Turkish Natural Gas Market Koray Kalaycioglu Network Regulations Group Natural Gas Market Department EMRA - Turkey December 2017
Energy Market Regulatory Authority ELECTRICITY MARKET LAW No.6446 NATURAL GAS MARKET LAW No.4646 PETROLEUM MARKET LAW No. 5015 LPG MARKET LAW No. 5307 TO ESTABLISH A FINANCIALLY VIABLE, STABLE, TRANSPARENT COMPETITIVE ENERGY MARKET TO ENSURE ADEQUATE EFFICIENT, CONTINUOUS HIGH QUALITY, LOW COST ENVIRONMENT FRIENDLY SUPPLY SUBJECT TO INDEPENDENT REGULATION AND SUPERVISION 2
Energy Market Regulatory Authority An independent, administratively and financially autonomous public institution. EMRA Board is the representative and decision making body of the Authority. EMRA is responsible mainly for Preparation of secondary legislation Issuing licenses Setting out the annual eligibility limits Monitoring market performance and ensuring the conformity with the market rules Drafting, amending, enforcing and auditing performance standards, distribution and customer service codes Approving the regulated tariffs Setting out the pricing principles for tariffs
BCM/YEAR 60 50 40 30 22,2 20 27,3 Annual Natural Gas Consumption in Turkey 30,9 35,3 36,8 35,2 37,4 43,6 45,2 45,9 48,7 48 46,4 [DEĞER]? 10 0
Annual Natural Gas Consumption in Turkey Year Consumptions (million sm 3 ) Change from the Previous Year (%) 2007 35.395 14,24 2008 36.865 4,15 2009 35.219-4,47 2010 37.411 6,22 2011 43.697 16,80 2012 45.242 3,53 2013 45.918 1,50 2014 48.717 6,10 2015 47.999-1,47 2016 46.395-3,34 2017 ~54.000 +12,08
Main Characteristics of the Gas Market Entry to the market is free through licensing. Regulated third party access (rtpa) is granted, and the EMRA Board is authorized to conclude all disputes on TPA. Pro-rata is applied for capacity allocations for the network, storage facilities, LNG terminals and FSRUs on a yearly basis. Tariffs of the TSO, storage facilities, LNG terminals, FSRUs and DSOs are regulated. Legal & account unbundling is applied. Imports is liberalized through gas release and new contracts. Existing DSOs are privatized and new DSOs are licensed by tender process. Static precautions are taken in terms of limiting market share. Non-discriminatory conduct between domestic and foreign investors is adopted.
Main Characteristics of the Gas Market (2016) Consumption 46,4 bcm Conversion: 36.1% Industry: 30.4% Household: 25.0% Services: 6.7% Others: 1.8% Import 46,35 bcm Pipeline: 83.5% LNG: 16.5% Production 367 mcm 2 production areas 9 active firms Export 675 mcm Kipi, Greece End-users 13,5 million 13 million subscribers 500 thousand eligible customers Source: EMRA
Licensing & Market Entry Licenses are required in order to engage in any natural gas market activity, Separate licenses are required for each market activity and each facility, Types of Licenses Import License Import License (Spot LNG) Transmission License Storage License Distribution License Wholesale License CNG License Export License
Natural Gas Market Players LICENSE TYPES COUNT STORAGE 8 EXPORT 8 TRANSMISSION 17 (1 + 16) IMPORT (Spot LNG) 43 IMPORT (Long Term) 17 (10 + 7) CNG SALES 77 CNG TRANSPORT & DISRTBUTION 38 WHOLESALE 49 DISTRIBUTION 72 TOTAL 251
Gas Market Model Producers Storage (8) Wholesalers (49) Transmission (2+15) Export (8) Eligible Customers (500K) Importers (10+7+43) Distribution (72) Captive Customers (13M) SUPPLY WHOLESALE NETWORK CONSUMPTION
NGML Milestones in Market Liberalization Beginnig of Licensing of the Market Players Contract Release Tender LNG & Spot LNG Import Set Free National Balancing Point and Transfer Points Determined Trade in National Balancing Point New Contracts by Private Importers from Terminated BOTAŞ Contracts Model Transport Agreements in Distribution Zones 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Network Code and Tranmission Tariffs Based on Entry/Exit System Wholesale Tariffs Set Free Storage Facility Code Published First Private Import License From a Country BOTAŞ didn t have an agreement First Private Importer Using the Network After the Contract Release LNG Termial Codes Published All nonhousehold customers are eligible
Milestones in Market Liberalization The First FSRU (Etki) licensed EMRA issued the By-law on Organized Natural Gas Wholesale Market Salt Lake Underground Storage Code 2016 2017 2018 The Etki FRSU Terminal Code was approved EMRA approved the Market Operation Rules for the Organized Natural Gas Wholesale Market Dörtyol FSRU Terminal Licensing and Approval of the Terminal Code Start of Operation of the Natural Gas Continious Trade Platform
Natural Gas Infrastructure & Entry Points 2 ~13.000 km pipeline length m 4 entry points / 9 compressor stations j 1 exit point
Natural Gas Infrastructure & Entry Points Name of the facility Malkoclar (Western Line) Operating Year Connected country Sort of capacity (Entry/exit/bilateral)* Capacity (bcm/year) 1986 Russia Entry 14 bcm/year Access Conditions: rtpa or ntpa rtpa Transmission pipeline (km) 842 km Gurbulak 2001 Iran Entry 9,6 bcm/year rtpa 1491 km Durusu (Blue Stream) 2003 Russia Entry 16 bcm/year rtpa 1261 km Turkgozu 2006 Azerbaijan Entry 6,6 bcm/year rtpa 113 km Kipi 2007 Greece Exit 0,7 bcm/year rtpa 296 km
Underground Storage & LNG BOTAŞ M. Eregli LNG Terminal 22.5 mcm/day 8.2 bcm/year TPAO Silivri Underground Storage 25 mcm/day 2.841 bcm/year BOTAŞ Tuz Golu Underground Storage 13 (40) mcm/day 0.25 (5.4) bcm/year Etki Liman FSRU LNG Terminal 14 mcm/day 5 bcm/year BOTAŞ FSRU LNG Terminal (Planned) 20 mcm/day Egegaz Aliağa LNG Terminal 40 mcm/day 6 bcm/year
Underground Storage Facilities Name of the facility BOTAS Silivri Underground Storage BOTAS Tuz Golu Underground Storage Operating Year Send-out/ Withdrawal (mm3/day) 2007 25 mm3/day (40 mm3/day) 2016 13 mm3/day (40 mm3/day) Injection (mm3/day) Capacity Tank/Reservoir (bcm) 16 mm3/day 2,8 bcm (4,3 bcm) mm3/day 0.25 bcm (5.4 bcm) Access Conditions: rtpa or ntpa rtpa rtpa Transmi ssion pipeline (km)
LNG Facilities Name of the facility Operating Year Regasificatio n Capacity Injection Capacity (mcm/day) Tank Capacity (mcm) Access Conditions: rtpa or ntpa BOTAŞ Marmara LNG Terminal 1994 22,5 mcm/day 8,2 bcm/year 151 mcm/day 153 mcm (255.000 LNG m 3 ) rtpa EGEGAZ Aliaga LNG Terminal 2006 40 mcm/day 6 bcm/year 81 mcm/day 168 mcm (280.000 LNG m 3 ) rtpa Etki Liman FSRU Terminal 2016 14,1 mcm/day 5 bcm/year 86 mcm/day 84 mcm (143.000 LNG m 3 ) rtpa
FSRU Practice In March 2016 EMRA Board issued decision on the licensing regime of the floating LNG terminals: Acknowledgement License granted in May 2016. Basic Operating Procedures and Guidelines of the first FSRU terminal approved in November 2016. The terminal operation initiated in early December 2016.
LNG Facilities in Turkey (2016) EXPORT 5,2 bcm long term 2,5 bcm spot =7.7 bcm (2015) TOTAL TANK CAPACITY 255,000 (3 x 85.000) 280,000 (2 x 140.000) 143,000 =678,000 m 3 LNG SENDOUT TO THE NETWORK SENDOUT TO LAND VEHICLES 22.5 mm3/day - 8,2 bcm/year 40 mm3/day - 6 bcm/year 14 mm3/day - 5 bcm/year =56 mm3/day - 19.2 bcm/year 75 vehicles/day 100 vehicles/day =175 vehicles/day BOTAS LNG EGEGAZ LNG ETKI FSRU
Natural Gas Imports by Country 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Russia Iran Azerbaijan Algeria Nigeria Others*
Spot LNG Imports by Country (2016) Norway [YÜZDE] Nigeria 8,4% Trinidad and Tobago 15,6% US 11,4% Belgium 4,0% France 4,2% Netherlands [YÜZDE] Egypt 4,7% Qatar 43,3%
Natural Gas Consumption by Sector (2016) Households 25,0% Government Offices and Business 6,1% Others 2,4% Electricity Generation 36,1% Industry 30,4%
Natural Gas Distribution in 2017
bcm Monthly Seasonality of Consumption in 2016 7 6 5 4 3 2 1 0,5 1,3 0,4 0,3 1,2 1,3 0,2 2,5 1,2 0,1 0,1 0,1 1,8 1,2 1,1 1,0 1,4 0,8 0,4 0,3 0,2 1,4 1,3 1,2 1,3 1,2 1,4 1,5 0,1 1,1 0,2 1,8 0,3 0,2 1,4 0,1 1,3 1,0 1,1 0,5 0,2 1,3 1,5 1,6 0,5 1,4 2,2 1,2 0 Power Residential Industrial Service
Key Performance Indicators 2014 2015 2016 2017 Number of TSOs 1 1 1 1 Pipeline length (km) 12.561 12.963 13.000 13.000 Pipeline pressure (barg) 50-75 50-75 50-75 50-75 Annual consumption (bcm) 48.717 47.999 46.500 54.000 Seasonal demand swing (%) 0,14 0,2 0,19 0,21 Daily peak demand (mcm) 195 224 220 243 Length of pipeline/consumption (km/bcm) 258 270 280 280 Storage capacity/consumption (%) 5,5% 5,9% 6,1% 5,7% LNG terminal capacity/consumption (%) 29% 30% 41% 47% LNG + storage daily send out / peak demand (%) 29% 27% 41% 212% Number of entry zones 9 9 9 9 Number of exit zones 1 1 1 1 Number of compressor stations 9 9 9 9 Pipeline length / # of compressor stations 1396 1440 1444 1444
2 500,00 Virtual Trade Amounts by Month (2016) 2 000,00 1 500,00 1 000,00 500,00 0,00 Transfer Points UDN Total
Organized Natural Gas Wholesale Market In line with the Turkey s objective of becoming natural gas trade center, organized natural gas market will be established for the purchase and sale of natural gas and will be operated by Energy Exchange (EPİAŞ). In November 2016, first draft of the By-Law on Organized Natural Gas Wholesale Market was published by EMRA. Organized Natural Gas Wholesale Market Usage Procedures and Principles was published in September 2017. The regulation aims to let the market players trade natural gas anonymously in an organized liberal market operating by continuous trade principles, besides letting the transmission system operator balance the system by entering the continuous trade platform when needed. The Organized Natural Gas Wholesale Market is expected to give the players much needed price signals about the market. The market simulations on the Continuous Trade Platform is will start on 1 April 2018.
Aims of the Organized Natural Gas Market The Organized Natural Gas Wholesale Market will provide A tool for the TSO to maintain the physical balance of the system, A platform where the market players can trade gas day-ahead and intraday, The means for the market players to balance themselves, Market based reference prices.
Characteristics of the Market Participating in the market is completely voluntary. All market players willing to enter the market shall have a Standard Transportation Contract signed with the TSO, BOTAŞ. A contract must also be signed with EPİAŞ in order to participate in Continuous Trade Platform. The TSO may enter the system as a Residual Balancer when needed. Non-market based methods may be used when the TSO can t balance the system by trading in the market. Net matchings will be entered to Electronic Bulletin Board of BOTAŞ as nominations for the EPİAŞ virtual entry/exit points. Residual Balancer Price, Balancing Gas Buy Price and Balancing Gas Sell Price will be calculated based on the market-based balancing operations. Daily Reference Price will be weighted aggregate of the day-ahead and intraday contracts.
CTPC Contracts EPİAŞ BOTAŞ CHPC TAKAS BANK TRADERS MDC: Market Delivery Contract CHC: Clearing House Contract STC: Standard Transportation Contract CHPC: Clearing House-Participant Contract CTPC: Continuous Trade Participant Contract
ORGANIZED NATURAL GAS WHOLESALE MARKET SYSTEM OPERATOR/MARKET OPERATOR BOTAŞ EPİAŞ TRADING POINT PRINCIPLES PHYSICAL NATIONAL BALANCING POINT NETWORK CODE/TRADING RULES Transmission Operation Rules Market Operation Rules
Continuous Trade
Continuous Trade Platform
Issues of Debate Pay-as-bid or Marginal Price? Bids limited or not by the Bank Guarantee? Bids and offers on the market limited or unlimited? Residual Balancer enters the market freely & anonymously or on a fixed time? Limit for the bids-offers for Residual Balancing? Imbalance fees based on Daily Reference Price or Residual Balancer Price? When and how non-market based methods shall be used for balancing the system? Cost of the non-market based methods included in the balancing fees or not?
Marmara LNG Aliağa LNG Etki FSRU Malkoçlar 8 Contracts Pemi Silivri Underground Tools of the Trade Akçakoca Blue Stream 2 Contracts Turkish Trade Center Tuz Gölü Underground TANAP Azerbaycan 1 Contract Turkmenistan 1 Contract Dortyol FSRU FSRU 7 Entry Points 2 Production Areas 5 LNG Terminals 3 Underground Storages Mersin Underground Eastern Mediterranean Iraq Iran 1 Contract
Turkish Gas Market Targets Balancing Platform Allowing the market players to balance their portfolios and the transmission system operator balance the system Day Ahead and Intra-day Markets Letting the market players trade natural gas anonymously in an organized liberal market operating by continuous trade principles Price Signals Giving the much needed regional and seasonal price signals about the market that will lead to new contracts and investments Demand Side Market Reshaping the purchase contracts with regards to the regional and seasonal price signals about the market New Infrastructure Investments Making new investments such as LNG terminals, storage facilities, transmission lines and compressors, in order to meet the demand and improve the trade Well-developed Natural Gas Trade Center Establishing a Gas Trade Center that will provide a reference price for the region
Steps Taken for Better Harmonization Entry-exit zones & entry-exit tariff system Model Transport Agreements for distribution zones - Basis for Interoperability Regulation Amendments in the network code for TANAP entry point Balancing regime fully compliant with EU regulations Amendments in the Network Code and regulations in the Market Usage Procedures & Principles aiming better transparency National TYNDP introduced by organized market directive Daily forecasts in Electronic Bulletin Board of BOTAŞ
Improvements to Make Redefining Gas Day & Gas Year compliant with EU regulations Reviewing and redesigning the Capacity Allocation Mechanism (Daily capacity, auctions & secondary markets) Adopting measurement units based on energy rather than volume A unified and comprehensive transparency regulation
Countries Compared (2014) Turkey Italy France Germany Netherland s UK Number of TSO 1 2 2 15 1 3 Pipeline Entry/Exit Points 4/1 6/2 6/4 22/16 6/12 5/3 NG Pipeline Length (km) 12.561 33.339 15.322 26.985 8.531 7.660 Number of Compressors 9 11 30 25 15 28 Consumption (bcm) 48,7 56,8 35,9 70,9 32,1 66,7 Residential & 24,9% 47% 58,6% 46,2% 50,4% 52,9% Commercial Power 48,1% 28,6% 6% 15,5% 15,3% 26,5% Industrial 25,4% 21,6% 31,3% 36,9% 32,4% 17,4% Other 1,5% 2,8% 4,1% 1,4% 1,9% 3,2%
Countries Compared (2014) Turkey Italy France Germany Netherlands UK LNG 15% 8% 20% 0% 1,5% 14% Pipeline 84% 81% 78% 92% 31% 41% Production 1% 11% 2% 8% 67% 45% First RUS/27 RUS/21,3 NOR/15.5 RUS/38.5 NOR/9.4 NOR/10.4 Second IRN/8,9 NLD/8.3 QAT/7.1 NOR/27.7 RUS/3.5 QAT/10.4 Third AZE/6.1 DZA/6.2 NLD/4.9 NLD/18.1 GBR/1.7 NLD/6.6 Other 7,3 15,6 7,1 0,7 8,7 1,3
Countries Compared (2014) Turkey Italy France Germany Netherlands UK Length of pipeline/consumption (km/bcm) Seasonal demand swing (%) # of Underground Gas Storage/ Capacity (bcm) Storage Capacity/Consumption # of LNG Terminals / Annual Capacity (bcm) LNG terminal capacity/consumption (%) Pipeline length / # compressor stations 258 587 427 381 266 115 0,14 0,47 0,33 0,34 0,25 1/2,8 13/16,6 17/12,0 58/24,6 5/12,9 8/5,0 5,5% 29% 33% 35% 40% 8% 2/12,2 3/14,8 3/22 0/0 1/12 4/52 29% 26% 61% 0% 37% 78% 1.396 3.030 510 1.079 568 274
Thank you for your attention! kkalaycioglu@epdk.org.tr www.emra.org.tr