Future Projection of Turkey Gas Market: In Comparison With Germany Gas Market Structure
The natural gas market structure in Germany as an example
The liberalisation of natural gas market in Germany has begun in 2006 with new legislation, through which the German Power Supply Agency (Bundesnetzagentur) has been instructed to control the natural gas market. The German Power Supply Agency provides an effective competition and a network - access free from discrimination via controlling the network regularisation and transmission tariffs. Moreover, the Federal Competition Authority (Bundeskartellamt), Land Competition Authority (Landeskartellamt) and BaFin (Federal Financial Supervisory Authority) come as market regulatory authorities to the fore. Competition authorities are instructed in market supervision.
According to the Energy Market Law (Energiewirtschaftsgesetz) from 2005, energy supply companies which operate in manufacturing or distribution are subject to the unbundling. The grid operator which is associated with the energy supply company shall be independent on the other energy supply activities. These unbundling types of a gas supply company are structured in diverse activities such as operational, financial, informational and legal activities. Accordingly, the grid operation shall be transferred into an independent legal structure and the accounting of diverse activities shall be kept separately. Moreover, the grid administrator shall not practise another activity in natural gas market. Gas distributing companies with a customer number of less than 100.000 are exempted from the legal and operational separation. In conclusion, competitive organised areas are separated in gas market. In addition to this, Germany has included the gas index to its import contracts.
After the integration of natural gas market areas in Germany, there are now two main energy trading points named Gaspool and NCG and these independent system operators have several shareholders. The reduction of natural gas trading areas in Germany has increased the number of natural gas trade transactions. The energy exchange is operated by "European Energy Exchange" (EEX) and it has sub-markets for intra-day, day-ahead, spot and derivatives markets. The clearing activities have been transferred to European Commodity Clearing (ECC).
Turkish Gas Market Profile
2001 economic crisis became a milestone on Turkish energy sector in terms of liberalization policies. Albeit, a well-structured gas stock exchange should be established for the purpose of comprising reference prices. The most problematic fact of Turkish gas market is limited manufacturing with a natural gas import dependent country profile.
Permanent Solution Propositions
- The number of countries that Turkey imports natural gas should be increased by existing pipelines. The hottest target for this projection is North Iraq that Turkish government currently signed a proposal including gas research and pipeline construction matters.
- Ownership of foreign gas manufacturing zones shall be enhanced.
- New strategic incentives shall be taken into account for shale gas operations.
- Investment opportunites for LNG terminals should be bolstered by government with several types of incentives such as tax exemptions and low interest rate loans.
- Gas indexed contracts will be mandatory tools for utilizing from natural gas market dynamics. Turkish policymakers shall augment the share of LNG contracts in total market.
- Electricity prices are highly correlated with natural gas prices in Turkey. Hence, gas storage capacity should be increased to control prices particularly in case there may be a power cut in a short notice.
- The regulation for capacity storage percentage to operations shall be reviewed. In accordance with Law No: 4646, 10% of total transaction volume of natural gas must be stored after 5 years.
- Stamp tax duty for all types of gas contracts shall be abrogated.
Unbundling of BOTAŞ
Despite the liberalisation policy of turkish natural gas market, the recent Natural Gas Market Law No. 4646 was not sufficient to accelerate the natural gas market liberalisation. With the Draft of New Natural Gas Market Law, a stabilization and reconciliation market will be established. Moreover, the unbundling of transmission and trade activities of BOTAŞ will be accelerated through the New Natural Gas Law which plans the completion of unbundling process in 2014. With the New Natural Gas Law, the authority of BOTAŞ to contract natural gas purchase will be removed. In addition to this, BOTAŞ will provide the coordination of all transmission networks. With decrease of the market share and market domination of BOTAŞ, it is expected that the natural gas market liberalisation will be provided to a large extent.
Prospective Gas Market Under Energy Stock Exchange
Turkish energy stock exchange (EPİAŞ) is expected to be established within 2014. In this regard, Turkish transmission system operator (TEİAŞ) will possess 30% of EPİAŞ' shares. Thereafter, 15% of TEİAŞ's shares will be transferred to Petroleum Pipeline Corporation (BOTAŞ) in long term. Furthermore, the ownership of private companies is limited with 2% that will be announced by Energy Market Regulatory Authority (EPDK). The primary focus of natural gas market is generating reference pricing with transparency. EPİAŞ's transparency rules shall be determined and information sharing system likewise Public Disclosure Platform for reliable gas prices.
Long Term Gas Market Model
Bilateral contracts and OTC markets operations will be directly driven by National Balancing Point which will be a buffer between BOTAŞ and markets with respect to pricing. In the scope of stock exchanges, transactions will be divided by spot markets and derivatives. Under the EPİAŞ day-ahead and intra-day markets' operations will be substantiated whereas Borsa Istanbul will embody Futures, Options, Swaps, CFDs and Swaptions. All the prices, are constituted in stock exchanges will be stabilized in National Balancing Point mechanism before transmission to BOTAŞ.