7. The Regulation of Natural Gas Industry in Turkey

Located between the natural gas-rich countries of Asia and Middle East on one hand and European countries with rapidly increasing demand for natural gas on the other hand, Turkey is situated at a geography where natural gas demand and supply intersect. With annual average gas demand growth rate of 10.4% during the last decade and a consumption of more than 32 billion  m³ in 2009 (which was just 12.5 billion  m³ in 1999), Turkey gradually turns out to be an important gas market in its own right. This trend is reinforced by the fact that Turkish natural gas consumption is projected to further increase remarkably in coming years. To transform Turkish gas market into a competitive one and to make sure that it develops in the lines of the European Union (EU), a reform process was initiated in 2001, which involves privatization, liberalization, as well as a radical restructuring of gas industry in Turkey. This chapter focuses on the reform process. First of all, the chapter provides a short summary of the developments taking place in the Turkish gas market since 1980s. Then it attempts to evaluate the regulatory framework created as a result of the reform process. The following subsections are devoted to two important issues in Turkish gas market, namely, Turkish gas release program and the auctions in gas distribution market. Another subsection deals with the issue of compatibility between Turkish reforms and EU norms. In the last part, the chapter touches upon some regulatory issues and provides some policy guidelines for both improvement and filling what is called the “expectations–capabilities gap” in Turkish natural gas market. The chapter concludes that in spite of relatively good legislative framework and some encouraging developments in practice, the reforms in Turkey are far from ideal and a significant amount of work still lies ahead of Turkey to set up a full fledged liberal natural gas market.