Turkey, with an energy market heavily dependent on Russian gas supply, has long looked to multiply its oil and gas supply sources. More recently, however, it has turned towards expanding its domestic potential. After the U.S.-based Energy Information Administration (EIA) reported Turkey’s estimated shale oil and gas reserves, mergers and acquisitions between Turkish and Northern American medium-sized energy investors in the shale gas business followed the lead of Shell and the Turkish Petroleum Corporation (TPAO) with their joint shale gas investments. Russia, meanwhile, has remained confident in pursuing production of traditional resources, keeping distance from the shale market. While Moscow watches passively, its new competitors are establishing ties in Turkey’s energy market.
Dependence on Russia
Concurrent with its economic expansion, Turkey’s energy demand has risen from 24.4 million tons of oil equivalent (Mtoe) in 1973 to 114.1 Mtoe in 2011. According to International Energy Agency, by 2030 that demand is expected to reach over 237 Mtoe. With a growing demand and limited domestic reserves, Turkey imports nearly all of its energy supply. Since the 1980s when Ankara decided to switch from oil to gas in the power generation industry, the share of natural gas in the domestic energy demand balance has increased to 32 percent (in 2011), while oil accounts for 28 percent and coal for 30 percent of the total primary energy supply. This overdependence on natural gas created a new challenge, as Turkey’s natural gas supply remains heavily dependent on Russia, which currently supplies 58 percent via Blue Stream and Western gas pipelines. Two international gas pipelines – Tabriz-Ankara and Baku-Tbilisi-Erzurum – provide 19 percent and 8 percent, respectively. The rest is LNG imported from Algeria and Nigeria.
To adjust this balance and diversify its natural gas supply portfolio, Ankara at first decided to use its geostrategic location and support the Southern Energy Corridor project, connecting oil and gas from the Caspian and Middle Eastern regions to Europe, thus making Turkey an energy center. After a decade of negotiations on several project possibilities such as Nabucco, TAP and ITGI, the Azeri-Turkish Trans-Anatolian pipeline was selected to deliver Azeri gas to Europe, pushing Turkey closer to its goal. Recently, a secondary strategy was born – to develop domestic shale oil and gas reserves, relying on EIA data for guidance.
Shale Gas as Path to Independence
Forecasts on Turkey’s shale gas reserves differ and the only public data comes from a 2013 EIA report. Estimates on technically recoverable resources vary between 6 billion cubic meters and 2 trillion cubic meters, which could meet Turkey’s demands for 10 to 40 years. These technically recoverable resources represent volumes of natural gas that could be produced with current technology, regardless of gas prices and production costs, though profitability remains unclear. It will depend on the costs of drilling and completing wells, the amount of oil or natural gas produced from an average well over its lifetime, and the prices received for gas production. In this context, estimated Turkish reserves might seem negligible compared