Ordinary questions for natural gas discovery

I ’ M not an energy expert. That’s why I’m not going to dive into the technical debate regarding the 320 billion cubic meters of natural gas reserves discovered in the Black Sea.

But still, after the first wave of excitement, joy, and simultaneous disdain, it’s important to note some of the questions raised by almost everyone in Turkey.

>> When the prices are decreasing all over the world, and it’s too pricy to extract natural gas from the sea, everyone asks how expensive it would be to exploit the natural gas reserve.

>> Even if it is cheap to extract this natural gas, some people argue that PresidentErdogan’s 2023 target is too ambitious; it’s nearly impossible to reach.

>> Turkey has the technical equipment to search for natural gas in the sea but it is insufficient to extract the gas. That’s why there are calls to secure the necessary equipment as soon as possible.

>> They say the 320 billion cubic-meter natural gas reserve is enough to support Turkey for six years, considering that Turkey consumes 50 billion cubic meters of natural gas annually. But it’s not possible to get 50 billion cubic meters of natural gas from this reserve every year. Experts believes the annual production will amount to 10 billion cubic meters at best, so Turkey will only be able to meet one-fifth of the annual natural gas need from this reserve.

>> The fact that the reserve will only ease natural gas imports by one-fifth proves that the current account deficit will continue to be a burden.

>> It’s hard to say that a 320 billion cubic-meter reserve will make Turkey a game changer in the region. Because the 320 billion cubic meters do not mean anything when consider take the amount of reserves that the other countries in the region, like Russia, Iran, and Qatar, have. Russia has 50 trillion cubic meters of natural gas reserves while Iran and Qatar have 34 trillion cubic meters and 25 trillion cubic meters, respectively. The total natural gas reserve in the world amount to 200 trillion cubic meters. Our share is not even 0.2%.

>> There may be other discoveries in the lower layers of the field where we found the 320 billion cubic meter reserve, or the reserve may even increase. Also, we may get similar news from the Eastern Mediterranean. But the Eastern Mediterranean issue is complicated; the reserve in the Black Sea belongs to us. In the EastMed, ownership over resources is still a contested issue.

What will it bring to the Turkish economy?

>> If we operate this reserve with full capacity, we will be able to produce 10 billion cubic meters of natural gas annually, and our imports will decline by one-fifth. If the 10 billion cubic meters of production is priced at USD 200 per 1,000 cubic meters, it will earn us USD 2 billion. Although our imports are expensive due to disadvantageous deals, current prices have declined due to the coronavirus pandemic. So for the time being, 10 billion cubic meters will not earn us USD 2 billion. I’m doing this calculation based on zero drilling costs with 10 billion cubic meters of production.

>> It doesn’t seem possible to start production in 2023, acording to experts. But let’s say we did. This means we won’t be benefitting from this reserve for two more winters.

>> The annual USD 2 billion savings will not affect the public directly, but there may be some indirect impacts. The direct impact is whether it will reflect on the natural gas bills or not. Would this reserve reduce natural gas prices? I don’t think so, because the price we are selling natural gas is well above its cost. Also, taxes constitute three-fourths of fuel prices. That’s why even if we produce our own natural gas or petroleum we will have to increase the retail prices to collect taxes because the strongest tax item is fuel.

>> There’s such a pricing method of fuel in Turkey that according to a study, even if the price of petroleum decreases by one kurus, it won’t be possible to sell gasoline and diesel fuel from TR 2.97 and TRY 2.42, respectively.

>> They said the value of the reserve amounts to USD 65bn. Even if the reserve is used 100%, we will begin to earn that USD 65bn years later. The USD 65bn is of course an important amount, but when you compare it to Turkey’s annual USD 180bn export revenue and USD 30-35bn tourism income, the return will not that be huge.

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