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Turkish industry fears low production in face of gas crisis

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ISTANBUL: Turkish industry representatives have warned that production would be hit, as Turkey ordered industrial sites and power plants to slash gas use and also said it would have to cut energy supplies after neighboring Iran temporarily suspended natural gas flows.

Adding to the woes is the timing of the halt as it comes when there is a major increase in household gas consumption due to colder-than-normal weather.

Iran on Thursday told Turkey it would cut gas supplies for up to 10 days due to a technical failure, sector officials said. Talks are ongoing to start flows earlier, the officials added.

The halt and the major increase in residential gas use prompted Turkey’s state pipeline operator Petroleum Pipeline Corporation (BOTAŞ) on Thursday to order gas-fueled power plants to slash gas use by 40%.

The natural gas distributors were asked to reduce supply to 60% for large consumers except for gas used for heating, the Turkish sector officials told Reuters, adding that schools and hospitals will be exempt.

The reason behind the technical failure remains unclear, but Iran is known for suffering from natural gas shortages in cold and hot temperatures when local consumption skyrockets.

Turkey’s Energy and Natural Resources Ministry on Thursday warned large industrial facilities and electricity plants would suffer limited and predetermined power outages due to the halt.

In a statement, the ministry added that it has taken precautions to ensure other consumers would not be impacted by the gas flow interruption.

Istanbul Chamber of Industry (ISO) Chairperson Erdal Bahçivan said industrialists had to shoulder the biggest burden of rising costs in recent months, and it was unacceptable that industries should now have to pay the price in terms of supply.

“This decision will hit our exports and cause very serious production and planning stress for our factories,” he said in a statement.

He added that the shortage will have a domino effect as it will negatively impact productivity, output quality, delivery and many other areas.

The halt followed a disruption in the flow of crude oil through the Kirkuk-Ceyhan pipeline after a blast near the pipeline in the southeastern Turkish province of Kahramanmaraş earlier this week.

A senior security source later clarified that the explosion was not an attack but that a fallen power pylon (transmission tower) had caused the pipeline near Kahramanmaraş to catch on fire.

The incident had added to global supply woes and drove global crude prices to a seven-year high.

The flow of crude oil through the pipeline from Iraq’s Kirkuk region for export from Turkey’s southern port of Ceyhan resumed Wednesday.

Compounding the gas concerns, the data showed daily gas consumption in Turkey hit a record high of around 288 million cubic meters (mcm) on Jan. 19, according to BOTAŞ.

It shattered the previous year’s record, set on Jan. 19 last year, when consumption totaled 280 mcm.

The increase stemmed from the recent harsh winter conditions and constant snowfall in many provinces around the country.

Turkey is almost fully dependent on imported gas from Russia, Azerbaijan and Iran. According to the latest official data, Iran alone provided 16% of Turkey’s natural gas needs in the first 10 months of 2021.

Energy prices have risen sharply in Turkey, driven by global increases and a 44% decline in the Turkish lira’s value against the United States dollar last year.

Electricity prices were raised as much as 125% for high-demand commercial users this month and by around 50% for lower-demand households.

Natural gas prices jumped 25% for residential use and 50% for industrial use in January, BOTAŞ said. The price rise was 15% for power generators.

Natural gas inflow to Turkey’s gas network saw a year-over-year increase of around 23.2% to 61.6 billion cubic meters (bcm) in 2021.

As Turkey’s natural gas export volume is relatively low, total consumption is expected to be close to the inflow volume.

In 2020, around 50 bcm of natural gas was distributed through the Turkish natural gas system.

The number of gas subscribers reached approximately 18 million as of last year-end, the population equivalent of 70 million, while the country’s natural gas storage capacity reached 3.84 bcm.

Power outages and limited gas supplies will not affect households, according to Turkish authorities.

Turkey also imports liquefied natural gas (LNG) to diversify supplies and optimize costs when spot prices are lower than the decades-long contracts BOTAŞ has with exporters in Azerbaijan, Russia and Iran.

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