Turkey Gas Field Opening Sets Stage for Pre-Election Energy Giveaway

Patrick Sykes
·3 min read
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(Bloomberg) -- Turkey will start natural gas production from the biggest field in the Black Sea on Thursday, giving President Recep Tayyip Erdogan an opportunity to slash consumer energy prices less than a month ahead of elections.

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The Sakarya field will supply 10 million cubic meters per day in its first phase, rising to a peak of 40 million cubic meters by 2027-28 in the second stage, state-run producer Turkish Petroleum AO said.

That would be enough to cover about a quarter of Turkey’s current consumption of 53 billion cubic meters per year, providing a welcome dent in the $97 billion annual energy import bill that’s driving a growing current account deficit.

Erdogan faces the toughest election of his 20 years in power on May 14, when he’ll face an opposition united against his handling of the economy during increasingly authoritarian rule. The country has grappled with inflation as high as 85% within the last year, though it has declined to about 50% last month.

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Energy Minister Fatih Donmez has previously said the gas will be produced cheaper than imports, and the pro-government Yeni Safak newspaper said Erdogan will use the opening to announce discounted or even free gas to some users.

Political Promises

TP hopes to export some of the gas to markets including Europe, Chairman Melih Han Bilgin told journalists during a visit to the processing facility in Zonguldak, on the southern coast of the Black Sea. But it would have to balance the financial incentive for sales abroad with Erdogan’s political promises to use the gas to cut bills at home.

Those commitments are clear at the site, where storage tanks are labeled with “We promised,” a reference to Erdogan’s commitment to develop the domestic expertise to realize the project. Engineers are challenged with extracting gas from more than 2 kilometers (1.24 miles) below sea level and 165 kilometers from the coast.

There’s no clarity yet on how much Turkey could export, but it already has pipeline connections with neighboring Bulgaria and Greece that could ship gas into Europe. If next winter is cold, the continent could face a fuel shortage and see increased demand for non-Russian supplies.

Russia cut most pipeline gas flows to the European Union in the fallout over the country’s invasion of Ukraine. However, Turkey has expanded cooperation with Russia. The two nations plan to turn western Turkey into a regional hub for the trade and transit of gas.

Turkish Petroleum, which developed the Sakarya field with Schlumberger NV and Subsea 7 SA, says the field holds 710 billion cubic meters of recoverable reserves.

If successful in the Black Sea, TP hopes to export its newfound upstream expertise elsewhere. It’s already teamed up with Algeria’s Sonatrach to look for oil and gas in the region, and it has held talks with other companies including Malaysia’s Petronas Gas Bhd and Brazil’s Petroleo Brasileiro SA, Bilgin said.

--With assistance from Elena Mazneva.

(Corrects to remove erroneous map.)

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