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Turkish Natural Gas Market is Changing its Shell… The Objective: Becoming a Natural Gas Trade Hub

As revealed by our President, the drilling ship Fatih discovered a natural gas reserve of 320 billion m3 in the Black Sea Sakarya Gas Field, causing happiness throughout Turkey, and the Energy Market Regulatory Authority has rolled up its sleeves to study the effects of this discovery on the energy market.

As it is well known, Turkey’s natural gas infrastructure has been fortified during the recent years by major investments realized by BOTAŞ and the private sector. The capacities of our transmission, distribution and storage facilities have been increased. International projects such as Turkish Stream and TANAP were implemented, new LNG/FSRU facilities were commissioned, and the natural gas distribution network has been expanded to reach as many as 81 provinces and 555 counties/townships.

In line with the joint strategy determined with the Ministry of Energy and Natural Resources, roles that had been assigned to our country in the past, as a bridge, a crossroads or transit were outright rejected, and the new goal was determined as “becoming a natural gas trade center.”

Undoubtedly, one of the most important milestones here is the commissioning of the Organized Natural Gas Wholesale Market (Natural gas exchange), the regulatory basis of which was formed by EMRA and established under EXIST on 1 September 2018.

Looking at the realization figures registered by our natural gas exchange over the past 2 years, it can be seen that a total quantity of 3.2 billion m3 of natural gas was traded, a total transaction volume of 4.7 billion TRY was realized and the average Daily Gas Reference Pricevalue was around the 1460 TRY/1000 Sm3. For a recently established stock exchange, these figures are quite pleasing and are an indication of the confidence felt by the players in the market towards 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 gradually expand as supply sources are diversified, there will be more liquidity and depth in the natural gas exchange, and a significant reduction will be seen in the energy costs of residential and industrial consumers.

The Countdown Is On For The Futures Gas Market

The Futures Gas Market(FGM), intended to be operational in 2021 as part of the Ministry of Energy’s 2019-2023 Strategic Plan, also has great importance in terms of creating a market where the natural gas we produce on our own can be sold through futures contracts. EMRA has nearly reached the end of its studies to address this opportunity.

A draft has been prepared to offer new options to market players who carry out transactions in our natural gas exchange and to minimize uncertainties with regards to prospective prices. The first meeting of the workshop process in which all interested parties (EMRA, EXIST, BOTAŞ, Private Sector NGOs and Companies) gather together in order to make the final touches to the draft and submit it to the approval of the Energy Market Regulatory Authority has been held.

In this first meeting attended by more than 50 participants, product types and terms to be offered in the FGM were evaluated by the parties, and EMRA informed the participants with respect to the types of futures products traded in international developed markets.

What Will the Futures Natural Gas Market Slated to be Introduced in 2021 Bring?

With the futures natural gas market, it will be possible to achieve objectives such as;

– Market predictability,

– Eliminating risks stemming from price uncertainties,

– Increasing the depth and liquidity in the market, which are essential for a healthy and competitive natural gas market.

By introducing innovative products that require future-dated physical delivery to the organized market, an alternative movement flexibility will be provided to the players trading in the OTSP in terms of their own positions, the market depth will be increased, future uncertainties will be minimized and great contributions will be made towards ensuring supply security.

Evaluating this matter, EMRA Chairman Mustafa Yılmaz said that, with the futures gas market to be operational in 2021, the players trading in the natural gas exchange would have the opportunity to purchase-sell in advance the domestic natural gas which is intended to be introduced into the system in the year 2023, through futures contracts… Yılmaz added, “Hopefully, we will see the positive effects of our Black Sea gas on the gas prices in our country even before its production begins.”

EMRA Chairman also added the following statement:

“As EMRA, after the production of our domestic natural gas that we discovered in the Black Sea, we will play a part in its commercialization and introduction into the system. We will ensure that our domestic natural gas is offered to our consumers in the most affordable way by carrying out the necessary licensing and regulation efforts.

With this discovery and our futures gas market, Turkey will be one step closer towards its goal of becoming a natural gas trade center. Granted, our natural gas market is already in a very good position. However discovering our own natural gas in the process, is the cherry on top… We will be proud to be regulating our own natural gas…  As we celebrate the second year of our natural gas exchange, I would like to take this opportunity to express my gratitude to everyone for their efforts, especially to our Minister who supported process of establishing the OTSP.”

Reference: News article dated 15.09.2020, as published on the EMRA website.

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