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Turkish Natural Gas Market
Koray Kalaycioglu
Network Regulations Group
Natural Gas Market Department EMRA - Turkey December 2017
2
TO ESTABLISH A FINANCIALLY VIABLE, STABLE, TRANSPARENT COMPETITIVE ENERGY MARKET
TO ENSURE ADEQUATE EFFICIENT, CONTINUOUS HIGH QUALITY, LOW COST ENVIRONMENT FRIENDLY SUPPLY
SUBJECT TO
INDEPENDENT REGULATION
AND SUPERVISION
ELECTRICITY MARKET LAW No.6446 NATURAL GAS MARKET LAW No.4646 PETROLEUM MARKET LAW No. 5015
LPG MARKET LAW No. 5307
Energy Market Regulatory Authority
• An independent, administratively and financially autonomous public institution.
• EMRA Board is the representative and decision making body of the Authority.
• EMRA is responsible mainly for Preparation of secondary legislation Issuing licenses Setting out the annual eligibility limits Monitoring market performance and ensuring the conformity with the market rules Drafting, amending, enforcing and auditing performance standards, distribution and customer service codes Approving the regulated tariffs Setting out the pricing principles for tariffs
Energy Market Regulatory Authority
0
10
20
30
40
50
60
22,2
27,3 30,9
35,3 36,8 35,2 37,4
43,6 45,2 45,9 48,7 48 46,4
[DEĞER]?
BCM/YEAR
Annual Natural Gas Consumption in Turkey
Year Consumptions (million sm3) Change from the Previous Year
(%)
2007 35.395 14,24
2008 36.865 4,15
2009 35.219 -4,47
2010 37.411 6,22
2011 43.697 16,80
2012 45.242 3,53
2013 45.918 1,50
2014 48.717 6,10
2015 47.999 -1,47
2016 46.395 -3,34
2017 ~54.000 +12,08
Annual Natural Gas Consumption in Turkey
Main Characteristics of the Gas Market • Entry to the market is free through licensing.
• Regulated third party access (rTPA) is granted, and the EMRA Board is authorized to conclude all disputes on TPA.
• Pro-rata is applied for capacity allocations for the network, storage facilities, LNG terminals and FSRUs on a yearly basis.
• Tariffs of the TSO, storage facilities, LNG terminals, FSRUs and DSOs are regulated.
• Legal & account unbundling is applied.
• Imports is liberalized through gas release and new contracts.
• Existing DSOs are privatized and new DSOs are licensed by tender process.
• Static precautions are taken in terms of limiting market share.
• Non-discriminatory conduct between domestic and foreign investors is adopted.
Source: EMRA
Main Characteristics of the Gas Market (2016)
Consumption
46,4 bcm Conversion: 36.1%
Industry: 30.4%
Household: 25.0%
Services: 6.7%
Others: 1.8%
Import
46,35 bcm Pipeline: 83.5%
LNG: 16.5%
Production
367 mcm 2 production areas
9 active firms
Export
675 mcm Kipi, Greece
End-users 13,5 million 13 million subscribers
500 thousand eligible customers
Licenses are required in order to engage in any natural gas market activity,
Separate licenses are required for each market activity and
each facility,
Types of Licenses • Import License • Import License (Spot LNG) • Transmission License • Storage License • Distribution License • Wholesale License • CNG License • Export License
Licensing & Market Entry
LICENSE TYPES COUNT
STORAGE 8
EXPORT 8
TRANSMISSION 17 (1 + 16)
IMPORT (Spot LNG) 43
IMPORT (Long Term) 17 (10 + 7)
CNG SALES 77
CNG TRANSPORT & DISRTBUTION 38
WHOLESALE 49
DISTRIBUTION 72
TOTAL 251
Natural Gas Market Players
Gas Market Model
Producers
Importers (10+7+43)
Wholesalers (49)
Transmission (2+15)
Distribution (72)
Eligible Customers (500K)
Captive Customers (13M)
Export (8)
SUPPLY WHOLESALE NETWORK CONSUMPTION
Storage (8)
NGML
Network Code and
Tranmission Tariffs
Based on Entry/Exit
System
Contract
Release
Tender
LNG &
Spot LNG
Import
Set Free
LNG Termial
Codes Published
Storage
Facility
Code
Published
First Private
Importer Using
the Network
After the
Contract Release
Model
Transport
Agreements
in
Distribution
Zones
2014 2008 2009 2010 2011 2012 2013 2005 2006 2007 2001 2002 2003 2004
New
Contracts
by Private
Importers
from
Terminated
BOTAŞ
Contracts
National
Balancing
Point and
Transfer
Points
Determined
Trade in
National
Balancing
Point
First Private
Import
License From
a Country
BOTAŞ didn’t
have
an agreement
Beginnig of
Licensing of
the Market
Players
All non-
household
customers are
eligible
Wholesale
Tariffs
Set Free
Milestones in Market Liberalization
2018 2016 2017
The First
FSRU (Etki)
licensed
The Etki FRSU
Terminal Code was
approved
EMRA issued the
By-law on
Organized Natural
Gas Wholesale
Market
EMRA approved the
Market Operation
Rules for the
Organized Natural
Gas Wholesale
Market
Salt Lake
Underground
Storage Code
Dörtyol FSRU
Terminal
Licensing
and Approval
of the
Terminal
Code
Start of
Operation of the
Natural Gas
Continious Trade
Platform
Milestones in Market Liberalization
Natural Gas Infrastructure & Entry Points
2 ~13.000 km pipeline length m 4 entry points
/ 9 compressor stations j 1 exit point
Natural Gas Infrastructure & Entry Points
Name of the
facility
Operating
Year
Connected
country
Sort of capacity
(Entry/exit/bilateral)*
Capacity
(bcm/year)
Access
Conditions:
rTPA or
nTPA
Transmission
pipeline (km)
Malkoclar
(Western
Line)
1986 Russia Entry 14
bcm/year
rTPA 842 km
Gurbulak
2001 Iran Entry 9,6
bcm/year
rTPA 1491 km
Durusu
(Blue
Stream)
2003 Russia Entry 16
bcm/year
rTPA 1261 km
Turkgozu
2006 Azerbaijan Entry 6,6
bcm/year
rTPA 113 km
Kipi
2007 Greece Exit 0,7
bcm/year
rTPA 296 km
Underground Storage & LNG
TPAO Silivri Underground Storage
25 mcm/day
2.841 bcm/year
BOTAŞ Tuz Golu Underground Storage
13 (40) mcm/day
0.25 (5.4) bcm/year
Etki Liman FSRU
LNG Terminal 14 mcm/day
5 bcm/year
Egegaz Aliağa
LNG Terminal 40 mcm/day
6 bcm/year
BOTAŞ FSRU
LNG Terminal (Planned)
20 mcm/day
BOTAŞ M. Eregli LNG Terminal 22.5 mcm/day 8.2 bcm/year
Underground Storage Facilities
Name of the
facility
Operating
Year
Capacity Access
Conditions:
rTPA or nTPA
Transmi
ssion
pipeline
(km)
Send-out/
Withdrawal
(mm3/day)
Injection
(mm3/day)
Tank/Reservoir
(bcm)
BOTAS Silivri
Underground
Storage
2007 25 mm3/day
(40 mm3/day)
16 mm3/day 2,8 bcm
(4,3 bcm)
rTPA
BOTAS Tuz
Golu
Underground
Storage
2016 13 mm3/day
(40 mm3/day)
mm3/day 0.25 bcm
(5.4 bcm)
rTPA
LNG Facilities
Name of the
facility
Operating
Year
Regasificatio
n Capacity
Injection
Capacity
(mcm/day)
Tank Capacity
(mcm)
Access
Conditions:
rTPA or nTPA
BOTAŞ Marmara
LNG Terminal
1994 22,5
mcm/day
8,2 bcm/year
151 mcm/day 153 mcm
(255.000 LNG m3)
rTPA
EGEGAZ Aliaga
LNG Terminal
2006 40 mcm/day
6 bcm/year
81 mcm/day 168 mcm
(280.000 LNG m3)
rTPA
Etki Liman FSRU
Terminal
2016 14,1
mcm/day
5 bcm/year
86 mcm/day 84 mcm
(143.000 LNG m3)
rTPA
FSRU Practice
• In March 2016 EMRA Board issued decision on the licensing regime of the floating LNG terminals: Acknowledgement
• License granted in May 2016.
• Basic Operating Procedures and Guidelines of the first FSRU terminal approved in November 2016.
• The terminal operation initiated in early December 2016.
EXPORT
TOTAL TANK CAPACITY
SENDOUT TO
THE NETWORK
SENDOUT TO LAND
VEHICLES
22.5 mm3/day - 8,2 bcm/year
40 mm3/day - 6 bcm/year
14 mm3/day - 5 bcm/year
=56 mm3/day - 19.2 bcm/year
255,000 (3 x 85.000)
280,000 (2 x 140.000)
143,000
=678,000 m3 LNG
5,2 bcm long term
2,5 bcm spot
=7.7 bcm (2015)
75 vehicles/day
100 vehicles/day
=175 vehicles/day
LNG Facilities in Turkey (2016)
BOTAS LNG EGEGAZ LNG ETKI FSRU
Natural Gas Imports by Country
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Russia Iran Azerbaijan Algeria Nigeria Others*
Spot LNG Imports by Country (2016)
US 11,4%
Belgium 4,0% France
4,2%
Netherlands [YÜZDE]
Qatar 43,3%
Egypt 4,7%
Nigeria 8,4%
Norway [YÜZDE]
Trinidad and Tobago 15,6%
Natural Gas Consumption by Sector (2016)
Electricity Generation
36,1%
Industry 30,4%
Households 25,0%
Government Offices and
Business 6,1%
Others 2,4%
Natural Gas Distribution in 2017
Monthly Seasonality of Consumption in 2016
1,4 1,3 1,2 1,3 1,2 1,4 1,5 1,8 1,3 1,5 1,6
1,2
2,5 1,8
1,4 0,8
0,4 0,3 0,2 0,2
0,2 0,5
1,1 2,2
1,3
1,2
1,3
1,2
1,2 1,1 1,0 1,1
1,0
1,3
1,4
1,4
0,5
0,4 0,3
0,2
0,1 0,1 0,1 0,1
0,1
0,2
0,3
0,5
0
1
2
3
4
5
6
7
bcm
Power Residential Industrial Service
Key Performance Indicators 2014 2015 2016 2017
Number of TSOs 1 1 1 1
Pipeline length (km) 12.561 12.963 13.000 13.000
Pipeline pressure (barg) 50-75 50-75 50-75 50-75
Annual consumption (bcm) 48.717 47.999 46.500 54.000
Seasonal demand swing (%) 0,14 0,2 0,19 0,21
Daily peak demand (mcm) 195 224 220 243
Length of pipeline/consumption (km/bcm)
258 270 280 280
Storage capacity/consumption (%) 5,5% 5,9% 6,1% 5,7%
LNG terminal capacity/consumption (%) 29% 30% 41% 47%
LNG + storage daily send out / peak demand (%)
29% 27% 41% 212%
Number of entry zones 9 9 9 9
Number of exit zones 1 1 1 1
Number of compressor stations 9 9 9 9
Pipeline length / # of compressor stations
1396 1440 1444 1444
Virtual Trade Amounts by Month (2016)
0,00
500,00
1 000,00
1 500,00
2 000,00
2 500,00
Transfer Points UDN Total
Organized Natural Gas Wholesale Market
• In line with the Turkey’s objective of becoming natural gas trade center, organized natural gas market will be established for the purchase and sale of natural gas and will be operated by Energy Exchange (EPİAŞ).
• In November 2016, first draft of the By-Law on Organized Natural Gas Wholesale Market was published by EMRA.
• Organized Natural Gas Wholesale Market Usage Procedures and Principles was published in September 2017.
• The regulation aims to let the market players trade natural gas anonymously in an organized liberal market operating by continuous trade principles, besides letting the transmission system operator balance the system by entering the continuous trade platform when needed.
• The Organized Natural Gas Wholesale Market is expected to give the players much needed price signals about the market.
• The market simulations on the Continuous Trade Platform is will start on 1 April 2018.
Aims of the Organized Natural Gas Market
The Organized Natural Gas Wholesale Market will provide
• A tool for the TSO to maintain the physical balance of the system,
• A platform where the market players can trade gas day-ahead and intraday,
• The means for the market players to balance themselves,
• Market based reference prices.
Characteristics of the Market • Participating in the market is completely voluntary.
• All market players willing to enter the market shall have a Standard Transportation Contract signed with the TSO, BOTAŞ.
• A contract must also be signed with EPİAŞ in order to participate in Continuous Trade Platform.
• The TSO may enter the system as a Residual Balancer when needed.
• Non-market based methods may be used when the TSO can’t balance the system by trading in the market.
• Net matchings will be entered to Electronic Bulletin Board of BOTAŞ as nominations for the EPİAŞ virtual entry/exit points.
• Residual Balancer Price, Balancing Gas Buy Price and Balancing Gas Sell Price will be calculated based on the market-based balancing operations.
• Daily Reference Price will be weighted aggregate of the day-ahead and intraday contracts.
Contracts
TAKAS
BANK
EPİAŞ
TRADERS
BOTAŞ
CTP
C
CHPC
MDC: Market Delivery Contract CHC: Clearing House Contract STC: Standard Transportation Contract CHPC: Clearing House-Participant Contract CTPC: Continuous Trade Participant Contract
NETWORK CODE/TRADING RULES
Transmission Operation Rules Market Operation Rules
TRADING POINT PRINCIPLES
PHYSICAL NATIONAL BALANCING POINT
SYSTEM OPERATOR/MARKET OPERATOR
BOTAŞ EPİAŞ
ORGANIZED NATURAL GAS WHOLESALE MARKET
Continuous Trade
Continuous Trade Platform
Issues of Debate
• Pay-as-bid or Marginal Price?
• Bids limited or not by the Bank Guarantee?
• Bids and offers on the market limited or unlimited?
• Residual Balancer enters the market freely & anonymously or on a fixed time?
• Limit for the bids-offers for Residual Balancing?
• Imbalance fees based on Daily Reference Price or Residual Balancer Price?
• When and how non-market based methods shall be used for balancing the system?
• Cost of the non-market based methods included in the balancing fees or not?
Aliağa LNG
Etki FSRU
FSRU
Marmara LNG
Pemi
Malkoçlar 8 Contracts
Silivri Underground
Akçakoca
Blue Stream 2 Contracts
Azerbaycan 1 Contract
TANAP
Mersin Underground
Tuz Gölü Underground
Iraq
Eastern Mediterranean
7 Entry Points 2 Production Areas 5 LNG Terminals 3 Underground Storages
Turkish Trade Center
Turkmenistan 1 Contract
Tools of the Trade
Iran 1 Contract
Dortyol FSRU
Well-developed Natural Gas Trade Center
Establishing a Gas Trade Center that will provide a reference price for the region
New Infrastructure Investments
Making new investments such as LNG terminals, storage facilities, transmission lines and compressors, in order to meet the demand and improve the trade
Demand Side Market
Reshaping the purchase contracts with regards to the regional and seasonal price signals about the market
Price Signals
Giving the much needed regional and seasonal price signals about the market that will lead to new contracts and investments
Day Ahead and Intra-day Markets
Letting the market players trade natural gas anonymously in an organized liberal market operating by continuous trade principles
Balancing Platform
Allowing the market players to balance their portfolios and the transmission system operator balance the system
Turkish Gas Market Targets
• Entry-exit zones & entry-exit tariff system
• Model Transport Agreements for distribution zones - Basis for Interoperability Regulation
• Amendments in the network code for TANAP entry point
• Balancing regime fully compliant with EU regulations
• Amendments in the Network Code and regulations in the Market Usage Procedures & Principles aiming better transparency
• National TYNDP introduced by organized market directive
• Daily forecasts in Electronic Bulletin Board of BOTAŞ
Steps Taken for Better Harmonization
• Redefining Gas Day & Gas Year compliant with EU regulations
• Reviewing and redesigning the Capacity Allocation Mechanism (Daily capacity, auctions & secondary markets)
• Adopting measurement units based on energy rather than volume
• A unified and comprehensive transparency regulation
Improvements to Make
Countries Compared (2014)
Turkey Italy France Germany Netherland
s
UK
Number of TSO 1 2 2 15 1 3
Pipeline Entry/Exit
Points
4/1 6/2 6/4 22/16 6/12 5/3
NG Pipeline Length (km) 12.561 33.339 15.322 26.985 8.531 7.660
Number of Compressors 9 11 30 25 15 28
Consumption (bcm) 48,7 56,8 35,9 70,9 32,1 66,7
Residential &
Commercial
24,9% 47% 58,6% 46,2% 50,4% 52,9%
Power 48,1% 28,6% 6% 15,5% 15,3% 26,5%
Industrial 25,4% 21,6% 31,3% 36,9% 32,4% 17,4%
Other 1,5% 2,8% 4,1% 1,4% 1,9% 3,2%
Countries Compared (2014)
Turkey Italy France Germany Netherlands UK
LNG 15% 8% 20% 0% 1,5% 14%
Pipeline 84% 81% 78% 92% 31% 41%
Production 1% 11% 2% 8% 67% 45%
First RUS/27 RUS/21,3 NOR/15.5 RUS/38.5 NOR/9.4 NOR/10.4
Second IRN/8,9 NLD/8.3 QAT/7.1 NOR/27.7 RUS/3.5 QAT/10.4
Third AZE/6.1 DZA/6.2 NLD/4.9 NLD/18.1 GBR/1.7 NLD/6.6
Other 7,3 15,6 7,1 0,7 8,7 1,3
Countries Compared (2014)
Turkey Italy France Germany Netherlands UK
Length of
pipeline/consumption
(km/bcm) 258 587 427 381 266 115
Seasonal demand swing
(%) 0,14 0,47 0,33 0,34 0,25
# of Underground Gas
Storage/ Capacity (bcm) 1/2,8 13/16,6 17/12,0 58/24,6 5/12,9 8/5,0
Storage
Capacity/Consumption 5,5% 29% 33% 35% 40% 8%
# of LNG Terminals /
Annual Capacity (bcm) 2/12,2 3/14,8 3/22 0/0 1/12 4/52
LNG terminal
capacity/consumption
(%)
29% 26% 61% 0% 37% 78%
Pipeline length / #
compressor stations 1.396 3.030 510 1.079 568 274
