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THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Dr. Muzaffer ERTÜRK ICCI-2010

THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Dr. Muzaffer ERTÜRK ICCI-2010 12 - 13 - 14 Mayıs 2010 WOW Convention Center - İstanbul. THE IMPORTANCE OF ENERGY AND NATURAL GAS.

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THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Dr. Muzaffer ERTÜRK ICCI-2010

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  1. THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Dr. Muzaffer ERTÜRK ICCI-2010 12 - 13 - 14 Mayıs 2010 WOW Convention Center - İstanbul

  2. THE IMPORTANCE OF ENERGY AND NATURAL GAS In the world economy, there has been a great demand of energy input, because of increasing population, technological change, economic growth. On the other hand, there is a scarcity of energy. For this reason, both countries and firms seek to efficient usage of energy, lower cost, sustainability, sensitivity for environment. Among the alternative energy resources, natural gas has a many advantages mentioned above, for this reason, both firms and countries has a increasing demand of natural gas. However, it is not easy to design and to manage a system in which can allocate the inadequate resources efficiently.

  3. THE IMPORTANCE OF ENERGY AND NATURAL GAS In the International Energy Outlook 2009, Energy Information Administration (EIA), it is stated that with world oil prices assumed to return to previous high levels after 2012 and remain high through the end of the projection, consumers opt for the comparatively less expensive natural gas for their energy needs whenever possible. In addition, because natural gas produces less carbon dioxide when it is burned than does either coal or petroleum, governments implementing national or regional plans to reduce greenhouse gas emissions may encourage its use to displace other fossil fuels.

  4. THE IMPORTANCE OF ENERGY AND NATURAL GAS Natural gas remains a key energy source for industrial sector uses and electricity generation throughout the projection. The industrial sector currently consumes more natural gas than any other end-use sector and is expected to continue that trend through 2030, when 40 percent of world natural gas consumption is projected to be used for industrial purposes. In particular, new petrochemical plants are expected to rely increasingly on natural gas as a feedstock—particularly in the Middle East, where major oil producers, working to maximize revenues from oil exports, turn to natural gas for domestic uses. In the electric power sector, natural gas is an attractive choice for new generating plants because of its relative fuel efficiency and low carbon dioxide intensity. Electricity generation accounts for 35 percent of the world’s total natural gas consumption in 2030, up from 32 percent in 2006.

  5. THE IMPORTANCE OF ENERGY AND NATURAL GAS In the International Energy Agency (IEA), (2009), Natural Gas Market Review (NGMR), it is claimed that during 2008, natural gas moved from a relatively tight supply and demand balance to an easing one. This will accelerate during 2009 as new supply capacity comes on line. Overall there was a 1% annual increase in OECD countries in 2008: gas demand rose strongly in the first half of 2008, but declined over the last quarter and fell even more rapidly in early 2009. For 2009, we anticipate demand to decline, especially in the industrial sector. Gas demand in the power generation sector will be affected differently in each region depending on the relative gas and coal prices. Demand is expected to rebound in the medium term driven by the power generation sector.

  6. THE IMPORTANCE OF ENERGY AND NATURAL GAS Figure-1 demonstrates the evolution from 1971 to 2007 of world total primary energy supply by fuel (Mtoe). It is clear that energy supply has increased. The share of oil has decreased and. the share of gas and nuclear energy have increased

  7. THE IMPORTANCE OF ENERGY AND NATURAL GAS Figure-2 demonstrates the evolution from 1971 to 2007 of natural gas production by region (billion cubic metres). It is clear that natural gas production has been increased. The market share of the Former Soviet Union and the Middle East has importantly increased. The share of OECD countries has importantly decreased. These differentiations also affect the economic and political power of the countries.

  8. THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Turkish economy has a great economic growth and industrialization potential. When the economy catch the stabile economic development path, than, Turkish economy dramatically grows. From the 2001 crises to 2008 world financial crises, Turkish economy shows the great economic growth performance. Figure-6 Natural Gas : Gross Domestic Consumption (ktoe and %change yoy) stated that, Turkey is a rather atypical OECD member country, as it is currently undergoing a high economic growth and high industrialisation phase. Between 2000 and 2007, GDP grew by nearly 40%, even allowing for the banking crisis of 2001 when GDP declined 7.5%. Natural gas has met a major part of Turkey’s rapidly growing energy needs, rising from 6% of supply in 1990 to more than 30% in 2007. Between 2000 and 2007, it doubled its share, representing in absolute terms a 150% increase, so that gas demand is now comparable with that of Spain.

  9. THE ROLE OF NATURAL GAS SECTOR IN TURKISH ENERGY SECTOR Turkish economy heavily depends on the import of energy. Domestic production is very low, especially, crude oil and natural gas. Figure-3 shows the total primary energy supply, the role of natural gas has been increased. Figure-4 demonstrates energy production of Turkey, it is clear that natural gas and crude oil production too low to meet the demand of Turkish economy. Figure-5 indicates net imports of natural gas and crude oil (% of total consumption), almost more than 90 percent of both natural gas and crude oil have been imported. Figure-6 shows gross domestic consumption of the natural gas, (ktoe and %change yoy), the consumption of natural gas in Turkish economy has been increased until the world financial crisis.

  10. TURKISH NATURAL GAS SECTOR Figure-2 demonstrates the evolution from 1971 to 2007 of natural gas production by region (billion cubic metres). It is clear that natural gas production has been increased. The market share of the Former Soviet Union and the Middle East has importantly increased. The share of OECD countries has importantly decreased. These differentiations also affect the economic and political power of the countries.

  11. TURKISH NATURAL GAS SECTOR In Turkish natural gas sector, BOTAS (wholly state-owned) owns and operates transmission system, and holds concession to transport gas. Within the framework of the Natural Gas Market Law enacted in May 2001, BOTAS's monopoly rights were abolished on natural gas imports, wholesales and distribution, and An Independent Regulatory Authority EMRA was established. The natural gas market activities have been unbundled as import and export, wholesale, production, distribution, transmission and storage of natural gas by Law. After 2009, BOTAS’s vertically-integrated corporate structure will be separated as trading, storage and transmission. Except for transmission, all business segments will be privatised. Tariffs are approved and published by the Energy Market Regulatory Authority (EMRA). In accordance with the Natural Gas Market Law, EMRA is issuing licenses for regional natural gas distribution.

  12. TURKISH NATURAL GAS SECTOR As of April 2009 the number of distribution companies reached 66, and 52 city centers as well as 60 provinces were provided access to natural gas in Turkey. Two projects are underway for transportation of natural gas from the Caspian Central Asian, South Mediterranean and Middle East regions to Europe through Turkey. The initial project of the South European Gas Ring, the Turkey-Greece Interconnector has been operational since November 2007. A feasibility study for linking the Interconnector with ltaly via a pipeline crossing the Adriatic sea was completed by the end of 2004. The studies on the ltaly extension are conducted by respective companies of Greece, Turkey and ltaly, and the off-shore pipeline is planned to be operational by 2012. The second project (Nabucco) aiming at construction of a pipeline from Turkey to Austria via Bulgaria, Romania and Hungary, with a capacity of 31 bcma is planned to become operational by 2013. The six partnered project is now in FEED phase. (See also, Hacisalihoglu (2008), Demirbas, (2002).)

  13. CONCLUSION Both world economy and Turkish economy, there has been an increasing energy demand, especially natural gas demand because of some advantages. On the other hand, especially, Turkish economy is heavily dependent on import. In order to achieve, sustainable, secure, cheaper natural gas, it have to be designed and managed the natural gas market both domestic and international level. It is carefully designed to liberalize the sector to prevent inefficient free market framework. Free-competitive market system should efficiently be designed to consider both public and private benefit. On the other hand, international natural gas sector has great complexity in terms of both global players and their political and economic power. Turkish economy should efficiently design international energy policies to obtain maximum benefit.

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