David O'Byrne in Istanbul -

As the crisis in Ukraine rumbles on and another war over Russian gas supplies looms, Turkey is facing the prospect of cold weather causing gas shortages for the next four winters at least.

Second guessing Russian President Vladimir Putin has never been easy. Given the failure of successive ceasefires in Ukraine to halt hostilities and still no sign of an agreement with Ukraine over gas supplies, few would be brave enough to bet against a repeat of spats between Moscow and Kyiv of 2006 and 2009 that closed down the export pipeline through Ukraine causing gas and power cuts all over Central and Eastern Europe. Among those countries affected was Turkey which receives 14bn cubic metres a year (cm/y) of Russian gas through Turkey’s western gas supply line via Ukraine.

In 2006 and 2009, Russia was able to minimize the impact by raising exports using spare capacity through the 16bn cm/y capacity Blue Stream pipeline across the Black Sea. Today, though, due to the continued expansion of regional gas distribution grids gas and the continued commissioning of new gas-fired power plants, Turkish gas demand is expected to reach 49bn cm this year - perilously close to the 52bn cm/y maximum of the country's import portfolio - meaning any cut in supply would result in Turkey being unable to meet demand, especially if it occurred during a peak demand cold spell.

That portfolio includes long-term contracts for 14bn cm/y and 16bn cm/y from Russia, as well as 10bn cm/y from Iran, 6.6bn cm/y from Azerbaijan and liquefied natural gas (LNG) from Algeria (4.4bn cm) and Nigeria (1.2bn cm).

Already the Ukraine crisis has briefly affected gas supplies to Turkey. "We just don't know what is going to happen - there was an unexplained pressure drop on the western line last week," says Burak Guler, an Istanbul-based energy policy analyst and the Turkish representative for the European Federation of Energy Traders (EFET), pointing out that the peak demand December to February period offers the greatest risk for a shortage.

Russian gas aside, Turkey is already facing the problem of losing the 4.4bn cm/y of Algerian LNG, the contract for which times out at the end of this year. An agreement in principle signed last year for up to 6bn cm/y for ten years has yet to be turned into an actual contract with Turkey holding out for a long-term pricing deal and Algeria preferring to sell on the more lucrative spot market.

Whether or not the contract will be renewed is unclear. In July, Turkey signed a deal with Qatar for nine cargoes of spot LNG to be delivered over this winter, with Turkish Energy Minister Taner Yildiz commenting that this represents around a third of Turkey's spot LNG requirements for the coming winter.

Technical limitations

The key figures though are not those for annual supply and demand, but those for the daily capacity of Turkey's gas import infrastructure. "Turkey is on the brink of being undersupplied," Matthias Keuchel, the head of gas at Enerjisa, Turkey's second biggest private power generator and a joint venture between Turkey's Sabanci Group and E.ON, told a conference in Istanbul in September.

According to Keuchel, the daily send-out capacity of Turkey's four import pipelines, two LNG import terminals, one underground gas storage point and minimal local production totals only 193m cubic metres per day against maximum daily demand that could top 215m cm.

The problem, explained Keuchel, stems from the slow pace of reform in the Turkish gas sector. With the last state-funded gas import infrastructure being the Azerbaijan-Turkey gas line completed in 2006, Turkey has turned to the private sector to develop new LNG import terminals and gas storage. And although interested, the private sector has been reluctant to invest due without a clear indication that the gas can be sold at market prices. Since 2009, state gas importer Botas has been selling the gas (currently up to 42bn cm/y) at a loss because the government has sought to hold down both retail gas and power prices during the current election cycle.

A new gas market law currently before parliament will, if passed into law, allow for the breakup of Botas into three separate entities dealing with respectively: gas transmission, LNG import and gas storage, and importing and marketing of pipeline gas, with the planned transfer of at least some of Botas' import contracts to the private sector.

These changes should also spell an end to the unofficial subsidies, although when that will happen is moot. "In the longer term, this (subsidy) issue will be fixed, but not for four to six years at least," says Burak Guler explaining that Turkey's plans for establishing a liberal energy market are way behind schedule.

An energy market operator, EPIAS was slated to be operating a power trading platform by October 2013, but this is not now expected to begin trading until late 2015, with gas trading not anticipated until several years later.

According to Keuchel, in addition to passing the planned gas law and liberalising the market, the government urgently needs to introduce incentives for private sector companies to fund new gas storage, LNG import terminals and pipelines,and  to boost the send-out capacity of Turkey's gas infrastructure.

However, such investments take years to plan, finance and develop, and with the only ongoing project - a new gas line slated for completion until 2018 - no quick fix is in sight, meaning Turkey is facing the prospect of cold weather causing gas shortages for the next four winters at least.

Ironically, with a general election scheduled for June next year, , the best scenario the government can hope for should the weather turn cold is that Russia will cut the gas arriving via Ukraine.

That at least would serve to disguise the causes of a gas shortage that would almost certainly have happened anyway.