At the beginning of January, Turkey’s state-owned gas firm BOTAS signed a long-term deal with Bulgaria’s state gas company Bulgargaz, giving the latter access to its gas network and Liquefied Natural Gas (LNG) terminals to help bring in supplies.
Indeed, looking to further diversify its supplies, Bulgaria has shown a huge interest in Turkey: already at the end of 2022, Bulgaria’s Energy Minister Rosen Hristov said that “a systematic supply of gas from Turkey” was to be expected following some negotiations. Practically, under the 13-year agreement, Bulgargaz will have long-term access to five LNG terminals of BOTAS which will also provide transit through its network to Bulgaria.
A crucial stepping stone for Turkey to become a gas hub
Fatih Dönmez, Minister of Energy and Natural Resources of Turkey said that the agreement will allow Bulgaria to transport about 1.5 billion cubic metres (bcm) of gas per year until 2036. He also defined the agreement as an important step in increasing the natural gas security of the Balkan region and a crucial stepping stone for Turkey to become a gas hub.
“Turkey wants to position itself as the biggest gas hub in the region,” confirms Eser Özdil, Nonresident Fellow at the Atlantic Council. “Based on this approach, we observe that Turkey has been increasing its cooperation with countries in the SEE region via bilateral agreements.”
“The BOTAS-Bulgargaz deal came at a critical moment for Bulgaria when the country encountered serious gas supply problems after cuts of Gazprom flows,” he tells CEENERGYNEWS. “In essence, such deals should be considered positive with a regional solidarity perspective, for a short, limited-term with a clear crisis management plan. However, the deal signed between BOTAS and Bulgargaz ensures access to the latter for 13 years to the Turkish grid and LNG terminals owned and operated by BOTAS, which will limit access of third parties to relevant infrastructure which is obviously not compatible with liberal gas trading principles.”
He goes on by underlining that there is no clear explanation of how the interconnection capacity between the two countries will be operated.
“Though we don’t know the full terms of the agreement, non-transparent capacity allocations and exclusivity given to a certain company limits the liquidity of the cross-border trade which is also not aligned with Turkey’s hub aspirations,” he adds.
Cooperation is key to increase liquidity and cross-border trade
Minister Hristov also described the long-term gas supply deal as a “historical document”.
“With this agreement, we are securing the opportunity to buy gas from all global producers and offload it in Turkey, which best suits Bulgaria logistically,” he underlined. “Over the past year, we had serious problems with LNG supplies precisely because of the lack of infrastructure. Now, together with our colleagues from Turkey, we are solving this problem.”
Previously, Russia provided more than 95 per cent of Bulgaria’s gas, until supplies were halted in April 2022 when Bulgaria refused to pay for gas in rubles. Thus, the country started to cover its consumption differently, with a third of its annual gas needs coming from Azerbaijan (1 bcm) and through the Interconnector Greece-Bulgaria which was inaugurated last October and whose capacity for gas transmission is currently 3 bcm per year with the option to reach 5 bcm. Indeed, also Greece plays an important role as a gas supplier to the region and it also prides itself on being the regional gas hub.
For Mr Özdil neither Turkey, Greece, Bulgaria nor other regional countries are competing to become a regional gas hub.
“Neither Turkey is seeking to replace Greece since all countries are trying to increase their flexibilities as no one wants to be dependent on a single source, nor Greece can replace Turkey which owns the largest gas infrastructure in the region with almost 500 million cubic metres per day (mcm/day) of gas entry capacity,” he points out. “Moreover, Turkey is exporting an important amount of gas to Greece considering its domestic consumption. At the end of the day, to increase liquidity and cross-border trade, all these countries should work in coordination based on the liberal market principles.”
Despite not being in competition, energy expert Emre Özgür believes that Turkey may become closer to Bulgaria compared to Greece, “with its recently increasing underground natural gas storage capacity (4.6 bcm) in the region, increasing and diversifying international natural gas pipelines (TurkStream, BlueStream, TANAP, Iran-Turkey Line), existing LNG terminals and FSRU facilities (two LNG terminals and two FSRU facilities with ongoing projects), new enormous natural gas discovery in the Black Sea (Sakarya Field, 710 bcm), 4 offshore drillships and 2 seismic vessels engaged in hydrocarbon exploration, ongoing hydrogen projects in the natural gas distribution system and its potential in the energy sector.”
“All these make Turkey an indispensable partner in the natural gas sector in the region,” he tells CEENERGYNEWS.
Has Ankara already decoupled itself from Moscow?
And when speaking of Turkey as a potential gas hub, many feared the risk of the country becoming too dependent on Russia, which never stopped the gas flowing through the Turkstream pipeline and earlier last year, President Vladimir Putin indicated Turkey as a main gas access to Europe. In her latest commentary published last December, Atlantic Council’s Nonresident Senior Fellow, Yevgeniya Gaber argued that Turkey could still take on the role of a major energy player in the region and offer Europe alternative fossil fuels to fill the Russian gas gap. However, for that, Ankara will have to make a political decision to decouple itself from Moscow and turn to alternative suppliers.
For Mr Özdil, Turkey has already developed and improved a lot. He reminds us that liquidity, transparency, market depth, infrastructure availability, diversification and regulations are key parameters in becoming a fully-fledged gas hub.
“Turkey has several advantages in becoming a real gas hub,” he says. “Turkey has a very developed gas infrastructure and it is connected to Iran, Azerbaijan and Russia via cross-border pipelines. Turkey is able to import gas from more than 15 different countries which bring huge flexibility for import diversification. Energy exchange is operational and regulatory authority EMRA has good human capacity.”
What, according to him, is a major obstacle, is the dominant role of BOTAS: “if progress is achieved in liberalisation then Turkey can further strengthen itself as a gas hub,” he concludes. “Last but not least, Russian volumes will definitely increase the liquidity of the Turkish hub but even the current market structure is far beyond relying on Russian volumes only to become a gas hub.”
