Natural gas market reform in Turkey: a critical review of progress toward liberalisation and the gas target model

Located at the crossroads of the major supply and demand regions for the energy markets of the East and West, Turkey can be a major energy hub and/or transit country. With its remarkable consumption rates, natural gas is expected to supply almost a quarter of the energy used in the country by 2023 despite other fuels. In view of a future accession to the EU, Turkey’s restructuring of its inherently monopolistic gas industry began through the Natural Gas Market Law of 2001. However, as the recent history of gas market liberalisation in Turkey demonstrates, many of the measures that had been initially considered for adoption have either been postponed or have never been adopted especially during the last decade when liberalisation was thought to be the answer for the sectors’ most problems. Taking the perspective of qualitative research methods, this thesis firstly seeks to expand the understanding of the natural gas liberalisation process within the EU context with an emphasis on mandatory regulatory instruments (i.e. market opening, regulatory authority, unbundling and third party access) and the Gas Target Model. It critically examines the key challenges persisted around Turkey’s institutional landscape, regulatory reforms and gas pricing mechanisms which impact the country’s gas sector liberalisation. The data was accrued from a combination of documents, archival records and interviews which were conducted with key members of staff across two institutions (EMRA, BOTAS), and private gas companies operating in Turkey. Despite fifteen years of legal transformation with limited evidence of an impact on competition overall, the overarching objective during the data collection process was to extensively investigate the Turkish gas market and to ask key individuals -as insiders- directly for their views regarding why the liberalisation has so far been (un)successful in Turkey, why the differences in the adoption of the liberalisation model still persist amongst different segments of the market and what is the optimum way for Turkey to proceed with progress towards liberalisation and the Gas Target Model. This research found that the Turkish gas market is highly politicised and there is a lack of commitment to curtailing the exercise of monopoly power. This thesis offers the recommendations that policy makers should give due consideration to the consolidation of EMRA’s independent role and to make its decisions challengeable with appropriate safeguards laid out against attempts of misuse as a regulator. This thesis concludes by suggesting that there is a compelling need to move forward with a consolidated reform III strategy sooner rather than later should Turkey genuinely wants to take a leadership position in the regional race to be a gas ‘hub’, and indeed to be part of the single European gas market.