Turkey has slashed its natural-gas-demand forecasts for the third time this year as the country's political crisis takes its toll. But a look at the figures suggests that more adjustments may be needed, posing problems for gas-exporting countries, including Russia, Iran, and Azerbaijan.
Boston, 17 July 2002 (RFE/RL) -- In the midst of a two-month-old political crisis, Turkey has again cut its gas-consumption forecasts, marking the third downward revision so far this year.
The move may be more bad news for gas-exporting countries like Russia, Iran, and Azerbaijan, which have already had weeks to weigh Turkey's problems since Prime Minister Bulent Ecevit fell ill on 4 May.
In a posting on its website, the Turkish state pipeline company Botas lowered its gas-demand estimates for next year by nearly 14 percent and slashed its 2004 forecast nearly 20 percent from predictions made less than three months ago.
The numbers may reflect a recognition that the economic effects of the country's uncertain politics will last longer than has previously been acknowledged. The value of the Turkish lira has dropped 22 percent against the dollar since April, effectively raising the cost of dollar-denominated imports of fuel.
Perhaps more troubling than the 2003-2004 forecast, Botas has simply omitted any estimate for gas demand this year after decreasing it by 5 percent between January and April. The company's forecast that Turkey would use 19 billion cubic meters of gas in 2002 assumed an annual growth rate of nearly 19 percent. Even if that level is reached, it would still leave the country with 6 billion cubic meters of surplus gas this year, based on contract commitments for imports.
With Turkey's political and economic future in the balance, gas issues may be far down on the list of concerns. But countries including Russia and Iran have invested large sums to build pipelines to a Turkish market that is now vastly oversupplied.
Iran has been pumping small amounts of gas under a 1996 contract that was supposed to be worth $20 billion over 25 years. Russia's Gazprom and Italy's ENI oil company are also set to open their $2.5 billion Blue Stream pipelines across the Black Sea in October. And investors in Azerbaijan are poised to approve a $3.2 billion plan for the Shah Deniz gas field in the Caspian Sea with yet another pipeline to Turkey.
All are hoping that Turkey's recovery from its last economic crisis in 2001 will get back on track. But even with Botas's latest revisions, gas exporters have reason to be skeptical.
As with earlier forecasts, the new figures still assume enormous leaps in consumption, suggesting that officials are reluctant to recognize the damage that successive crises have caused.
For example, Botas's new forecast would reduce Turkey's gas demand next year from 31.6 billion cubic meters to 27.8 billion. But even the lower number implies that gas use would grow more than 43 percent over this year's predicted rate. The country used only 16 billion cubic meters of gas last year.
According to Botas, Turkish consumers bought only 7.5 billion cubic meters of gas as of May, indicating little if any growth so far this year. Energy officials have apparently been trying to make adjustments for unrealistically high expectations, but in the process, they are still predicting that gas use will grow many times faster than the economy.
Pipeline developers are unlikely to have bet billions of dollars on unreliable forecasts. But Turkey's difficulty in facing facts may set a poor pattern for investment. The country is still sticking with its six-year-old forecast that demand will reach 55 billion cubic meters by 2010, despite analysts' warnings that the estimate is 40 percent too high.
Each exporting country seems to assume that it can win a share of Turkey's slipping market for a different reason. Russia believes that Blue Stream is a sure thing because it already controls more than 70 percent of Turkey's gas imports through take-or-pay contracts. Ankara can hardly afford to say no to more Russian gas.
Iran seems to think that its take-or-pay contract gives it leverage, particularly since Turkey cannot afford to rely on Russia as a sole supplier. And Azerbaijan's developers have argued that their gas will be closer and cheaper, in addition to fostering Turkic ethnic ties.
All have now turned to the prospect of transit through Turkey to Europe, now that their primary target has shrunk. Botas has been negotiating with Greece for a pipeline that could carry some of its surplus, while it studies a project to create underground storage for more.
On 14 July, the Turkish daily "Radical" raised questions about the quality of Iranian gas, suggesting either jockeying over transit or an effort to escape the take-or-pay contract. On 15 July, Botas denied any quality problem but said it retains the right to reject any substandard gas, the "Turkish Daily News" and the official Iranian news agency IRNA said.
In the long run, transit and storage may make Turkey's ever-changing economy less of a problem for its gas-exporting neighbors. But neither the pipeline to Greece nor the storage will be ready before 2005, even according to Botas's latest forecasts. What will happen in the meantime is anyone's guess.