Future of Global LNG Trade: A Possible Turkish Impact - Onurcan Mısır

Global trade of LNG has been on the rise for many years. Events such as the discoveries of shale gas in the US and technological developments in LNG storage and transportation have facilitated the global LNG market’s transformation from oligopolies to being a much more competitive market with new participants. In line with these developments, Turkey has been thriving in the regional LNG trade with its neighbors and building infrastructure to make further trade possible. It has also intensified its efforts to search for LNG in its territorial waters. A potential Turkish influence on the growing LNG market seems closer than ever if Turkey manages to pursue the right policies, especially in trade.

Developments in the know-how of LNG transportation technologies such as liquefaction, regasification, and reverse flow pipelines have established the foundation of an increasing LNG trade. Many coastal countries have intensified their efforts to build LNG terminals to regasify the LNG shipped in by tankers from the production zones. These terminals, when connected to a natural gas trading hub, first of which was established in Britain in 1999 and spread throughout Europe, help to achieve a more flexible price mechanism by pacing up the energy trade. In Ukraine, a country facing complicated economic and political relations with Russia, import from Europe is now a reality with the recently developed technology of reverse flow pipelines. While this rapid evolution of technology impacted the nature of the global LNG market, the shale boom in the US that took place at the beginning of the century suggested that more participants would begin to be a part of the equilibrium. The US overtook Russia as the world’s biggest LNG producer in 2011 and initiated worldwide LNG exports to South America, Europe, Asia, and even the Middle East, previously known as the leading exporter of global energy trade. It can easily be argued that the global LNG trade is becoming freer, for these developments in technological issues and discoveries are clearly a danger for monopolies. These events found their reflections in the figures: In 2020, even when the COVID-19 pandemic negatively hit many sectors that relied on global trade, global LNG trade has increased to 360 million tonnes. According to Shell LNG Outlook 2021, global demand for LNG is expected to almost double by 2040. In short, global LNG trade will possibly become more competitive while expanding.

Turkey, on the other hand, holding an important key to ease LNG trade both in its region and globally, has many opportunities to benefit from it. It has two straits that separate Europe from Asia, which are crucial in the transportation of all kinds of commodities between the East and the West. It is the only country to own four different LNG terminals in its region. Marmara Ereğlisi LNG Terminal with a capacity of 5.9 million tonnes and the Aliağa Egegaz LNG Terminal with 4.4 million tonnes of capacity per annum are most likely to serve as essential strongholds in a possible Turkish move to act as an ‘Energy Trade Hub.’ With these infrastructure investments and its geographical features, Turkey can become one of the most important countries in the growing LNG trade. The latest resolution to establish the ‘Energy Exchange Istanbul (EXIST)’ under Borsa Istanbul (BIST) will undoubtedly result in the creation of a more competitive and flexible price mechanism which is critical in achieving an attractiveness to gain foreign investors and energy traders both from the supply and demand sides. All of these conditions and achievements in Turkey demonstrate a parallel to the establishment process of the Title Transfer Facility in the Netherlands. Having invested primarily in infrastructure and pipelines, the Netherlands was able to coordinate the LNG trade first with its neighbors in the Benelux, then with Europe, and lastly with the world as a whole when the liberalization of the market began. Turkish economy and energy markets would perform perhaps even better than the TTF example since Turkey stands between two major continents and has the opportunity to influence its neighbors both economically and diplomatically.

Therefore, it is clear that Turkey can benefit significantly from acting as an ‘Energy Trade Hub’ in its region. The globalizing nature of the LNG trade can contribute to the Turkish economy. Turkey can use its already present infrastructure to establish mechanisms that will contribute to LNG’s more competitive pricing, making the whole trade more accessible and more beneficial to every part of the equilibrium. Under these circumstances, it would not be an exaggeration to argue that the Turkish impact is imminent to be one of the biggest trendsetters of the Eurasian and global energy trade.

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