Recent Gas Dispute Stresses Importance of Gas Storage in Turkey

Ankara, January 9, 2006 - Last week’s natural gas crisis between Russia and Ukraine highlighted  the importance of energy security in the region. Although the crisis had no immediate fallout in Turkey, the country is a major buyer of Russian natural gas and the question mark hovering over Russian supplies brought forward the importance of national contingency plans.

But a USD 325 million loan, under the World Bank’s Gas Sector Development Project, will finance the construction of an underground natural gas storage facility and two key compressor stations. The underground storage facility will be built in an underground salt formation south of the Tuz Golu (or Salt Lake). 

The facility, when complete, will provide storage for about one billion cubic meters of gas. This amount is still a fraction of what a country of Turkey’s size should be storing, noted Ranjit Lamech, Sector Leader, at the World Bank. But it is a crucial step in the right direction.

In Western Europe, countries typically store enough gas to meet 20 to 30 percent of their gas requirements. Turkey’s goal is to meet a more modest 10 percent of its requirements. Although this project will fall below this target, “it gets the ball rolling,” said Lamech. “It’s a huge risk for a country like Turkey to go through the winter without a reasonable amount of storage. Turkey needs gas storage urgently and this project will help start that process.”

“The energy sector, and particularly the natural gas sector, is a key driver in Turkey’s economic recovery,” said Andrew Vorkink, the World Bank’s Country Director for Turkey when the project was approved in November 2005.

“Natural gas consumption has grown rapidly in Turkey over the past two decades - with an average annual growth rate of 24%. Considerable amounts of environmentally friendly and less costly natural gas are used in industry, commerce and increasingly, households. Therefore, storage of gas in the country is extremely important.”

As Turkish households and cities have started consuming more gas, demand has become increasingly seasonal. “You need to build buffer stocks so you can draw them down on particularly cold winter days or if an import pipeline goes down,” noted Lamech. The Tuz Gölü (Salt Lake) underground gas storage will enhance supply security and allow Turkey to meet seasonal fluctuations in the most efficient manner.

The project also supports the general goal of establishing a modern and well-functioning gas sector in Turkey. Geographically, the country is well-placed to be a major transit country, exporting gas into mainland Europe.

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