On the Cusp of Discovery. Turkey Steps Up Shale Gas Development as Russia Looks On

By Olgu Okumuș, December 14, 2013

told Reuters that the company would be able to make an assessment of Turkey’s shale gas potential only after completing the first well.

Russia Silent to Shale Gas Call

While Western players boost investments, Gazprom and Russia’s other energy giants remain distant about the implications of shale gas speculation in Turkey. Gazprom CEO Alexei Miller has made statements undermining the impact U.S. shale fields and European exploration dynamics will have in the Eurasian market. As Miller said on state television in March, “[Shale gas is a] bubble that will burst very soon. We are skeptical about shale gas. We don’t see any risks for Gazprom at all.” Gazprom’s spokesman likewise prefers to ignore the shale gas issue, stressing that Gazprom’s main competitive advantage is that it can guarantee long-term supply compared to the questionable exploitation conditions of shale gas deposits. 

Concerning Turkish fields, Gazprom does not have any activity in Turkey’s shale gas sector and it doesn’t have any plans either to engage in it in the future. When asked by OGE to identify the reason behind Russia’s distance from the Turkish shale game, the Gazprom spokesman said, “Gazprom has the privilege to be able to concentrate on the monetization of its large conventional gas fields. Therefore, until the numbers and risks for shale gas become commercially attractive for Gazprom, we do not see an interest in developing shale gas fields.”

Despite Russian investors’ reluctance, the Turkish market is attractive as a shale gas producer because of low taxes, existing oil and gas infrastructure, high domestic energy demand and convenient geographic location of its facilities for international shipping. Moreover, environmental concerns that are an issue in Europe are not even a concern in Turkey. In contrast to Europe, Turkish environmentalists haven’t displayed any signs of opposition to the
drilling methods used to extract shale gas.

Bubble or Boom?

From a purely economic perspective Turkey’s shale gas sector risks being a bubble rather than a boom. Additionally, it is still not clear if the cost of shale gas extraction will be cheaper than simply importing natural gas from regional suppliers. Nevertheless, Turkey’s shale gas and oil market is flourishing and North American players have already begun importing their technology. Even though Turkey’s economic expectations are not clear and distinct, the shale gas initiative’s political expectations match with the Southern Energy Corridor’s intentions – i.e., independence from Russia’s energy monopoly. Over the short term, fracking might not bring enough natural gas for the Turkish market to declare its independence, but it has already led an increasing number of foreign players to invest in Turkey. This act alone jeopardizes Russian companies’ well-established traditional presence, enhancing overall competitiveness.