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Several large new natural gas discoveries in Turkey will be
developed over the coming decade. Though the gas is thought to be
relatively dry, production should be large enough to justify
recovery of some propane and butane. Turkey currently imports close
to 3 million metric tons of LPG per year, so any new domestic
production will welcome. IHS Markit does not believe LPG production
will be large enough to significantly change Turkey's LPG balance,
but it will help to reduce total import demand over the long
term.
Turkey Natural Gas Production
Total gas production in Turkey averaged about 0.7 BCM between
2000-2020. Nearly all of this gas is associated with crude oil
production. This is miniscule compared to the domestic demand which
is close to 50 BCM per year. As a result, Turkey imports most of
its natural gas from Russia, Azerbaijan and Iran. Turkey has ramped
up exploration for oil and gas off its coasts in recent years.
Turkey's first national drillship Fatih, owned and operated by the
state-owned Turkish Petroleum Corporation (TPAO), discovered 405
BCM of natural gas last year in the in 2020 at the Tuna-1 well
located within Sakarya Gas Field, about 170 kilometers off Turkey's
Zonguldak coast in Black Sea. This was Turkey's largest discovery
ever in its history and the biggest offshore gas discovery
worldwide in 2020. Another 135 BCM of gas was discovered at the
Amasra-1 offshore well in 2021 bringing the total amount of
deposits discovered over the past year to 540 BCM. Turkey plans to
begin pumping gas from Sakarya Gas Field in 2024 but must first
build the offshore pipeline network and processing facilities. The
rate at which gas will be produced is not known at this time.
In addition to the implications for Turkey's natural gas
balance, the new gas production could also yield LPG (propane and
butane) that would be additive to domestic supply. Turkey produces
about 1.0 million metric tons per year of propane and butane from
its refineries, but must import the majority of its supply. Crude
oil throughput in Turkey's refineries increased substantially in
the 2015-2017 period, resulting in growing LPG production. In 2020,
domestic LPG production was 0.97 million metric tons, and total
demand was 3.87 million metric tons, so Turkey imported 2.9 million
metric tons. LPG imports used to come mainly from the CIS. As
supply via the Black Sea has declined, Turkey now gets most of its
LPG via waterborne cargoes from Algeria, the United States,
Kazakhstan and occasionally the North Sea (see Figure 1).
Turkey has several import terminals with the capability to
receive VLGCs, including at Izmir, Dortyol, and Yarimca. This has
proven valuable in recent years as Turkish importers have been able
to take advantage of low VLGC freight and low prices at the US Gulf
Coast to access US propane at good prices (sometimes enjoying a
discount to the delivered cost of propane from Algeria).
Figure 1
Gas processing in Turkey
The only existing gas processing plant in Turkey is a small 15
MMSCFD Poyraz Ridge Processing Facility, owned and operated by
Marsa Turkey BV, a subsidiary of Condor Petroleum. It processes gas
production from Poyraz Gas Field in Gallipoli peninsula which lies
within the gas-producing Thrace Basin in Northwest Turkey. The
sales gas is then transported through the 36" Inter
Turkey-Greece-Italy (ITGI) export pipeline. The gas plant produces
only natural gas and condensate.
Turkey does not currently produce any natural gas liquids (NGLs)
from gas processing. We estimate that new gas processing
facilities, with capacities approximately 1,500 MMcfd in 2024 and
1,000 MMcfd in 2030 will be needed to process natural gas
production from Sakarya Gas field beginning in 2024, see Figure 2.
The gas quality from Sakarya Gas Field is not known at this time
but is described as dry gas. Even moderately dry gas is likely to
contain NGLs in economically recoverable quantities, but it is most
likely that new supplies will only slightly reduce LPG imports.
Figure 2
Summary
The Turkish government is keen to reduce reliance on imported
energy, and increasing natural gas production is a welcome
development that will be afforded policy support. Since Turkey is
also heavily reliant on imported LPG to supply its large Autogas
market, any opportunity to recover propane and butane from domestic
natural gas and reduce the need for imports will also be
prioritized, even if the net impact is small. For this reason, even
if gas quality is such that NGL recovery is not technically
required to meet pipeline specifications, we believe that NGL
recovery is likely to be added to any new gas processing plants
where NGLs can be recovered in great enough quantity to provide an
adequate return on investment. No specific policy support for this
has been announced, but it is possible that the government will
provide preferential financing or other incentives to limit the
investment risk.
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