Turkey's discovery of natural gas resource to give markets a boost in 2023

The benefits of Turkey's recent giant natural gas discovery in the Black Sea will be felt mostly in the medium and long term as the gas is expected to be ready for public consumption in 2023.

As announced on Friday by President Recep Tayyip Erdogan, some 320 billion cubic meters of natural gas reserves were found after the drill ship Fatih started work on July 20 off the Black Sea coast.

The size of the discovery dwarfs all the natural gas Turkey has ever produced (16.6 billion cubic meters), and is expected to be worth roughly $65 billion in value.

Enver Erkan, an economist at Istanbul-based private investment firm Tera Yatirim, said after Erdogan teased the arrival of good news ushering in a "new era" in Turkey, energy shares and the Turkish lira both gained some ground.

The US Dollar/Turkish lira exchange rate fell to around 7.20 ahead of the announcement, after hovering above 7.34 earlier in the week, but settled for the weekend at 7.34 after the announcement was made.

Underlining the importance of energy as a driver of Turkey’s current account deficit, Erkan says the reserves will be enough for the country's gas needs for the next eight years.

READ MORE: Turkey finds natural gas reserve of 320 billion cubic metres off Black Sea

If the country discovers more such resources in the near future, which is highly likely, this will bring greater benefits to the country and economy, Erkan said.

"Rescuing Turkey from foreign exchange sensitivity is crucial for its economic transformation," he explained.

Noting that the market reaction is still in the short run, Erkan said this will also cut costs for households as well as help the production economy.

Meeting long-term gas needs

Uzeyir Dogan, an investment consultancy director at Gedik Investment, stressed that initial rumours saying Turkey had found 800 billion cubic meters of natural gas reserves in the Black Sea served to lift market expectations.

"The announced figure, which is less than half of the amount mentioned, upset the market," Dogan explained, telling how the Turkish lira lost ground and the country's stock exchange fell after Erdogan's announcement.

The discovery itself is very positive, Dogan stressed.

"This amount will meet Turkey's gas needs for a long time. We will see a lasting impact of the news [on financial markets] in the medium term."

Saying that Turkey set its mind to finding gas and learning how to process it, Dogan said this will give the country renewed impetus and acceleration.

READ MORE: Why Turkey's gas find is a game changer

Help with current gas contracts

Ferhat Yukselturk, a managing partner of Istanbul-based eCons Consulting, said the news is promising, as besides its size, new natural gas finds in nearby areas of the Black Sea are likely.

As the process of bringing gas into the economy points to a period of at least three years, he said expecting to see a significant impact on the economy in the short run would be "overly optimistic."

But he pointed to a possible benefit in helping Turkey get better terms in its current international gas contracts.

"If we can put these reserves into use at a time close to the expiry date of long-term contracts with Russia, our bargaining power will increase as we use the most expensive gas from the country in Europe," Yukselturk said.

In addition to closing the country’s current account deficit, the find could also trigger changes in its gas contracts with Russia, Iran, and Azerbaijan.