Iran cuts the flow, have we been left without gas mid-winter?
With the start of January each year, harsh winter conditions shape life in Turkey and the northern hemisphere. The drop in heat reaching the negative twenties in some provinces causes people to increase the settings on their central heating systems. The 163% spike in natural gas prices over the course of a single year, however, causes hesitation. Even if adults are willing to forego their own needs, the presence of children or the elderly in homes leaves individuals to decide between the weight of their conscience and the financial burdens. The conscience tends to weigh heavier, and the heating system is turned on even if it causes debt. Central heating’s primary input is natural gas, so what happens in its absence? Then comes another predicament, as Iran suspends gas flow at intervals during the year, sometimes entirely and sometimes partially. Why does this happen? Why does Iran choose to cut off the flow of gas? Is there a difference between this year and the last? We will look for answers to these questions in the below analysis.
HAS IRAN CUT OFF THE FLOW ENTIRELY?
Interruptions in the gas exchange between Iran and Turkey are becoming commonplace. The situation this year has not changed. Petroleum Pipeline Corporation’s (BOTAS) January 7 statement reads: “As of January 1, 2023, the natural gas supplied to our country through the Gurbulak-Agri entry point will be cut down by 70 percent due to a malfunction on the part of the Iranian transmission network. The necessary steps to resolve the issues as soon as possible have been taken by our Iranian contacts, and the issue is being followed meticulously. In this winter period, all the necessary precautions have been taken to prevent natural gas use throughout the country from being adversely affected, and our additional gas needs are being met by way of our natural gas storage facilities.”
According to the BOTAS statement, the fault of restricted gas flow lies with Iran. When we take a general look at the situation, we see that problems are experienced at this pipeline’s entry point to Turkey every year. A similar situation had been the case again in January of last year, and serious problems occurred in supplying electricity and natural gas not to residential areas but rather to organized industrial zones. So, how much less gas is Iran supplying to Turkey daily? Why is such a large disruption not felt intensely in the country?
WHY IS IRANIAN GAS STOPPED EACH YEAR?
According to the Energy Market Regulatory Authority’s (EPDK) 2021 natural gas report, Iran supplied approximately 9.5 billion cubic meters (bcm) of gas to Turkey last year. In that period, Turkey’s annual gas consumption was roughly 60 bcm. Based on these numbers, Iran is Turkey’s biggest gas supplier after Russia. However, there are frequent stoppages in the flow between the two countries. More often than not, this is due to technical problems and Iran’s prioritization of domestic market needs especially during the winter months.
Iran’s annual gas production stands at 260 bcm in comparison to the size of its reserves. Russia, which has a similar reserve ratio, produced 760 bcm in the same period. The wide gap between the two was affected by sanctions against Iran and a lack of sufficient technology. A similar situation is being experienced in the petrol sector.
Yet another problem for Iran is the extensive use of natural gas for the production of electricity and the operation of petrol facilities. This is reflected in the country’s consumption rates. According to 2021 data, while Iran produced 800 million cubic meters of gas, which some claim to be an inflated figure, domestic consumption was around 600-750 million cubic meters. When consumption increases in the winter months, Iran decreases the amount of gas it transfers to Turkey to be able to meet the demands of its domestic sector.
Due to the gap between production and consumption, Iran is forced to import gas from Turkmenistan even though it is itself a natural gas productor. In this context, Tehran signed a 25-year agreement with Ashgabat for gas imports between 5-7 bcm per year in 1997. However, gas exchanges were suspended in 2017 as Iran failed to comply with the "take or pay" requirement and delayed debt repayment. Despite this problem, Iran buys gas from its neighbor with payments made from time to time.
This instability in Iran's gas caused interruptions this year, as it had last year. So, what is Turkey doing in this regard?
TURKEY’S PRECAUTIONS AGAINST THE IRAN INTERRUPTIONS
Taking into account its energy security and cost calculations, Turkey is trying to diversify its natural gas suppliers. Currently, it receives natural gas from three countries (Russia, Azerbaijan, Iran) through pipelines, and liquefied natural gas (LNG) from countries such as the USA and Egypt, as well as from its established suppliers such as Algeria and Nigeria. Especially considering the possible interruption in LNG purchases and increase in consumption and based on lessons Turkey has learned from the past, the country is trying to enter the winter season with its reserves full. Aside from the update regarding the Silivri facility (the facility is not yet stocking gas at the announced level), Turkey's total gas storage capacity is 4.9 bcm. So how much gas is actually stored in these reserves?
According to the statement made by BOTAS on October 8, 100 percent of the storage space at at the Tuz Golu and Silivri facilities was used. This could mean that there is no need to worry, we are prepared for Iran's outage. In this regard, when Iran announced the gas cut, the company announced that the missing gas was supplied from the reserves. Uncertainty in the global markets and Iran's usual habit of interrupted gas transfers pushed BOTAS to take precautions. Especially the reactions due to the gas shortages in some regions in the middle of winter last year seem to have been effective in this. So what gas was used to fill these reserves? The financial cost to Turkey of the measures taken due to the Iran interruption is a separate issue. However, it can be said that these measures were necessary for energy security reasons. That being said, based on the frequency of cuts and the difficulties they cause to Turkey, the country stands to benefit from a new agreement with Iran which reviews the amount of gas it has received and negotiates the repair of the pipeline which is allegedly constantly malfunctioning. In doing so, Turkey can both prevent the experienced grievances and fill its reserves, and the country can move forward with a less costly formula against the increasing consumption and interruptions during the winter.