With LNG prices soaring, Turkey’s Black Sea gas will become more valuable than ever!

We are living in an era in which global inflationary pressures are being felt more deeply than ever before. Even though idiosyncratic conditions of the global pandemic are triggering this period, expectations that the rising prices of some commodities will be long-term are being fortified by the day. Liquefied natural gas (LNG) tops these commodities, as natural gas prices are hitting an all-time high in Europe.

In a study it published last week, Morgan Stanley revealed that LNG would be the fastest growing hydrocarbon over the next decade. It further stated that demand for LNG is expected to rise by 25 to 50 percent by 2030.

According to its findings, when compared with the last five years, LNG prices will increase by 40 percent over the next ten years. Morgan Stanley has already updated its long-term LNG price outlook to $10 per million British thermal units (mmBtu).

Over the last decade, Turkey has imported about 50 billion cubic meters (bcm) of natural gas per year. Since last year, we know that in addition to a significant amount of LNG, Turkey has been using pipe gas in a bid to diversify its resources. To increase its LNG purchasing capacity, Turkey has been investing in Floating Storage Regasification Units (FSRU). Ertuğrul Gazi, the FSRU ship it purchased, is also a part of this strategy.

Energy imports constitute one of the important reasons there is a deficit in Turkey’s balance sheets.  Within this context, Turkey’s 540 bcm of natural gas discovery in the Black Sea becomes ever more important. Starting the drilling of the Black Sea reserve carries strategic significance, in terms of both supply and price security.

Only days remain for the 2021 United Nations Climate Change Conference, where climate change will be discussed at the highest level. On the top of the global agenda, we have the fight against climate change. The number of ventures aiming to limit the use of fossil fuels to minimize carbon emissions is bouncing. However, despite these initiatives, fossil fuel has retained its significance, and energy security is still directly linked to the unlimited and affordable availability of fossil fuels.

Japan is the latest example of this. At the beginning of this year when it had LNG supply issues, it sought to address the problem of meeting the country’s electricity demand by directly burning fuel. Now, once more, with rising LNG prices, Japan has turned to burning crude oil to generate electricity.

To finish off, a word of advice: To stay up to date with the latest developments in energy and for detailed analyses, I recommend you follow the social media accounts of Caner Can, energy advisor of the Ministry of Foreign Affairs, who will start working as Turkey’s energy advisor at the Permanent Representation to the EU at the beginning of next year.