Caspian Energy Journal Caspian European Club
Wednesday, 02 October 2019 11:09

World market behavior not lining up in favor of Caspian upstream Featured

World market behavior not lining up in favor of Caspian upstream

In September, the Turkish Energy Market Regulatory Authority (EMRA) allocated part of the carrying capacity of Turkey’s gas pipeline network in order to perform short-term contract-based gas supplies via cross-border pipelines.  In this way, companies possessing a license for making spot gas import will manage to buy gas on basis of monthly, quarterly and annual contracts. Thus, much cheaper gas will be supplied to the domestic market, President of EMRA Mustafa Yilmaz told Caspian Energy News about it. According to him, a capacity growth of the free gas market in the world will considerably lower prices for imported gas. According to Yilmaz, the market will be more dynamic with the growth of natural gas supplies and diversification of resources. “I would like to note that this regulation will promote gas trade growth, and the price competition will have a positive impact on budget of our consumers”.

It is expected that free regulation will make the domestic market’s gas price to fall in the short term.  In the long term, it will help to strengthen Turkey’s positions when signing new long-term and medium-term contracts.

It is noteworthy that Azerbaijan exported 2.81 bcm to Turkey in May 2019. Of this volume, 2.207 bcm accounted for pipeline gas, while 473.19 million fell to the share of LNG.

In May 2018, Turkey imported 3.008 bcm of Shah Deniz gas, of which 2.454 bcm accounted for pipeline gas and 554.63 million fell to the share of LNG. 

Between January and September 2018 Azerbaijan raised the export of Shah Deniz gas to Turkey by 7%, supplying over 5.2bcm.  According to the data of EPDK, gas export to Turkey totaled over 3.281 bcm in September 2018, which is 10.85% lower than the figures of September 2017.

Azeri gas supply to Turkey exceeded 6.542 bcm in 2017.

Turkey has a contract for an annual purchase of 6.6 bcm of Azerbaijani gas from Shah Deniz offshore gas condensate field.

According to the data of EIA, natural gas provides 22% of energy consumed all over the world. It makes almost a quarter of the generated electricity. Besides, gas is also important as a raw material used in the industry. Natural gas is a universal fuel, and its growth is partly associated with its environmental advantages compared to other fossil fuels, especially with regard to air quality and greenhouse gas emissions. According to the statement made by the Executive Director of the International Energy Agency (IEA) Fatih Birol, the most rapid growth of the world demand for primary energy resources was registered in 2018. A half of needs in the total volume of demand is met at the expense of natural gas followed by renewable sources of energy, as well as oil, coal and nuclear energy. As the world leader in terms of gas demand growth, China starts implementing projects based on environmentally friendly technologies and air pollution preventing measures, which will promote substantial growth of global gas demand. 

According to EIA forecasts for 2018-2024, the markets of the EU and Russia will remain the only ones in the world, where a gas demand decline by 6 bcm and 13 bcm will be fixed respectively.  At the same time, supply from Russia to the EU makes about 170 bcm per annum and is carried out on basis of long-term contracts.  Meanwhile, supplies from Shah Deniz field are estimated at 10 bcm. An increase of the carrying capacity of the underconstruction Southern Gas Corridor remains in question due to Russia’s and Iran’s positions opposing the construction of the Trans Caspian gas pipeline, which can raise a competitiveness of the Caspian gas in the European and Turkish markets.

Extreme vulnerability of oil and gas markets, as has been demonstrated by the latest attack of drones on the oil refinery in Saudi Arabia and the cessation of gas production on the single offshore gas field of Denmark due to the seabed subsidence, tells about ongoing trend in the EU towards diversification of supply sources and reduction of dependence on primary energy resources in favor of local and renewable sources of energy. As a result, new investments in the Caspian upstream may be in question, and the supply of new volumes of Caspian gas may require additional diversification and a possible reverse of the Trans-Caspian gas pipeline project towards the Chinese market.

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