Caspian Report - Issue: 07 - Spring 2014

Turkey will be USD 37 billion higher
each year starting from 2029 when
compared to levels which would be
attained without implementation of
the project. Naturally, this increase
in GDP will also contribute to employment
as well. Our calculations
suggest that the TANAP project may
create up to additional 279.914 permanent
jobs in Turkey in the long
run.
Effects of TANAP on Turkish
Natural Gas Market
Opening of TANAP will increase supplies of
natural gas to Turkey and hence increase
competition in the market.
MUbarIz Hasanov
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Turkey will purchase additional 6
bcm of natural gas per year from
Azerbaijan via TANAP. Currently, Turkey
imports natural gas from Russia,
Iran and Azerbaijan via pipes and in
the form of LNG from various countries.
Although import prices are
not disclosed officially, according to
some estimates import prices are
around USD 480 per tcm for Iranian
gas, USD 400/tcm for Russian gas
and USD 340/tcm for gas from Azerbaijan.
Therefore, by importing more
natural gas from Azerbaijan, Turkey
will be able to reduce total gas import
bill.
However, the difference between
import prices does not provide the
full picture of total economic benefits
of Turkey from importing more
natural gas from Azerbaijan. Opening
of TANAP will increase supplies
of natural gas to Turkey and hence
increase competition in the market.
Once TANAP becomes operational,
Turkey will increase her bargaining
power against other suppliers as the
Turkish natural gas market will become
more competitive. Therefore,
other suppliers will be forced to cut
their prices when TANAP opens. Our
calculations suggest that even if all
suppliers charged the same price for
natural gas, extra supply of 6 bcm
per year via TANAP would reduce
total import prices by around USD
38-57 per 1 thousand cubic meter.
This implies around USD 1.6-3.3 billion
reduction in total expenses on
imports of natural gas per year starting
from 2018. Reduction in import
bill will depend on actual import volumes.
Gains of Turkey will be much
higher in the following years as it is
expected that import of natural gas
will increase continually. Total gains
of Turkey during the period till 2045
may reach to USD 94.8 billion in real
terms.
In addition, unlike other gas-import
agreements, Turkey will have the
right to re-export natural gas imported
via TANAP. Therefore, Turkey
will have the opportunity to earn
extra income by re-exporting this
volume of natural gas to European
countries.
Importance of TANAP for
Turkey’s Ambition to Become
an Energy Hub
Turkey has a long-standing ambition
to become a regional energy
hub. TANAP represents opening of
the Southern Gas Corridor (SGC)
that will deliver natural gas from
the Caspian Basin and Middle East