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Turkey’s natural gas market is changing its shell… The goal is to become a natural gas commercial center

As recently described by President Erdoğan , drilling ship Fatih discovered 320 billion m3 natural gas in the Black Sea Sakarya Gas Field, which caused happiness throughout Turkey. On the heels of the discovery, Turkish Energy Market Regulatory Authority has rolled up its sleeves to commence work on the effects on the energy market.

As is known, Turkey’s natural gas infrastructure has been strengthened in recent years by major investments undertaken by BOTAŞ and the private sector. Transmission, distribution and storage facility capacities have been increased. International projects such as Turkish Stream and TANAP were implemented, new LNG / FSRU facilities have been brought online, and the natural gas distribution network has been extended to 81 provinces and 555 provincial districts / townships.

In conjunction with the joint strategy laid out with Turkish Ministry of Energy and Natural Resources, roles such as ‘bridge,’ ‘crossroads’ and transit’ assigned to our country in previous years have been rejected, whereby the goal has been announced as “becoming a natural gas commodity center.”

Undoubtedly, one of the most important landmarks here is the commissioning of the Organized Wholesale Natural Gas Sales Market (Natural Gas Exchange), which was established by EMRA and set up within the structure of EXIST on 1 September, 2018.

Considering the numbers our natural gas exchange has registered over the past two years, it is seen that a total of 3.2 billion m3 of natural gas was traded, a total transaction of 4.7 billion TL was realized and DRP (dailiy reference price) was formulated at an average level of 1460 TL/1000 Sm3. For a newly established stock exchange, these figures are satisfactory and are an indication of the market players’ trust in our legislation and institutions.

As the recently discovered Black Sea natural gas is introduced into the system, Turkey’s natural gas market is set to expand even further, as supply sources diversify, there is more liquidity and depth in the natural gas exchange, and a notable decrease is seen in residential and industrial consumers’ energy bills.

The Countdown For The Futures Gas Market is Underway

Scheduled to be operational in 2021 as part of the Energy Ministry’s 2019-2023 Strategic Plan, the Futures Gas Market is also of great importance in terms of creating a market where the natural gas we produce can be sold through futures contracts. The EMRA has nearly completed its studies in this regard.

A draft was prepared to offer fresh options to market players trading in our natural gas commodity exchange and minimize uncertainties pertaining to futures prices. The first meeting of the workshop process in which all pertinent parties, such as EMRA, EXIST, BOTAŞ, private sector NGOs and companies shall come together in order to provide the final draft and submit it to the Energy Market Regulatory Board for approval has been held.

In this first meeting with more than 50 participants, product types and terms to be offered to the Futures Gas Market were evaluated by the parties, whereby the EMRA provided participants information regarding the types of futures traded in international developed markets.

What is in store for the Futures Natural Gas Market to be introduced in 2021?

Essential qualities for a healthy functioning competitive natural gas market include;

– market predictability,

– Eliminating risks stemming from price uncertainty,

– Targets such as increasing depth and liquidity in the market to be achieved through the natural gas futures market.

Along with introducing innovative products that require future physical delivery in the organized market, alternative movement flexibility will be provided to the players operating in the CTP (natural gas continuous trading platform) in terms of their positions, leading to increased market depth, minimized future uncertainties and a great contribution towards securing the supply.

In his assessment of the matter, EMRA President Mustafa Yılmaz said, “Along with the futures gas market to be inaugurated in 2021, players trading on the natural gas commodity exchange will have the opportunity to pre-purchase and sell domestic natural gas which is slated to be introduced into the system through futures contracts in 2023. Thus, we hope to see a positive impact on prices even before the production of our Black Sea gas begins.”

“We at EPDK will be engaged in the process of producing and commercializing the domestic natural gas discovered in the Black Sea. Hopefully, we will ensure that our domestic natural gas is offered to our consumers in the most economical way by carrying out the required licensing and regulation studies.

With the recent gas discovery as well as its futures gas market, Turkey will be a step closer towards its goal of becoming a natural gas commodity center. While our natural gas market was already in a very good position, discovering our own natural gas adds verve to this process. We are going to be proud of regulating our own natural gas. On this occasion, as we celebrate the second year of our natural gas commodity exchange, I would like to thank everyone, especially our Minister who supported the establishment of the CTP (natural gas continuous trading platform), for their efforts in making it possible.

Reference: website of EMRA

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