Turkey Energy Outlook Entering 2025

Introduction

Turkey has been highly dependent on foreign sources for its primary energy consumption (since many years). It is a simple and negative reality that this dependence carries a great risk potential in terms of our foreign policy and security as well as economic aspects. However, another reality that should be mentioned at the outset is that our country's rich potential of renewable energy resources is either not utilised at all or can be put into use at very limited rates.

When we look at the details of our external dependence in energy, it is seen that our excessive dependence on a single country (Russian Federation) is another important risk factor. The ‘interdependence’ argument put forward by some in such cases is more in line with the definition of ‘overdependence’ when our foreign trade balance (or imbalance), the high rates of our dependence on more than one energy source and the very high amounts of Russia's reserves (self-sufficiency capacity) are taken into account. In my opinion, it is not appropriate to argue that Turkey, as a member of NATO, would not be problematic if it is overly dependent on the Russian Federation for energy. The excessively high share of fossil fuels in Turkey's energy consumption profile (energy mix), as in the rest of the world, is another problem, both in terms of our very high import dependency and the negative impact on the ecosystem. Our inadequacy in the (current) domestic production of energy equipment and energy technologies that will enable the conversion of energy resources into usable energy (for final consumption) is also a troublesome shortcoming.

Following this very general assessment, we will try to look at the energy profile of our country in a little more detail in the light of the ‘National Energy Balance Table for 2023’ data published on 21 November 2024.

2023 National Energy Balance Table

The Ministry of Energy and Natural Resources (MENR) (1) publishes the ‘National Energy Balance Table’ towards the end of November each year. The said data are published on the basis of all energy resources, the production, consumption, import and stockpiling amounts of energy resources of our country both in their original units and in units converted to ‘million tonnes of oil equivalent’ of all resources. In other words, all resources are gathered in a single denominator and presented ready for comprehensive evaluations.

In 2023, Turkey consumed approximately 158.4 million tonnes of oil equivalent (TOE) of primary energy. This amount corresponds to an increase of 0.38 per cent compared to 2022. As can be seen from the 2023 Energy Balance Table data, 30.2 per cent of the primary energy consumed in 2023 will be fuelled by petroleum (crude oil and petroleum products), 26.2 per cent by natural gas, 15.5 per cent by hard coal, 9.1 per cent by lignite, 3. 5% hydroelectricity, 1.8% wind energy, 1.7% solar energy, 7.8% geothermal, 3.2% bioenergy and waste energy and 0.6% asphaltite and coke. While 56.4 per cent of the total primary energy we consume is obtained from oil and natural gas, if the share of coal is added to these two fossil fuels, the share of fossil fuels in the total reaches 81 per cent. (If the presence of asphaltite and coke is taken into account, the total share of fossil fuels is 81.6 per cent).

Turkey's dependence on imports in primary energy consumption is as high as 69 per cent when all sources are evaluated together.

Very High Dependence on Imports of Fossil Fuels

In 1990, Turkey imported 52 per cent of the energy it consumed (48 per cent of which could be met by domestic production); however, starting from the 2000s, Turkey's external energy dependency ratios started to hover around 70 per cent and above.

However, our dependency on oil, natural gas and coal, which account for approximately 81 per cent of our primary energy consumption, is much higher.

To be concrete; according to 2023 data, our import dependency rates are:

98.3 per cent for natural gas, 91 per cent for crude oil and petroleum products and 97.4 per cent for hard coal. Undoubtedly, such high import dependency brings along serious economic and security risks.

In 2023, 98.3 per cent of the natural gas we consumed was met by imports, with the largest portion of imports (42.3 per cent) coming from the Russian Federation. In August 2024, the share of Russia in our natural gas imports increased to 58%. (2)

As mentioned earlier, Turkey is also highly dependent on imports (91 per cent) in the consumption of crude oil and petroleum products. In 2023, 51% of our imports of crude oil and petroleum products came from the Russian Federation. In August 2024, this dependency rate increased to 62%. Our already high dependence on Russia for energy resources, which has existed for years, has increased even more in the aftermath of the Russia-Ukraine conflict. The main reason for this is the various restrictions imposed on imports of energy resources from Russia by the US, which largely fuelled this conflict, and the EU administration, which ‘jumped on its bandwagon’.

In response to these restrictions, Russia, in order to keep its exports at a certain level, has been making significant reductions in its prices, and Turkey is (naturally) among the countries benefiting from these opportunities. Turkey has gained a big advantage in its crude oil, petroleum products and hard coal imports from Russia. According to Reuters; ‘Turkey and Turkish companies have boosted imports of discounted Russian oil and refined products, saving about $2 billion on their 2023 energy bills, according to a Reuters calculation based on LSEG (London Stock Exchange Group) data and company estimates, and Ankara wants to buy more from its neighbour despite Western sanctions.’ (3)

Russia has also provided a ‘breathing space’ for Turkey's struggling economy through debt deferrals in our natural gas purchases. (4)

Unsustainable Burden of Energy Imports

One of the main causes of Turkey's current account deficit is undoubtedly the huge burden created by excessive external dependence on energy. Turkey is not a decisive player in the formation of oil, natural gas or hard coal prices in international markets. Therefore, it is adversely affected by the prices.

On the other hand, these foreign purchases are made in dollars, and despite all efforts to suppress the dollar, both the TL depreciates against the dollar and oil and natural gas prices fluctuate constantly due to many factors. While the demand for energy resources, which fell sharply during the Covid period, rapidly decreased oil and natural gas prices, Turkey, which was relieved in foreign purchases, faced an energy import bill close to 100 billion dollars as a result of oil prices exceeding 100 dollars per barrel in 2022.

Our energy import bill varies between 13 per cent and 26 per cent of our total import bill, depending on the year, and deeply affects the economy. In 2023, the average price of Brent oil was 82 USD, while our import bill was around 69 billion USD. For 2024, the average price expectation is around $81 (US Department of Energy forecast). In a very rough approximation, it can be predicted that our energy import bill for 2024 will be close to that of 2023.

Natural gas import prices may also be partly based on ‘TTF’ and partly indexed to some oil product prices. Therefore, in addition to oil prices, prices in the virtual market are also reflected in our invoice. Although prices are relatively low, especially due to the decline in demand in China, the energy import bill of USD 70 billion constitutes a major economic risk.

Conclusion

This article (5) has been prepared in order to share a very general assessment with our readers as soon as possible in the light of the recently published (21 November 2024) ‘National Energy Balance Table’ data.

In the coming months, we will continue to evaluate the Turkish energy sector and policies with more detailed assessments. It would be useful to reiterate the following very general recommendations.

- Turkey should significantly reduce its over-dependence on fossil resources, almost all of which are imported, and rapidly increase the share of idle renewable resources in its energy mix.

- Only 25 per cent of our onshore wind energy potential (approximately 45,000 MW) is currently operational. Our offshore wind potential (about 75,000 MW) is still ‘untouched’.

- Only 5% of our solar energy potential, which has been announced as 400 billion kilowatt-hours (with current technologies), has been commissioned yet. Increasing the share of these resources in the energy mix should be our priority.

- Increasing our energy efficiency (reducing energy intensity in every sector) should be another important target. Strategic plans need to move from rhetoric to action.

- One of the most basic requirements for reducing foreign dependency in energy is to ensure the manufacturing of energy equipment in our country through public - university - private sector cooperation. The richness of our wind or solar potential does not automatically eliminate dependency. The fact that the equipment is largely imported is another reflection of external dependence.

- The ‘Energy Transformation’ (Energy Transformation), which is continuing on a global scale (although not at the expected pace)

Transition) has created and imposed a brand new energy geopolitics. This geopolitics needs to be read well and strategic plans need to be reconstructed. Oil and natural gas will continue to dominate not only as fuels but also as inputs for hundreds of industrial products. However, as the weight of renewable resources increases in the energy mix, the need for critical minerals is growing rapidly. Countries with these mineral reserves, those that produce energy equipment using them, those that can realise this production in the most economical way, those that set the standards in the new energy geopolitics, will be the determinants and winners of the new game that is being established.

The question is: Beyond the vicious political slogans that are of no benefit to society, can it be said that in terms of the ‘simple’ homework listed above (in very general terms), we have received or will receive a glowing grade?

Endnotes

(1) Data are prepared and published by the ‘General Directorate of Energy Affairs’ (EİGM) of the Ministry.

(2) EMRA Natural Gas Monthly Sector Report (August 2024)

(3) https://gazeteoksijen.com/ekonomi/reuters-yazdi-turkiye-rus-petrolu-sayesinde-2-milyar-dolar-tasarruf-etti-197509

(4) ‘Dönmez finally confessed: Russia postponed Turkey's natural gas debt’, Sözcü newspaper, (3 May 2023): https://www.sozcu.com.tr/donmez-rusya-turkiyenin-dogalgaz-borcunu-erteledi-iddialarini-dogruladi-wp7672748

(5) This article was published in All World Magazine, December 2024 issue.