of this law have not been achieved. The main objective of the liberalisation has been the dilution of the power of state owned company Botas. Botas was the sole importer of natural gas in Turkey in 2001 and the objective was set to reduce its import share to 20% by 2009. As of this year, Botas is still the most powerful player and imports approximately 75% of the Turkish natural gas import. Again unbundling of Botas is vital for Turkish market’s liberalisation. On the other hand, Turkey has achieved a very successful liberalisation process in the privatisation of distribution sector. Distribution tenders has been done for more than 60 cities countrywide. The number of wholesale companies is more than 40. This two numbers indicate that although there is still a long way to go, Turkey has managed to create a natural gas market, particularly in downstream. Epiaş will attract even more participants in the Turkish natural gas market.

GTF: Do you think it is important that the private and public sectors collaborate?

Energy markets cannot be fully liberal by nature. Due to economies of scale, there must be a dominant state presence on some part of energy industry. Also due to the importance of energy for nations, it should be regulated diligently. Even if the fully liberalised market has been achieved the regulatory body should ensure the fair competition, rule of law and prevent the country from any kind of manipulation and oligopoly. Hence we believe that the collaboration between private and public sector is vital for the development of Turkish energy market.

GTF: What is your biggest project to date, tell us more about it.

As you may know, an energy exchange called Epiaş is about to be established in Turkey. The integration of natural gas market into Epiaş is our main focus recently. In order to achieve this objective, Turkish natural gas market is needed to be more liberalised and became more mature. Turkish electricity market is ahead of natural gas market in terms of liberalisation. Thus Epiaş is designed for the electricity market in the first phase and natural gas market is expected to be integrated in the near future. Currently natural gas stakeholders have been working on to establish a balancing market. Balancing market will ease the introduction of natural gas market into Epiaş. An exchange where the prices are determined as the physical deliveries are made would attract the local and international investors. Natural gas prices in the exchange will give opportunities to LNG players as opposed to the current conditions where Turkish natural gas prices are below global LNG prices.

GTF: If you had a message for the international community, what would it be?

Let’s cooperate for establishing a sustainable and international energy Hub in Turkey for a sustainable energy future of Euro-Asia.

Mr. Fatih Baltaci

President of DIVID (Natural Gas Importers and Exporters Association)

Mr. Fatih Baltaci is the President of DIVID (Natural Gas Importers and Exporters Association) and he is also founder and chairman of Akfel Holding that is established in 1995 and specialized in natural gas and power supply, trading and engineering through its affiliates. Akfel Holding is the biggest private natural gas importer in Turkey . Akfel also supplies its customers with green energy from its renewable portfolio, trades in the wholesale spot market and has been one of the pioneers in the trading of power across the borders. Akfel’s team has also carried out various EPC and consultancy projects on a range of energy infrastructure projects in natural gas and power supply and distribution in Turkey and in the region.
Mr. Baltaci has been the President of DIVID ((Natural Gas Importers And Exporters Association) since 2011.
Fatih Baltaci has been graduated from Bogaziçi University with B.S. in mechanical engineering. He has been the Honorary Consul of Malawi since 1999 . He is member of TUSKON, DEIK and Turkish Chamber of Mechanical Engineers.

Published: 28/09/2013