In February 2023, Turkey will host a global summit on natural gas as part of its efforts to become a hub for exporting gas to Europe. This objective is driven by various factors, including the traditional aim of boosting the government’s popularity before elections and addressing energy security threats. Additionally, Ankara seeks to compete with some of its European neighbors who also aspire to become gas collection and export centers. The summit aims to establish an effective platform that connects the interests of gas-exporting and importing countries, while also mitigating political disputes and attracting investments from global energy companies to the Turkish market. Turkey views this as a means to become an active player in the global energy market, which is becoming increasingly significant due to its rapid fluctuations, while also improving its adaptability to manage these fluctuations.
During the “Turkey’s Energy Century” summit on January 30, 2023, Fatih Donmez, the Turkish Minister of Energy and Natural Resources, announced that Istanbul will host the “Securing the Future Together” summit on February 14 and 15, 2023. The summit aims to bring together gas-producing countries from the Middle East, the Mediterranean, the Caspian Sea, and Central Asia with gas-consuming countries in Europe. The main objective of the summit is to discuss the establishment of a gas hub in Turkey to supply natural gas to Europe. The summit will also cover other topics such as the impact of global developments on the energy sector, changes in supply, demand, and pricing, and global energy security. Donmez emphasized that the summit will be attended by energy ministers, high-level representatives from public and private sector institutions, and international energy organizations.
To activate a proposal made by Russian President Vladimir Putin on October 12, 2022, Turkey is set to host a summit. The proposal aims to establish the largest gas supply center for Europe on Turkish soil, supplying Russian natural gas to Europe. On November 18, 2022, the Turkish Minister of Energy announced that his country expects to begin implementing the gas distribution platform project proposed by Moscow at the beginning of 2023. Ankara is conducting negotiations with potential gas suppliers to ensure energy security in Europe and balance the market through that center.
Turkey has accelerated its efforts to establish a natural gas export platform to Europe due to several economic reasons, including:
1-Competition with regional countries to dominate the natural gas export center to Europe: Ankara’s recent actions indicate its pursuit of competing with some European countries that are striving to become the hub for the transportation and commerce of natural gas between the European continent and Mediterranean basin countries. In particular, Italian Prime Minister Giorgia Meloni visited Algeria and Libya in January 2023 to increase gas supplies from both countries. This highlights the following:
- The agreement with Libya involves the development of two offshore gas fields that will produce up to 800 million cubic meters of gas per day starting 2026 (refer to Map 1).
- An agreement was signed with Algeria to revive the “Galsi” gas pipeline project (see Map 2) for exporting Algerian gas to Italy alongside the “TransMed” gas pipeline. It’s worth noting that the new pipeline was proposed in 2003 and construction was scheduled to begin in 2012.
In January 2023, Stefano Venier, CEO of Snam, a natural gas infrastructure and network company in Italy, announced that Rome plans to increase its gas imports to around 70 billion cubic meters annually by 2025 to become a European energy hub. Germany, Austria, Hungary, and Poland are expected to be the primary destinations for gas supplies through Italy. Venier presented Snam’s five-year strategy, which includes developing additional infrastructure for gas transportation to enable imports from North Africa and the Caspian Sea basin, making Italy a strategic corridor for meeting European energy needs.
Spain is expected to play a significant role in resolving the natural gas crisis in Europe due to its capabilities in the natural gas sector. These capabilities include the ability to convert liquefied natural gas back to its natural state and pump it to European countries, representing 25% of the total capacity of European countries in this field. Spain also has the largest number of regasification plants, with 6 out of the 20 European plants located there, making it an important center for re-exporting natural gas to other European countries. Additionally, Spain’s storage capacity for natural gas is estimated to be about 30% of the total storage capacity in Europe. Transporting and exporting gas through Spain and Italy is expected to have a lower political cost compared to Turkey, as they are both trusted members of the European Union, giving them a competitive advantage.
The actions taken by Turkey in this context aim to compete with Europe, as Ankara hopes that its access to Russian gas and gas from other countries, such as Oman, will give it a competitive advantage through its stockpile, which it can export to Europe. However, Spain faces challenges when it comes to exporting the gas it stores for Europe. Exporting gas through pipelines is costly, and Spain only has two gas pipelines connecting it to France and then to the European network. These pipelines have a limited capacity of 7 billion cubic meters annually and cannot meet the increasing demand in Europe. In contrast, pipelines that extend from Russia, such as the Nord Stream 1 pipeline, have an annual energy capacity of around 55 billion cubic meters of natural gas. As a result, Madrid must export gas in its liquefied form by sea, bearing in mind that not all European countries have regasification plants.
2-Ankara is planning to establish a platform that would connect countries involved in the export and import of gas. This move is aimed at keeping up with the many global energy conferences hosted by Middle Eastern countries recently, especially during the gas summit in February. Ankara believes that proposing a vision for a global center for importing and exporting natural gas between different regions would add a new dimension to the energy industry. This is crucial because it would address issues that threaten energy security and sustainability, such as establishing a mechanism for pricing natural gas and neutralizing any obstacles to energy supplies based on the source or importer’s identity. These issues are expected to affect natural gas trade in the future.
The upcoming Turkish gas summit has the potential to become a regular event if it proves successful. The summit’s objective is to reduce political tensions in the global energy industry and monitor Turkish measures to facilitate gas exports from southern countries to more advanced ones. By doing so, Ankara would establish itself as an active player on the global energy map. In addition, Turkey aims to compete with other events such as the Eastern Mediterranean Gas Forum and the Gas Exporting Countries Forum. The Turkish summit will provide a broader platform for source and producing countries to discuss all aspects related to energy supply risks. The discussions could lead to the signing of binding agreements that promote energy sustainability by exporting knowledge, technology, and investing from north to south. Such agreements would provide energy in all its forms to countries suffering from energy deficits, including Turkey.
3-Ankara has made attracting investments from global energy companies to the Turkish market a top priority. The government hopes to capitalize on the current trend of increasing reliance on fossil fuels, particularly gas. This trend differs from the pre-Russian-Ukrainian war period when there were plans to reduce investments in the oil and gas sector in the coming decades, based on the “zero emissions” scenario (see Figure 1). However, the new goal is to maintain a steady level of investment or even increase it, despite global population growth and economic activities. This is to compensate for the growing energy demands and increase reliance on green energy.
Based on the graph provided, investments in oil and gas production totaled approximately $490 billion in 2018 but decreased to around $356 billion in 2021. However, meeting the “zero emissions” scenario goal will require investments in oil and gas from 2022 to 2030 to be around $366 billion, which is a challenging target. According to energy research company Rystad Energy’s estimates, the world’s 20 largest oil and gas production companies will invest approximately $932 billion by 2030 to develop new oil and gas fields, with about $405 billion earmarked for the gas sector (see Figure 2). Therefore, Ankara is seeking to secure a portion of these investments by attracting energy companies to explore and extract recently discovered gas reserves off its coast, which require advanced technology to fully utilize.
Turkey is offering a range of incentives to attract investments in the energy sector, such as exemption from value-added tax and customs duties, a 40% tax reduction, and interest rate facilitations (up to a maximum of 700,000 Turkish liras). This highlights the sector’s importance to Turkey and its aspiration to draw foreign investments to strengthen its economic position. As a result, Turkey’s aim to establish itself as a platform for transporting and exporting gas to Europe will make it an attractive location for such investments.
It’s worth noting that, according to the Investment Office of the Turkish Presidency (refer to Figure 3), direct foreign investments in the Turkish energy sector accounted for 10.6% of the total investments of $240 billion between 2003 and 2021. This sector was the third-largest in terms of attracting foreign direct investment, following the financial services sector (31.6%) and manufacturing (24.2%).
Inherent Challenges
In summary, Turkey’s endeavors to position itself as a significant player in the global energy market demonstrates its ambition to expand its influence and become a central figure across various regions. Turkey recognizes the available opportunities that can aid in achieving this objective, which would enable it to establish broader transportation routes in the future towards the north and south, ultimately achieving a balance in its foreign relations without compromising its diverse interests. However, the lack of acceptance of Turkey’s role in this critical sector, due to a history of animosity towards several Middle Eastern and European countries, poses a significant obstacle to these efforts. Additionally, gathering Russia and Iran with consuming countries in a single summit is a daunting task, reducing the effectiveness of such summits as promotional events that do not accomplish their intended objectives.