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What will Turkey's new energy policy mean for the gas industry?

The groundbreaking ceremony for the Trans-Anatolian Natural Gas Pipeline (TANAP) project occurred on March 17th, but some are concerned there will be a reduced need for the pipeline in the future. Turkey's National Renewable Energy Action Plan, launched last month, has stated that the country will be relying more on renewable energy in the next decade.

This has caused fears that Turkey will end up reducing the amount of gas that it imports, which would make TANAP less profitable if it were true. While these concerns are understandable, it does not look like they will end up coming true.

In fact, things are looking very positive for the future of TANAP. The pipeline has secured additional investment recently from BP - which purchased a 12 per cent stake in the project - and it looks set to provide a huge economic boost to Turkey's industry in general once construction gets fully underway.

So why will Turkey continue needing to import gas at the same rate if the steps laid out in its National Renewable Energy Action Plan go ahead? There are a number of factors that indicate Turkey will not be reducing the amount it purchases from other nations any time soon.


An increasing need

The plan outlined by Turkey's Energy Ministry last month stated that the country would aim to develop 30 per cent of its total installed capacity from renewable sources by 2023. This would involve increasing hydropower output by 34 GW, wind by 20 GW, solar by five GW, and geothermal and biomass by one GW each.

However, by 2023 Turkey's energy requirements will have sharply increased; the Turkish government estimates the country's need will have more than doubled by 2020. This means that while a smaller portion of the nation's energy will come from imported gas - should it manage to construct the necessary renewable power infrastructure - the actual amount of the resource it requires will not decrease by much, if at all.

In fact, industry experts are unsure Turkey will be able to supply such a large portion of its energy from renewable sources. Volkan Emre, founder of the World Energy Security Analysis Platform, told SES Turkiye: "Turkey is heavily dependent on natural gas and coal, and transitioning to different energy sources in the heating sector would be impossible.

"Currently, just 13 percent of the country's heating energy comes from renewable resources, mostly from hydroelectricity production, and we can expect it to stay under 15 percent for the foreseeable future." This means the country will still need to import a large amount of gas in the future.


Looking for diversity and security, not independence

Then again, Turkey isn't really looking to reduce the amount of gas it imports. While it would be beneficial if the nation could become wholly energy-independent, this is not a realistic goal. Mr Emre added: "Turkey cannot be fully independent in the energy sector. Turkey will continue to rely on imported natural gas as a key energy source."

Instead, the nation simply wants a more diverse set of energy sources to shield itself from harm caused by fluctuations in the market. Currently, around 44 per cent of the country's energy is provided by natural gas, which leaves it with a need for greater energy security. Focusing on renewable energy is one way to achieve this, but Turkey has others in the works.

One of these is the Akkuyu Nuclear Power Plant. Once completed, this project would have a capacity of 1,200 MW, enough to provide Turkey with 17 per cent of its electricity according to the project's director Fuad Akhundov. But the most important thing for the nation is not replacing gas as an energy source, but diversifying into other areas as well.

In fact, with the increasing demand for energy Turkey will probably have to diversify its gas sources as well by investing in more projects in addition to TANAP. Mr Emre said: "Turkey should seek opportunities to build additional pipelines from Iraqi Kurdistan, Iran and Turkmenistan."


An energy hub

Finally, there is the fact that a large amount of the gas Turkey will import in the future is likely to be exported straight to Europe. Turkey has been setting itself up as an energy hub for some time now, with TANAP at the forefront of a plan to supply the EU with gas from central Asia.

The pipeline's construction alone should be proof that Turkey does not intend to reduce its gas imports, and international investors are betting on this. In fact, BP announced on March 13th that it had signed an agreement to purchase a 12 per cent stake in TANAP, reducing the amount held by the Azeri state company SOCAR.
The $9 billion project would not be the target of such investment if it wasn't set to bring returns in the future. While Turkey will likely end up with a more diverse range of energy sources for its domestic use, it will still import plenty of gas from central Asia to supply to Europe.

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