Turkey announced reduction of gas use as well as gas cuts

Many sectors will be affected by gas cuts as a direct consequence of technical failures in Iran

AFP/ADEM ALTAN  -   Turkish Minister of Energy and Natural Resources, Fatih Donmez

The main electricity distribution company (TEIAŞ) announced a three-day power cut in the country's industrial zones due to gas shortages. Previously and during the weekend, the electricity company had spoken to the managers of the industrial zones to inform them about what was going to happen during the week.

The origin of the situation in Turkey can be traced back to Iran's announcement of a temporary halt in natural gas exports, which would disrupt Turkey's industrial production, as Iran is one of Turkey's most important energy suppliers. Iran reported that it had a problem with gas flows, the interruption of which is estimated to last 10 days due to technical failures. In response, Turkish authorities ordered gas-fired power plants to reduce gas consumption to 40 per cent. The country's natural gas distributors were also asked to reduce supplies to large consumers to 60%. All companies producing medicines, meat and dairy products are exempted from the measure imposed to reduce gas use, as stated by Turkey's state-owned pipeline operator, Petroleum Pipeline Corporation (BOTAŞ). BOTAŞ also commented on the imbalance between supply and demand that would result from the increase in gas due to state conditions and the disruption of natural gas supplied by foreign suppliers.

Plataforma de producción de petróleo y gas junto a una bandera iraní en el Golfo REUTERS/RAHEB HOMAVANDI
REUTERS/RAHEB HOMAVANDI - Oil and gas production platform next to Iranian flag in the Gulf

Several sectors complained about the negative consequences of the power cuts and announced the temporary suspension of their production. One of the sectors to express their halt in production were listed manufacturers. Another sector affected were car manufacturers, who complained that the power cuts could have a significant cost on production. As a result, car companies such as Tofas, a joint venture between Turkey's Koc Holding and Italy's Fiat Chrysler, announced that they would stop production for three days; and the Turkish-French joint venture Oyak Renault announced that they would stop production for 15 days. Meanwhile, other companies were to hold meetings to assess whether to stop production or just reduce it.

Fábrica de Renault en Bursa, el centro de la industria automovilística turca AFP/OZAN KOSE
AFP/OZAN KOSE - Renault factory in Bursa, the centre of the Turkish car industry

In response, the president of the Turkish Automotive Suppliers Association (TAYSAD) expressed concern about production and the increased cost that the disruptions would bring. "When we consider the whole ecosystem, including exports of $30 billion, the domestic market of $40 billion and services and dealers, the three-day production stoppage means a loss of $1 billion in the simplest terms," Saydam told the business daily Dünya. The automotive sector accounts for a total of 11 per cent of total foreign sales in the year; in 2021 alone, the auto industry exported $30 billion worth of product.

Industry and Technology Minister Mustafa Varank and Energy and Natural Resources Minister Fatih Dönmez held a meeting to discuss the disruption problem. The latter said that talks were underway with Iran to resolve the difficulties that have arisen, as well as affirming the operation of all natural gas entry points, except, of course, Iran's gas stations. "We see that Iran is currently unable to meet the flow-related standards set out in its contract. They said in a written statement that they had detected a gas leak at a station on their side. We sent our teams there for on-site detection," the energy and natural resources minister said. Turkey initially denied that the problem was a fault at a pressure station on its side, and sent a delegation to Tehran, headed by a deputy minister, to investigate.

El ministro turco de Industria y Tecnología, Mustafa Varank AP/BERND VON JUTRCZENKA
AP/BERND VON JUTRCZENKA - Turkey's Minister of Industry and Technology, Mustafa Varank

On the other hand, Minister Varank showed his support to the industrial sectors, "we will overcome this period completely". He also said that there would be short-term production losses but that both ministries are working together to plan a process effectively, especially to ensure that machine equipment is not damaged and to seek resolution of problems related to the loss of raw materials.