Azeri and Iranian gas supply failure fuels shortage concerns

Azeri and Iranian gas supply failure fuels shortage concerns

(Photo: Cihan)

February 07, 2012, Tuesday/ 17:31:00

The flow of natural gas to Turkey from Azerbaijan's Shah Deniz field, the largest in the Caucasian country, via the South Caucasus gas pipeline, stopped on Tuesday, raising fears among Turks at a time when the demand for the natural gas is rising and gas supply from major providers such as Iran is declining.

The interruption of natural gas was the result of a technical issue and will be quickly solved, said Kenan Yavuz, CEO of the energy consortium Socar-Turcas, jointly operated by the State Oil Company of Azerbaijan Republic (SOCAR) and Turkey's Turcas, shortly after the news hit online media outlets. “It will be fixed by the midnight [on Tuesday] or Wednesday at the latest,” he said.

Also responding to questions was Energy and Natural Resources Minister Taner Yıldız. He said that households were not immediately affected by the cessation of Azeri gas to Turkey. “As of today, problems will not spread to the households of Turkish citizens,” the minister said, adding that natural gas conversion plants that produce electricity have started using secondary fuels (diesel and fuel oil) to avoid power cuts across the country. He spoke during a press conference held at Parliament on Tuesday. Turkey's daily natural gas consumption is 192 million cubic meters, a level above the seasonal average due to the cold weather, particularly in the past few weeks. Last year Turkey's natural gas consumption was 171 million cubic meters per day during the winter. The country imports 6.6 billion cubic meters (bcm) of gas per year from Azerbaijan, which is around 16 percent of its total consumption. It also imports around 10 bcm from Iran, making it Turkey's second largest supplier after Russia. Turkey also halted gas supplies to Greece due to the cut in Azeri gas supply and said it has asked Iran to increase its supply.

“Turkey receives natural gas from five different locations. We have been told that there is now a problem with Azeri gas. There is also an issue with natural gas coming from Iran because of a compressor problem,” Yıldız also said Tuesday. He joined Yavuz in announcing that a solution will be quickly found for the Azeri gas flow problem, noting that it will resume by 5 a.m. (GMT +2) on Wednesday morning. He did not, however, elaborate on the issue in Iran. He only said that Iran has sent less gas to Turkey as a result of a technical problem there. Turkey and Iran are currently at odds over the price of natural gas. Last month Turkey applied for arbitration at the International Chamber of Commerce in Switzerland as part of this dispute. Of the natural gas purchased by Turkey, Iran charges the most. Turkey currently buys one cubic meter of Azeri gas for $330 and pays Russia $400 for the same amount. Iran, however, sells its gas to Turkey for $505 for each cubic meter, which increases Turkey’s natural gas bill by $800 million annually. The average price of one cubic meter of natural gas is $400 in international markets. Turkey wants Iran to bring the price down to international levels. A similar situation arose between Turkey and Russia earlier this year; however, it ended when Turkey traded an agreement allowing the Russian South Stream pipeline to pass through Turkish territorial waters for a discounted price.

How prepared is Turkey?

During Tuesday’s press conference, Yıldız was also asked if Turkey is adequately prepared in the event that Azeri gas flow cannot be restored for longer than expected. “We are prepared for the worst-case scenario. We have plans A, B and C but we are not there yet. There is no need to be worried as of now. We are continuing to replace the missing natural gas,” he said. Currently Turkey has the capacity to store 2.1 bcm of natural gas; enough to keep Turkey’s citizens warm for nearly two weeks at this year’s winter levels of consumption. Last year the government agreed with a private company to construct a natural gas storage facility under Lake Tuz near the capital of Ankara, but it will not be completed before 2015.

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