In 2018, the Trans-Anatolian Pipeline (TANAP) gas pipeline was commissioned with actual start Azerbaijan gas pumping to Greece on 2019, which raised the issue of changing energy flows in the Central Asia-Caspian-European Union (EU) region with a significant increase in the transit role of Turkey. The Republic of Turkey is de facto becoming the centre of energy transit of Caspian and Central Asian gas to the EU and at the same time the gas gate of Southern Europe. But for the country this is not only an opportunity to receive transit revenues, it is also the beginning of the process of unlocking the potential of its own economy, which has the potential to provide more environmentally friendly energy sources.
The use of TANAP opportunities for export to the EU will open for Turkey latest by the end of 2020 with the completion of work on Trans-Adriatic Pipeline (TAP). Many analysts interpret the further progress of the project as a threat to Russian gas pipelines entering Turkish territory (Blue Stream and Turkish Stream). Today’s conditions for the implementation of the TAP/TANAP gas pipeline system are focused on the operation of the Shah Deniz field in Azerbaijan. Without alternative gas sources, with rising consumption in the EU, Turkey will have to limit the prospects for domestic consumption growth. Under these conditions, prospects for net exports to the EU through the TAP/TANAP infrastructure are opening up for the Russian Federation. These prospects depend not so much on Russia and Turkey and their relationship, but on the pace of infrastructure development and gas consumption in the Balkans.
The territory of Turkey will be made a gas hub for the EU by the time the construction of the Uzbekistan-Azerbaijan gas pipeline is completed, which in the future can increase transit capabilities to the planned 60 billion cubic meters per year. Joining Iran’s project seems promising, but this country, like individual Russian companies, continues to be under sanction pressure, which makes the expansion of the project in this direction unlikely in the medium term.
Work to increase Turkey’s ability to strengthen its position as a EU gas hub is increasing its relevance in light of a possible change in the gas sector of the global energy market. This year’s climatic changes have shown how fragile its parameters can be. The change in gas prices affected the entire world’s leading producers. But local shocks do not provide a complete picture of the dynamics of the gas market in the long term and the prospect of a gradual departure from the use of oil and petroleum products for both environmental and resource reasons. According to the statements of individual analysts, mankind has already used about half of the recoverable oil reserves, which in the future will make the gradual drift towards gas technologies relevant.
The EU environmental policy being developed today, which assumes zero emissions from major energy consumers by 2030, will also make a significant contribution to the transition to gas. Nobody can predict how accelerating this transition to the EU will affect gas consumption.
These trends have already been reflected in US energy policy, which continues to expand actively in the Liquid Natural Gas (LNG) market. They are also reflected in the energy policy of the Russian Federation in the gas sector. In light of the transformation into one of the largest gas hubs for the EU, Turkey should also think about it, which will sooner or later face the choice of remaining a marginal gas transit or looking for new mechanisms to increase the added value of raw materials passing through the country on its own territory.
As far back as the 19th century, the great Russian chemist Dmitry Mendeleev said that burning oil as fuel is the same as burning a stove with banknotes (note in those days oil-fuelled engines were still a strategic prospect for economic development, since the first internal combustion engines were gas powered). The same analogy holds true for gas, which, in addition to the calorific value carrier, is a source of chemical processing products. The history of the development of Russian gas remembers the time of the “Gas Pause”, when domestic gas prices in the country were underestimated in the future in the development of other energy production technologies, which ultimately led to the need to reduce domestic consumption in order to increase exports. Since then, Russia has been developing programs for producing alternative export products based on gas.
Speaking about the transit prospects for Turkey, it is necessary to look back in a strategic perspective. The early adoption of Green Deal in Europe can stimulate tectonic changes both in the motor fuel market and in the gas market earlier than in 2030. One of the new environmental policy directions continues to be the fight against greenhouse gas emissions in commercial maritime transport. The central requirement of the new global policy will be the transition to low-emission fuels (LNG) with the equipping of ships with propulsion systems for this type of fuel.
The Turkish Republic will not be able to stay away from these trends in connection with the introduction of the MARPOL Convention in the Black Sea basin in 2021, restricting the use of traditional fuels with a high sulphur content in the outlet, and the need to modernize the merchant fleet in the Black Sea basin. Turkey is one of the largest ship-owners in the region. One of the promising solutions could be the conversion of the fleet under construction to LNG fuel.
The main constraint on the use of marine LNG fuel is the lack of bunkering infrastructure in the Black Sea basin. In Russia, technologies for small-scale production of LNG (SSPLNG) have been mastered, which can be used in conjunction with the infrastructure of the South Stream gas pipeline. In cooperation between the Russian Federation and the Republic of Turkey (having experience in shipbuilding using LNG marine engines), a system of LNG bunkering, as well as tanker transportation of LNG fuel from production sites, can be created in the Black Sea basin. An additional bonus to using the technology can be gasification in areas where pipeline gasification is economically inefficient.
The second factor confirming the prospects for the development of LNG bunkering will be the development of the Chinese OBOR project (BRI), in which sea ferry and container transportation in the Black Sea basin can significantly increase. The presence of a gap in direct railway transportation between the territory of Iran and Turkey generates logistics projects for the transit of Chinese goods bypassing the territory of the Russian Federation and until the commissioning of the Rasht-Astara railway link, the transit cargo flow both in the Caspian and in Turkish ports will tend to grow.
The second strategic direction of gas cooperation between Russia and Turkey may be the development of gas chemical industries. In the Russian Federation, a program for the development of production of gas chemical industry products is being implemented. The final results of gas processing can be as high-octane components for motor fuels, polymers and plastics, as well as nitrogen compounds and nitrogen fertilizers. The development of cooperation with Russia in this direction on the basis of South Stream infrastructure may open up these new export destinations for Turkey and also close the needs of the domestic market. True, in this direction Turkey will have to compete not only with traditional market players, but also with the Persian Gulf countries, which are actively developing gas chemical production to reduce the oil dependence of the economy on development programs until 2030.
The third strategic direction of cooperation between the Russian and Turkish sides in the gas sector may be the production of feed protein produced using methane – Haprin. Technologies for the production of this type of protein by methane-oxidizing bacteria have been developed for a long time. The main problem was the choice of a bacterial culture to obtain feed protein. In Russia, studies have been completed to obtain a new productive strain (Methylococcus capsulatus GBS-15). Since last year in the Russian Federation several plants for the production of animal feed based on Haprin have been built. Together, Russia and Turkey could find a substitute for fishmeal or soybean meal in the production of animal feeds for animals, birds and fish.