Tuna-1, as the well is known (a reference to the Turkish word for the Danube River, not the fish), holds some 320 billion cubic meters of gas. For perspective, that is around two and a half times the size of the Aphrodite field south of Cyprus, which is the subject of ownership disputes that are one of several triggers for current tensions between Ankara and a Greek-led coalition of Mediterranean countries.
Turkish President Recep Tayyip Erdogan has vowed to make Black Sea gas available for use in 2023, the 100th anniversary of the Turkish Republic. If he is right, Turkey will be able to meet close to 7 percent of its annual demand for natural gas (around 45 billion cubic meters in 2019) from domestic sources. That’s not a small achievement for a country traditionally dependent on oil and gas imports. This gas find also dovetails well with the government’s campaign to boost domestic manufacturing to upgrade the economy and add to the country’s prestige, under the heading “yerli ve milli” (“local and national”).
Still, industry experts are skeptical. They point out that this gas field by itself would only meet Turkey’s demand for seven years. And extracting the hydrocarbons is challenging too. TPAO, the national oil and gas company, will need to partner with a Western firm to accomplish the task. Last but not least, and especially contrary to upbeat statements by Erdogan and his son-in-law Finance Minister Berat Albayrak, the discovery is nowhere near the silver bullet to kill the problems facing the faltering Turkish economy, which include runaway inflation, a currency that has lost nearly a fifth of its value since the start of the year, and sluggish growth coupled with large current account deficit, not to mention the hollowing out of key institutions such as the Central Bank.
What is really at stake in all this are Turkey’s trade relations, first and foremost with Russia. Since the 1990s, Gazprom has been the dominant supplier on the Turkish market, providing half of the gas for local consumption. In fact, since 2005, when the Blue Stream pipeline between Russia and Turkey came online, Turkey has turned into Russia’s second-most-significant natural gas customer after Germany.
For the most part, Moscow has always had the upper hand in commercial negotiations with Ankara, whether through setting a pricing formula favorable to Russia or the so-called take-or-pay clauses in long-term contracts, which obliged Turkey to purchase certain volume of gas annually. Turkey was not even able to capitalize on the Russia-EU spat following the annexation of Crimea and the subsequent cancellation of the South Stream pipeline, which would have taken Russian gas to Europe through other countries, either. Turkey signed up to TurkStream, the alternative project across the Black Sea, but failed to extract significant concessions from the Russian side. In October 2016, Erdogan by and large accepted Russian President Vladimir Putin’s terms as a price for the two countries’ reconciliation following clashes between them in Syria.
But now the tide appears to be turning in Turkey’s favor. Since 2018, BOTAS, a Turkish state-owned utility, as well as several private importers have been buying larger amounts of liquified natural gas from the likes of Algeria, Nigeria, and Qatar, as well as from the United States, which offer lower prices than Gazprom. Pipeline gas from Azerbaijan is also picking up the slack.
In turn, Gazprom has seen its share on the Turkish market contracting from 52 percent in 2017, to 47 percent in 2018, to just 33 percent in 2019. And at the same time, demand in Turkey has been shrinking because of the sluggish economy. As a result, the Russian pipelines running across the Black Sea—TurkStream and Blue Stream—are operating much below capacity. The notion that Russia wields an “energy weapon” to coerce neighbors, popular in the 2000s, is no longer borne out by market realities.
Access to gas deposits in the Black Sea will further enhance Turkey’s negotiating position. The long-term contracts with Gazprom are up for renewal at the end of 2021 (for TurkStream) and in 2025 (for Blue Stream). Deals with Azerbaijan, Nigeria, and Qatar are expiring, too. Turkish negotiators will be pressing hard on the take-or-pay issue in order to gain flexibility. Turkey’s debt of $2 billion to Gazprom in fines for Turkish importers failing to meet their annual quotas will be on the table as well. Having alternative suppliers and being able to tap into their own hydrocarbons, even if they’re still trapped at the bottom of the Black Sea, will be Ankara’s top bargaining chip.
Turkey’s neighbors will be closely watching how it fares in the coming negotiations. On Aug. 24, Bulgaria and Greece finalized a deal to set up a joint liquefied natural gas terminal outside the Greek port city of Alexandroupolis, close to the Greek-Turkish border. They, too, will try to use their new alternative supplies to squeeze concessions from Russia.
Tuna-1 has regional repercussions as well. Black Sea nations have been drilling for oil and gas for years, along with energy firms such as Exxon Mobil (from the United States), Total (France), OMV (Austria), and Repsol (Spain). Romania has long hoped to find gas in its exclusive economic zone, including in the Neptun Deep field, some 60 miles to the north of the Turkish find. Bulgaria has been prospecting in the Khan Asparuh offshore field, where Total discovered oil in 2016. Many of those projects face technical and logistical challenges. Low hydrocarbon prices are a disincentive, too. But if Turkey starts production and investors prove able to recoup their money, the game may change.
The good news is that the Black Sea is more amenable to regional cooperation than the Eastern Mediterranean, where a tangle of competing interests have nearly led to bloodshed. Though jurisdiction disputes do exist—Russia’s conquest of Crimea being exhibit No. 1—boundaries in the Black Sea are settled, and exclusive economic zones delimited. In the Mediterranean, meanwhile, Turkey acts as a spoiler, putting a wrench in the works of competitors such as Greece, Egypt, and Israel in order to secure what it considers its fair share of the energy resources. In the Black Sea, however, it could play a productive role—providing a positive example for neighbors striving to diversify gas supplies.
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