Turkey’s large dependence on energy imports provides a unique opportunity for investors and explorers as the government carves a path toward energy independence.
It is anticipated that one of the sectors poised to most significantly reflect Turkey’s economic growth is the energy sector. Mounting energy requirements, growing profits and untapped potential have foreign and domestic investors seeing promising opportunities.
Turkey ranks as the fifth largest electricity consumer in Europe. The country imported 100 percent of its natural gas and 91 percent of its oil products in 2022, according to a report from the Carnegie Endowment for International Peace.
Between 2018 and 2023, Turkey imported US$324 billion worth of its energy supply, with Russia as the primary supplier. This highlights a huge challenge for the country to strive for energy independence and, in response, the government has significantly increased its investments in developing its domestic energy supply.
Foreign investors, as well, are recognizing a huge opportunity to invest in Turkey’s energy independence journey. Between 2002 and 2003, about US$30 billion of the total US$262 billion in direct foreign investments into Turkey went to the energy sector.
Quest for energy independence
Lacking the proven natural resources necessary to sufficiently meet its domestic energy consumption, Turkey has been investing in the development of its natural gas fields in the Black Sea, as well as nuclear and oil and gas power generation across the country.
Turkey’s dependence on foreign energy has led to the creation of an energy importation infrastructure of pipelines, storage and processing sites.
While the EU preferred Turkey to be a transit country through which pipelines pass without a say in transactions, Turkey wanted to be an energy hub, middle-manning energy transfers across the region.
Turkey sees itself as an energy bridge, where oil and gas flow to the European market from suppliers in the Middle East, the Caspian Sea and Central Asia. That view seems more acceptable these days, thanks to the Russia-Ukraine war and the Nord Stream destruction.
The Baku-Tbilisi-Ceyhan oil pipeline and the Trans-Anatolian natural gas pipeline (TANAP) pass through Turkey, providing an alternative supply route from Azerbaijan to assist Europe in diversifying its energy sources.
Turkey has four liquefied natural gas (LNG) plants, two of which are floating storage and regasification units. A third floating storage and regasification unit is being developed in the Gulf of Saros. Its location near maritime routes allows Turkey to import and re-export LNG to Europe.
The storage capacity of the Silivri natural gas storage facility was increased from 3.2 billion cubic meters of gas to 4.6 billion cubic meters. Capacity is being increased at the Tuz Gölü natural gas storage facility, intended to attain 5.4 billion cubic meters this year.
The Southern Gas Corridor is a multinational project intended to decrease European reliance on Russian gas by bringing gas from the Caspian Sea to Europe through the TANAP and TAP pipelines.
Turkish oil and gas
Turkish foreign policy is driven by energy insecurity. Securing its energy source is important for Turkey as its foreign dependence represents a significant vulnerability, and the country sits in an area of geopolitical complexities where energy is often used as a lever.
An additional vulnerability is its reliance on pipeline delivery. Four crude oil pipelines and seven international natural gas pipelines traverse Turkey, bringing 84 percent of natural gas imports.
Affordable energy prices are critical for maintaining political and economic stability. Pipelines are susceptible to radicals’ actions, specifically in Turkey’s region.
Neighbors exploit Turkey’s vulnerabilities while Turkey exploits its neighbors’ reliance on energy revenues. For example, Turkey would like the Kurdistan Regional Government of Northern Iraq to have one option for its exports — across Turkish territory.
Although in 2016 Turkish natural gas reserves were estimated at 218 billion cubic feet, natural gas production is insufficient. Turkey produces approximately 2 percent of the natural gas it consumes and must rely on imports for the rest.
In 2022, the volume of gas discovered in offshore fields of the Black Sea was announced as 710 billion cubic meters. About 10 million cubic meters of gas per day is expected to be pumped through the offshore gas pipeline in its first phase, while the infrastructure is in place to increase production up to 40 million cubic meters.
As of 2021, Turkey has 3P oil reserves of approximately 8 billion barrels. Recent finds in Southeast Turkey are expected to increase the daily output from 65,000 barrels to 100,000 barrels.
State-owned Türkiye Petrolleri Anonim Ortaklığı (TPAO) dominates exploration and production activities, which represent 73 percent of total crude oil production.
Current exploration and production activities
In 2023, TPAO announced the largest onshore oil find in its history — 1 billion barrels of oil in a field in the southeast province of Sirnak. Drilling to 2,771 meters, so far it’s found a 162 meter light oil-bearing reservoir, and has more prospective drill sites in the area.
Prior to the Russia-Ukraine war, Trillion Energy (CSE:TCF,OTCQB:TRLEF,FWB:Z62) began an enormous 10 year natural gas development offshore Turkey in the Black Sea.
Just in time to ease energy shortage fears, Trillion Energy recently announced that the Akcakoca-3 well at the SASB gas field has started producing. Trillion holds a 49 percent interest in the Black Sea’s SASB gas field, with 323 billion cubic feet of original gas in place and proven reserves valued at US$421 million.
In Southeast Turkey, Trillion is engaged in oil exploration in the Cudi-Gabar province, where it holds a 50 percent interest and is funding 100 percent of the costs of the project exploration. The area is surrounded by major oil discoveries, including the nearby Sehit Aybuke Yalcin and Sehit Esma Cevik fields, which are rich in oil reserves.
ARAR, a private Turkish energy company, holds a portfolio of production and exploration oil and gas assets, including the Urfa and Hatay blocks in Southeast Turkey.
TotalEnergies (LSE:TTE,NYSE:TTE), a French multinational integrated oil and gas company, recently strengthened its position in the Turkish energy market through strategic partnerships.
While not primarily engaged in exploration and production within Turkey, TotalEnergies plays a significant role in the country’s energy supply chain and has been strengthening its position in the Turkish energy market through strategic partnerships. The company has signed a 10 year agreement with Turkey’s state energy firm BOTAS to supply 1.1 million metric tons of liquefied natural gas annually starting in 2027.
Investor takeaway
Control over multiple international energy routes grants Turkey geopolitical leverage with Europe and energy-producing countries in the east. There is serious potential for Turkey to grow in its role as a regional energy hub, with future possibilities for hosting additional pipelines from the Eastern Mediterranean and the Gulf. Investors would do well to understand the various opportunities for investing in Turkey’s energy sector.
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