ESM325

Turkey’s Experience with Greenfield Gas Distribution since 2003

Formal Report 325/07

Turkey’s Experience
with Greenfield Gas
Distribution since
2003

May 2007
Formal Report 325/07

Energy Sector Management Assistance Program

Energy Sector Management Assistance Program (ESMAP)

Purpose
The Energy Sector Management Assistance Program (ESMAP) is a global technical assistance partnership
administered by the World Bank and sponsored by bi-lateral official donors, since 1983. ESMAP’s
mission is to promote the role of energy in poverty reduction and economic growth in an environmentally
responsible manner. Its work applies to low-income, emerging, and transition economies and contributes
to the achievement of internationally agreed development goals. ESMAP interventions are knowledge
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energy-poverty and market efficiency and governance.

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Formal Report 325/07

Turkey’s Experience
with Greenfield Gas
Distribution
since 2003

Energy Sector Management Assistance Program (ESMAP)

Copyright © 2007
The International Bank for Reconstruction
and Development/THE WORLD BANK
1818 H Street, N.W.
Washington, D.C. 20433, U.S.A.

All rights reserved

Produced in India
First printing May 2007

ESMAP Reports are published to communicate the results of ESMAP’s work to the development community
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Contents

Acknowledgments ............................................................................................................... vii

Acronyms, Abbreviations and Conversions ........................................................................... ix

Executive Summary .............................................................................................................. xi

1. Introduction .................................................................................................................... 1

2. Turkey’s Greenfield Gas Distribution Model since 2003 .................................................... 3

Current Natural Gas Market in Turkey ........................................................................ 3
The Greenfield Gas Distribution Model ........................................................................ 4

3. Review of Turkey’s Progress with Greenfield Gas Distribution Projects since 2003 .............. 9
The Drive for Gasification of all Major Cities ................................................................ 9
Participation in the Distribution Tenders and the Winning Bids .................................... 12
Licensees’ justifications for the low winning bids ........................................................ 13
Licensees’ Progress in Meeting their Investment Requirements .................................... 17

4. Major Drivers in Turkey’s Recent Experience with Greenfield Gas Distribution Projects ...... 27

5. Primary Constraints on Further Progress in Turkey’s Greenfield Gas Distribution Projects ...... 35
Some Shortcomings of the Licensing Process ............................................................. 35
Constraints on Expanding the Licensee’s Consumer Base .......................................... 36
Difficulties Related to BOTAS ...................................................................................... 38

6. Major Challenges Ahead ............................................................................................... 41

Securing and Measuring Progress ............................................................................. 41
Tariff Regulation after the Eight-year Period of Fixed Distribution Margins .................... 44
Transformation in the Distribution Companies’ Main Activity ....................................... 46
Upfront Capital Costs for Consumers ........................................................................ 46

Annex I: Statistical Annex .................................................................................................... 49

Annex II: Questionnaire for Gas Distribution Companies .................................................... 59

iii
TURKEY'S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Tables

Table 3.1: Distribution Margins for Old Distribution Regions ............................................... 14

Table 3.2: Alternative Estimates for Residential Penetration Rates (Based on the
Number of Dwellings and Installed Meters .................................................... 20
Table 3.3: Asset Transfers from BOTAS – Costs for Licensees .............................................. 23
Table 3.4: Investment Progress in Turkey’s Gas Distribution Regions as on February 2006 .. 24
Table A1: Participation in Gas Distribution Tenders and Their Results ..................................... 49
Table A2: Progress in Gas Penetration in New Distribution Regions as at the End of 2005 .... 52
Table A3: Transportation Fees Charged in Old and New Distribution Regions ........................ 53
Table A4: Cumulative and Projected Investments by Distribution Companies in
Regions where Residential Consumption has Already Commenced ..................... 55
Table A5: The Share of Industrial Consumption in Licensees’ Distribution Regions in 2005 ..... 56
Table A6: Ranking of Relative Prices for Selected Fuels Consumed by Households ................... 57
Table A7: End user Average Gas Prices in Industry and Households in
2005 – International Comparisons .................................................................... 57

Figures
Figure 2.1: Major Steps in a Gas Distribution Project ............................................................. 5
Figure 3.1: Progress in Gas Penetration in New Distribution Regions, 2005 .......................... 10
Figure 3.2: Current Penetration Ratio (Current Subscribers to Potential
Subscribers, %) ............................................................................................. 10
Figure 3.3: Residential Gas Consumption in New and Old Distribution Regions in
2001-05 ...................................................................................................... 11

iv
CONTENTS

Figure 3.4: Winning Bids in Gas Distribution Tenders (US cents/kWh) over
2003-05 ...................................................................................................... 12
Figure 3.5: Transportation Fees (US cents/kWh) Across Distribution Regions ........................ 16
Figure 3.6: Estimated Residential Penetration Rate (Number of Meters/Number of
Dwellings in the Beginning of 2006, %) ......................................................... 21
Figure 3.7: Completion Rate of Distribution Company Investments, End-2005 (%) ................ 22
Figure 4.1: Share of Industrial and Residential Gas Consumption (%), 2005 ......................... 28
Figure 4.2: Turkey’s Gas Distribution Regions ..................................................................... 30
Figure 4.3: Relative Prices of Select Fuels Consumed by Households, 2005 ........................... 32
Figure 4.4: Industrial and Household Gas Prices ($/toe), 2005 ............................................ 32

Boxes

Box 2.1: BOTAS’ Contract Transfer – Implications for Gas Distribution ................................... 3
Box 2.2: The Tendering and Licensing Process for Gas Distribution Licenses in Turkey ............. 6
Box 3.1: The Case of the Lowest Winning Bids .................................................................... 18

v
Acknowledgments
This study was commissioned by the Energy
Sector Management Assistance Program
(ESMAP) and was prepared by Adnan
Vatansever. The task of preparing and finalizing
the report was managed by Sameer Shukla
(ECSSD). The research, data collection and
analysis, and background interviews with
various stakeholders were carried out by Adnan
Vatansever. Ranjit Lamech, Gurhan Ozdora
and James Moose (ECSSD) contributed
significantly to the finalization of the report.
Kalpana Seethapalli from the Energy Mining
Sector Unit (EASEG) provided valuable
assistance in finalizing the report and bringing
together the data in a presentable structure.
Selma Karaman (ECCU6) and Yukari Tsuchiya
(ECSSD) assisted in editing and finalizing
the report.
The report benefited tremendously from
comments, advice and guidance from World
Bank peer reviewers, Franz Gerner (ECSSD) and
Bent Svensson (COCPO), to whom the task
team is particularly grateful.
The team also wishes to acknowledge
the assistance from ESMAP in producing
this report.
vii
Acronyms, Abbreviations
and Conversions

APEC Asia-Pacific Economic Cooperation

BOTAS Boru Hatlari ve Petrol Tasima AS (Turkey’s Petroleum Pipeline Corporation)
Dosider Turkey’s Natural Gas Equipment Manufacturers and
Businessmen Association
EIA United States Energy Information Administration
EMRA Energy Market Regulatory Authority
IEA International Energy Agency
LPG Liquefied Petroleum Gas
NGMDCR Natural Gas Market Distribution and Customer Services Regulation
NGML Natural Gas Market Law (#4646, adopted on May 2, 2001)
NGMLR Natural Gas Market License Regulation
YTL New Turkish Liras
PE Polyethylene
TPES Total Primary Energy Supply
TSI Turkish Statistics Institute
UGETAM International Gas Training Technology Research Center
USD United States Dollar
VAT Value Added Tax
Licensee Gas distribution company which has obtained a license for gas
distribution from the Energy Market Regulatory Authority
1 USD = 1.33 YTL
1 cent/kWh = 10.64 cent/m3

ix
Executive Summary
Purpose of the Study
A growing number of countries have embarked
upon greenfield gas distribution projects which
aim to spread the benefits of natural gas to a
larger part of their population. Turkey appears
as one of the newest examples of rapid progress
in such projects. In less than three years,
construction of gas distribution grids has
commenced in nearly three dozen cities. In 20
cities, residential consumers secured access to
gas for the first time in the 2003-05 period.
The report has two main objectives. First, it aims
to provide a detailed assessment of Turkey’s
progress in greenfield gas distribution projects.
Turkey’s experience can help to provide valuable
lessons for other countries who have recently
initiated gas distribution projects or plan to do
so in the near future. Second, the report aims
to highlight the strengths of Turkey’s current
licensing system for gas distribution, as well as
indicate certain challenges. Addressing these
challenges may facilitate Turkey’s continuous
progress with greenfield gas distribution in the
following decade.
Turkey’s New Model for Greenfield
Gas Distribution since 2003
Much of Turkey’s recent success in rapidly
expanding gas distribution projects throughout
the country is the result of the decision to adopt
a new model for developing gas distribution.
The new model is an outcome of the Natural
Gas Market Law (NGML) (Law#4646, adopted
on May 2, 2001) and vigorous efforts by
Turkey’s Energy Market Regulatory Authority
(EMRA) to create a growing and competitive gas
market. This model provides a distinctive
environment for building gas distribution
networks based on the following key features:
• Heavy state involvement in gas distribution
is replaced with regulation by an
autonomous regulatory body (EMRA);
• Gas distribution projects are initiated after
a competitive tender designed to allow for
the greatest simplicity, transparency,
objectivity, and speed;
• Competition in gas distribution occurs in
conjunction with a gas market which is
rapidly moving toward liberalization; and
• Private companies are assigned a leading
role in realizing gas distribution projects with
no public finance involved in the process.
Progress in Greenfield Gas
Distribution Projects in 2003-05
This study focused on two broad areas related
to Turkey ’s progress in greenfield gas
distribution projects: EMRA’s ability to finalize
gas distribution tenders and the level of
investment completed by license holders.
Since 2003, EMRA has seen unprecedented
success in finalizing tenders which aim to
spread gas consumption in every major city of
xi
TURKEY'S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
Turkey. By the end of 2005, the regulatory
agency was able to finalize the tenders for
gas distribution in 35 separate regions.
It announced an ambitious plan to finalize
24 additional tenders in 2006, seven of
which were completed in the first two
months of 2006.
EMRA’s initiative has been met with considerable
interest among Turkey’s private companies
willing to undertake gas distribution projects.
The interest has varied across tenders, but the
overall trend has been an initial downturn after
the relatively low winning bids in 2003, followed
by a significant upward swing in 2005. There
has been a noteworthy increase in the number
of participants in the distribution tenders during
the last year. Moreover, some large Turkish
conglomerates, which had shelved their plans
for involvement in gas distribution following the
initial low winning bids, decided to return.
The higher level of competition has been
reflected in the winning distribution margins,
which reached record low levels in 2005.
Interestingly, despite widespread criticism about
the low level of winning bids at the tenders,
distribution companies have continued with
their investment projects. Furthermore, growing
experience in the field has not barred these
companies from accepting even lower
distribution margins in new tenders.
In terms of the progress made in meeting
the investment requirements set for distribution
companies, it is possible to arrive at the
following conclusions.
• Licensees have been able to meet their
investment requirements so far: Winners
of distribution tenders are required to
commence investment within six months of
acquiring a distribution license. In addition,
they are required to complete their first gas
connections within 18 months. There have
been no reports of licensees failing to reach
these requirements;
xii
• However, initial requirements are
relatively easy to meet: Both requirements
(for six and 18 months) are set in very broad
terms and do not require licensees to invest
specific amounts in the projected distribution
networks. Neither do they require the
licensees to connect a certain minimum
number of consumers. As a result, meeting
the requirements is relatively easy;
• Progress in meeting medium-term
requirements is substantial: Licensees
face a much tougher requirement in the
medium-term: within the first five years of
their operation, they are required to connect
every willing potential consumer in their
settlement zone (imarli area), if the
requested connection is economically and
technically feasible. Most companies have
been involved in rapid investment in
infrastructure. Many of them have reported
significant penetration rates in their
respective regions. In some distribution
regions, more than 50 percent of the
potential consumers have already been
connected. Meanwhile, a comparison of
licensees’ cumulative investments so far with
their projected investment volume for the
duration of their licenses provides
an additional indicator of progress.
Accordingly, for most regions for which data
are available, the level of investment far
exceeds the current penetration ratios
concerning potential consumers; and
• It may, however, be early to predict success
for distribution projects overall. First, no
licensee of the new distribution regions has
been operating for more than three years.
As a result, it is too early to judge their ability
to meet their five-year requirements. Second,
figures on gas connections and penetration
rates are subject to bias. This is partly due
to the lack of a clear definition of what needs
to be done by the licensees in their first five
years of operation. In addition, licensees are
potentially able to demonstrate relatively
EXECUTIVE SUMMARY
higher penetration ratios by keeping low
estimates about the potential number of
consumers, as well as by connecting the
larger commercial consumers. Finally, a real
criterion for success would appear in the
form of an absence of complaints by
potential consumers about not being
connected by the licensees, when they
appear in a region deemed as economically
and technically feasible. So far, there have
been no such disputes, but this is partly
because licensees have initially focused on
areas with higher population densities. The
main challenge for licensees will be to
maintain their successful performance after
they turn their attention toward regions
(within their existing settlement zone) where
gas connection costs are relatively higher.
Primary Factors Assisting Turkey’s
Progress in Gas Distribution Projects
Turkey’s rapid move toward the gasification
of its cities between 2003-05 has benefited
from a number of factors. Some are not
unique to Turkey and have proven to be
highly important for successfully realizing gas
distribution projects on a global scale. Thus,
for instance, by the time EMRA announced
its first tenders, Turkey had already acquired
some major experience in gas distribution in
some of its largest cities. Generally, new
distribution regions have significantly
benefited from such an experience in the
past. Also, Boru Hatlari ve Petrol Tasima AS
(BOTAS) (Turkey ’s petroleum pipeline
corporation) the national pipeline operator,
had already established a comprehensive
transmission network, while it continued its
vigorous investment program in its further
expansion. As a result, by 2003-05, natural
gas had already become available to most
parts of Turkey. In addition, environmental
concerns, as well as competitive pricing
for natural gas, have helped significantly
in introducing this fuel to new regions in
the country.
Yet, it is clear that the main reason for the
success in attracting private investment
into greenfield gas distribution rests with
EMRA. There is a wide consensus among
representatives of Turkey’s gas sector that the
presence of a well structured tendering process
under the guidance and supervision of an
independent regulatory body has constituted
the principal driver for Turkey’s rapid progress
with greenfield gas distribution projects.
The process has had several major strengths:
• EMRA’s success in establishing a simple and
transparent bidding system for gas
distribution tenders;
• EMRA’s ability to remain largely autonomous
from political pressures;
• Limited interference by the regulatory body
in investment decisions, which has allowed
some room for flexibility in the investment
strategies of licensees;
• The regulator’s propensity for improving
its regulations based on feedback from
the industry;
• Key regulatory decisions (such as on
connection fees and transportation fees),
which have been considered forward-
looking by licensees; and
• Careful sequencing of gas market reforms,
where the focus has been on gas
distribution-related initiatives in the
short term.
Remaining Challenges
Interviews with a large number of
representatives of Turkey’s gas distribution
companies has revealed that, overall, there is
strong support for the existing licensing process
adopted by EMRA. Many of the issues
mentioned by licensees thus far have appeared
minor and inconsequential in terms of
endangering their ability to meet their
xiii
TURKEY'S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
requirements. However, as an increasing
number of licensees are advancing through their
projects, they will soon need to comply with
much tougher requirements (such as the
obligation to connect all feasible consumers
willing to use gas within the first five years). If
licensees are able to meet these requirements
as well, then Turkey’s recent experience with
greenfield gas distribution can be defined as a
major success story.
Overall, there are several challenges which, if
addressed, will facilitate Turkey ’s further
progress in gas distribution projects.
• Licensees’ rights and responsibilities:
During the first five years of operation,
EMRA requires distribution companies to
connect all consumers willing to use
natural gas, if they are located in a region
where it is economically and technically
feasible to do so. However, there is
potential for some uncertainty about the
rights and obligations of licensees in
meeting this requirement, as discussions
with licensees have shown. The legislation
also seems to lack an objective test of
feasibility about consumer connections;
• Monitoring targets and evaluating
performance: One of the major
responsibilities of the regulatory body lies
in ensuring that distribution companies
meet the license requirements. Lack
of complete clarity on targets among
licensees complicates this task. The lack
of intermediate targets between the 18th
month and fifth year of operations has
further potential to make monitoring
complicated. EMRA, however, has taken
steps to develop a complex monitoring
system regarding the performance of
distribution companies. Independent
auditing companies supervise financial books
and reports of the distribution companies.
Companies which are granted construction
and service certificates by EMRA supervise
xiv
the compliance of the construction of the
distribution network with the relative
legislation. In addition, EMRA staff also
performs supervision and surveillance of the
distribution companies’ activities.
• Tariff regulation after the eight-year
period of fixed distribution margins:
During the first eight years of operation,
licensees are required to operate at fixed
distribution margins. However, there is much
lack of clarity about the margin after
this first phase. The regulatory body
has announced that the second-phase
distribution margin will be based on the price
cap method, but it has not yet defined the
methodology for applying the price cap, and
determining the types of expenditures which
will be included in the licensees’ asset base
is a work in progress. An early resolution of
this issue is highly important in terms of
shaping the investment strategies of
licensees. It will provide more clarity about
future revenues and facilitate the process of
preparing for new distribution tenders;
• Licensees’ readiness for transformation
in their main activity: Investment in
infrastructure appears to be the main activity
of distribution companies at this point.
However, as they progress with their projects,
investment will emerge as a secondary
activity, as priorities will shift toward
operating their network. At this new stage,
distribution companies will need access to
expertise and new types of skills for
managing their networks and
the associated consumer base. In this
regard, they will need to be prepared to
adequately address safety issues and
consumer satisfaction; and
• Consumers’ upfront capital costs:
Estimates of upfront costs for consumers are
primarily the costs related to installing
heating systems, piping and related
infrastructure. These costs vary significantly,
EXECUTIVE SUMMARY
depending on whether it is a central heating
system or an individual one. Quick estimates
based on discussions with some licensees and
some industry associations suggest that the
cost for individual heating systems (with
combined functions for space heating,
water heating, and cooking) could vary
between 2,000 and 3,500 New Turkish Liras
(YTL) (US$1, 500-2,630). The cost of a central
heating system (serving the same purpose)
per subscriber depends on the number of units
in a building. Such costs are typically found to
be lower, and usually range from 500 to
1,000 YTL (US$376-752). Data show that
central heating is still quite limited in buildings,
and such buildings are also primarily restricted
to the larger cities. Licensees in other cities,
therefore, may have to deal with consumers
who will require individual heating. The
challenge, therefore, will be to convince
consumers of the long-term benefits of the
high upfront costs. In some cases, licensees may
be required to provide financing to consumers,
to enable them to bear the upfront costs.
xv
1. Introduction
As in early 2006, residents of about 24
distribution regions in Turkey have obtained
access to natural gas. The number of gasified
cities is expected to more than double within
less than two years. This represents a major
breakthrough for Turkey in its experience
with greenfield gas distribution projects.
Until only 2003, in spite of a significantly
long experience with city gasification
projects (dating back to the late 80s), only
six cities’ residents had the opportunity to use
natural gas.
The objective of the report is to provide an
assessment of Turkey’s progress with gas
distribution projects. The report aims to
provide a detailed analysis of Turkey’s current
experience with gas distribution, which
can possibly serve as an example for
greenfield gas distribution for other countries
– especially for those that are undergoing
gas market liberalization. In addition, it aims
to highlight some major challenges which,
if addressed, will help to ensure successful
progress in Turkey ’s gasification in the
next decade.
The report examines the following:
• Specifics of Turkey ’s new model for
greenfield gas distribution;
• Progress in gas distribution projects through
the end of 2005 regarding the level of
gasification, completed investment, and the
ability of licensees to meet their requirements;
• Perspectives of distribution companies on
major issues related to Turkey ’s new
distribution model;
• Major drivers of Turkey’s recent experience
with gas distribution; and
• Current and potential challenges faced
by the sector.
In addressing these issues, the report largely
constitutes a follow-up to a previous the World
Bank study (conducted in mid-2004) which
examined Turkey ’s experience with gas
distribution. Meanwhile, due to the relatively
rapid advance in most of the distribution projects
in 2004-05, the report benefits from the
availability of a larger number of cases.
The report is based on a field study conducted in
Turkey in December 2005. It reflects on
consultation with distribution companies
representing 26 distinct distribution regions (out
of the total of 35 as in the end of 2005). It has
also benefited from meetings with officials at
EMRA, Turkey’s energy market regulatory
authority; BOTAS, the national pipeline operator;
companies in charge of feasibility studies;
Dosider, Turkey’s Natural Gas Equipment
Manufacturers and Businessmen Association;
and other participants in the gas sector.
1
2. Turkey’s Greenfield Gas
Distribution Model since 2003

Current Natural Gas Market
in Turkey
Before discussing the greenfield distribution
model, it may be pertinent to reflect upon
the current industry structure in the Turkish
gas market.
At present, BOTAS has monopoly over the
gas industry down to the gates of the
distribution business. So, all gas imports,
transmission and sales, down to the level of
supply to the distribution companies and to
eligible consumers are in the hands of BOTAS.
Market risk is currently borne largely by
BOTAS, and ultimately by the Government as
owner of the company. Exports and
private new entrant wholesale is yet to
begin, although EMRA attempted to carry out
a contract transfer program in 2005 in
keeping with the requirements of the Law
(See Box 2.1).

Box 2.1: BOTAS’ Contract Transfer – Implications for Gas Distribution

NGML #4646 requires BOTAS to gradually transfer its import contracts to private companies.
Each year, BOTAS needs to transfer at least 10 percent of its total contracted volumes.
The objective is to reduce BOTAS’ allowable import share of the national gas market to
20 percent by 2009.

To realize this ambitious goal, BOTAS made several attempts at contract transfer in 2005. Its
latest initiative came on November 30, 2005, when it successfully completed a tender for
part of its import contracts. This was largely an outcome of the consent of Turkey’s main gas
supplier (Gazprom) for its involvement in the impending contract transfer negotiations with
the tender participants. Thus, Gazprom has authorized a contract release for 4 bcm of its
total supply to Turkey. This is for the gas contracted (between Gazprom and BOTAS) in 1998
and transported to Turkey through Bulgaria. Authorizations for Turkey’s other gas import
contracts have not been made.

The success of BOTAS’ tender is shown by the presence of four applicants who submitted
their bids after obtaining a for an import license from EMRA, as well as Gazprom’s initial
consent to the import contract transfer under question. However, the contract transfer process
for these companies is not complete. Some procedures remain before EMRA’s approval is
complete, and the approval of the competition board is needed. BOTAS is in the process of
submitting information about the bidders, at the tender, to Gazprom. Following this, the
companies will start negotiations with Gazprom for gas delivery terms. Some of the final

3
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

steps involve a contract transfer agreement between Gazprom and BOTAS and a gas sales
agreement between the Russian supplier and the private companies.

A successful realization of BOTAS’ initiatives for contract transfer will provide a major boost
to wholesale competition in Turkey’s gas market. However, its implications for gas distribution,
in the short- and medium-term (six to eight years from now), will be minimal:

• Changes in the gas price delivered to distribution companies as a result of wholesale

competition will not have a direct impact on company profits since the gas price is a
pass through; and

• As the law prohibits cross-subsidization between various segments of the gas chain,
any distribution company planning to get involved in wholesale will not be able to
cross-subsidize its gas distribution business. Moreover, the legislation prohibits
distribution companies from executing any market activity other than distribution. As
a result, accepting low distribution margins at EMRA’s gas distribution tenders, based
on prospects for involvement in wholesale, will not bear results for the gas distribution
segment of their business.

While wholesale competition development will not have significant implications for gas
distribution in the near future, the gas distribution business itself is likely to emerge as an
essential force behind wholesale competition. Accordingly, the Law requires gas distribution
companies to procure not more than 50 percent of their gas from a single supplier. This rule
has not been enforced due to BOTAS’ wholesale monopoly. However, if contract release is
successfully accomplished, gas distribution companies will need to purchase part of their gas
from the new wholesalers. As a result, distribution companies are likely to play a significant
role in fostering wholesale competition.

The contract transfer has not been completed yet.
BOTAS has spun off its distribution businesses into
separate regional companies. Further, in keeping
with the principles of the Law, BOTAS has begun
separating its accounts for the transmission,
natural gas wholesale, gas storage, and
petroleum businesses. EMRA has also awarded
separate tariffs for each of these businesses.
The next phase of this gradual restructuring
process will be the establishment of
independent importers and wholesalers, once
the contract transfers are completed. These
wholesalers will then compete with BOTAS for
sales to distribution companies and to eligible
consumers. According to the Gas Sector Strategy
Note (September 2004), this was expected to
happen by 2006, but has been delayed.
The Greenfield Gas
Distribution Model
Following the enactment of the NGML (#4646),
Turkey has adopted a new model for developing
its gas distribution networks. This model appears
to be one of the primary reasons for the rapid
progress which has recently occurred in
the gasification of Turkey ’s major cities.
In several cities (Istanbul, Ankara, Izmit and
Adapazari), gas distribution has been
undertaken by municipally owned companies,
though some major steps for their privatization
have been taken (and have been completed in
Adapazari). As an example of another model,
gasification of two cities (Bursa and Eskisehir)
was undertaken by the state-owned pipeline
monopoly BOTAS. These two companies were
subsequently privatized by the national

4
TURKEY’S GREENFIELD GAS DISTRIBUTION MODEL SINCE 2003
privatization agency, which has helped to boost
investment for expanding the existing network
in these two cities.
The following are the factors which distinguish
Turkey’s new model from those adopted previously.
• The process involving the distribution projects
is regulated by an independent energy
regulatory body (EMRA). The previous two
models were initiated in a period when EMRA
was not yet established, which led to heavy
state interference in the process of regulating
the gas distribution sector. Yet, since the
establishment of EMRA, there has been an
increasing tendency toward reaching
uniformity in the rules governing various gas
distribution entities;
• A competitive tender is at the core of
the process which has been designed to
a l l o w f o r t h e g r e a t e s t s i m p l i c i t y,
transparency, objectivity and speed.
This is at odds with the previous two
models, where greenfield projects were
Figure 2.1: Major Steps in a Gas Distribution Project
Tender
Prequalification
Announcement
Revision of the
Expiration of the
Fixed Distribution
License/Renewal
Margin (After
(30 Years)
Eighth Year)
initiated by public entities following
government decisions;
• Private companies, rather than public
entities, have fully undertaken investment in
these greenfield gas distribution projects and
their operation. As a result, EMRA reports
that there has been no need for public
financial involvement in this process so far.
Financial difficulties experienced in the public
sector had often been a cause for investment
delays in the previous models;
• The gas distribution projects are undertaken
in the context of a gas market which is
rapidly moving toward liberalization; and
• The new model appears to have sparked
off significant interest among investors,
resulting in a nearly massive drive for
gasification projects throughout Turkey.
Figure 2.1 and Box 2.2 briefly summarize
the major aspects of the tendering and
licensing process concerning the new gas
distribution model.
Acquisition
Tender
of License
Commencement
of Investment
(Wthin Six
Months)
Gasification of First Gas
all Distribution Connections
Region (Within (Within
Five Years) 18 Months)
5
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Box 2.2: The Tendering and Licensing Process for Gas Distribution Licenses in Turkey

Tender’s stage

• EMRA determines the size of the distribution region and announces a tender. Companies
can apply within a specified time span – usually between two and six weeks following the
tender announcement. A commission established by EMRA evaluates the applicants using
two general criteria: financial viability and experience (Natural Gas Market Distribution
and Customer Services Regulation [NGMDCR], Article 9);

• The minimum equity requirement for applicants has been set at 1 million YTL1
(US$752,000);

• Prequalified applicants are invited by EMRA to obtain the tender documents; and

• Prequalified applicants willing to participate at the tender are required to submit bid
bonds, whose value is determined in the tender announcement.

Determining the winner of the tender

• Bidding is evaluated by a single criterion – the lowest distribution margin (unit service
and depreciation charge) offered by an applicant. The margin is fixed for the following
eight years;

• EMRA determines the three lowest bids and the relevant bidders are asked to revise
their bids; and

• The winner is invited to submit a performance bond (at the amount determined in the
tender document) and to obtain the distribution license (NGMDCR, Article 9). The
performance bond has ranged from 500,000 to 5,000,000 YTL (US$376,000-3,760,000).

Major rights for licensees and their primary sources of revenues

• The licensee acquires the license for 30 years. With EMRA’s approval one year before the
license’s expiration, the licensee has the right to apply for an extension of the license
term. The licensee is allowed to sell the distribution network in its possession before the
license’s expiration with EMRA’s approval;

• The licensee collects connection fees from residential subscribers, the amount of which is
defined in the distribution license. It is usually about US$180 for the first 200 m2 per
household, and commercial/public consumers who use gas for heating purposes.
Supplementary connectione fees (usually US$150) apply per every 100 m2 of additional
space. Connection fees collected from industrial users and “eligible consumers” are higher,
based on a rule that the distribution company may charge up to 10 percent above the

1 YTL = New Turkish Liras.

6
TURKEY’S GREENFIELD GAS DISTRIBUTION MODEL SINCE 2003

connection cost. Commercial consumers, according to EMRA, are charged in the same
way as industrial ones, though there is an ongoing disagreement on the interpretation
of the relevant regulation;

• The licensee receives a distribution margin per kilowatt-hour (kWh) of gas sold to its own
consumers. When providing a gas transportation service to “eligible consumers,” the
distribution company is allowed to charge the amount equivalent to the distribution margin
(EMRA Decision #397);

• Licensees operate at fixed distribution margins during the first eight years, after which
EMRA will apply a price cap;

• Less significant sources of income for a licensee include fees related to approval, testing,
and commencement of internal installations designed by installation companies; and

• Upon signing of a contract with a consumer, the licensee may collect deposits from
consumers only once to address potential nonpayment problems (NGMDCR, Article
38). As in mid-2006, the deposit for households which plan to use gas as a part of
a central heating system is 132 YTL (US$99.2) per subscription unit – an area of up
to 200 m 2; for individual households planning to use gas for oven and water heating
only, 32 YTL (US$24.1); and for combined (heating and water heating) purposes,
162 YTL (US$121.8).

Licensees’ responsibilities related to investment in infrastructure

• A distribution company is required to begin investment in infrastructure within six months

of its license acquisition;

• A distribution company must inaugurate the gas connection of a certain area in its
distribution region within 18 months;

• In the first five years, the licensee is required to connect all consumers within the region of
its responsibility to the distribution network upon their request; however, this obligation
depends on the availability of capacity of the system and on whether the requested
connection is economically and technically feasible. In the event of a dispute between a
prospective consumer and a licensee, the feasibility of the projected connection is
determined by EMRA (NGMDCR, Article 36, and Natural Gas Market License Regulation
[NGMLR], Article 27); and

• It is obligated to ensure adequate network capacity according to the demand in the area
under its responsibility (NGMDCR, Article 56).

Other major responsibilities for licensees

• Unbundling of activities: Legal entities are allowed to engage in more than one market
activity upon obtaining a separate license. However, legal entities engaged in gas wholesale
activity are allowed to perform neither transmission nor distribution (NGMLR, Article 31);

7
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

• Separation of accounts: Licensees engaged in more than one market activity or

carrying out the same activity at more than one facility are required to keep separate
accounts and are prohibited from cross-subsidization between these accounts.
Moreover, distribution companies are required to keep separate accounts for sales
to “eligible” consumers, sales to noneligible consumers, and the transportation
services provided to system users. Cross-subsidization between these accounts is
also prohibited (NGMLR, Article 35); and

• Nondiscriminatory access to the network: In provision of services, distribution companies

are not allowed to discriminate between users. They may reject access to their network
only if they do not have adequate capacity or where they will no longer be able to fulfill
their obligations if access is provided (NGMLR, Article 32-33).

Monitoring of licensees by the regulatory agency

• EMRA is authorized to guide, supervise, and monitor distribution companies. It is authorized

to purchase such services at the expense of distribution companies (NGMLR, Article 28);

• Licensees are required to prepare annual balance sheets and income statements regarding
their investment process, and submit them to EMRA. This is in addition to progress reports
submitted periodically (NGDCSR, Article 28-29); and

• For submission to EMRA upon request, licensees have to maintain certificates obtained
from the Turkish Statistics Institute (TSI), certifying that the equipment and material used
in the infrastructure are in compliance with the relevant legislation and standards
(NGDCSR, Article 28).

8
3. Review of Turkey’s Progress with
Greenfield Gas Distribution
Projects since 2003

The Drive for Gasification of all
Major Cities
Once the Natural Gas Law came into force,
EMRA initiated a vigorous preparation of
tenders which aimed to spread gas
consumption in every major city of Turkey. In
2003, the first year of implementation of this
new model of greenfield gas distribution, EMRA
completed the tenders for 13 distribution
regions. In 2004, the number of finalized
tenders dropped to seven, while in 2005, 15
new regions were tendered, bringing the total
number of completed tenders to 35.2 At the end
of 2005, EMRA announced an ambitious plan
to finalize 24 additional tenders in 2006,3
seven of which were completed in the first
two months of 2006.
EMRA’s progress with distribution tenders has
been successfully matched with a growing
number of cities which have secured access to
natural gas.4 Accordingly, while there were only
six provinces in which residents had obtained
access to gas before the initiation of EMRA’s
tendering process in 2003, the total number
of new distribution regions where gas
consumption has commenced5 reached 20 by
the end of 2005 (see Table A 2 in Annex I).
Figure 3.1 shows the absolute numbers of
current and potential subscribers, while Figure
3.2 displays the penetration ratio, that is, the
ratio of current to potential subscribers. Taken
together, Figures 3.1 and 3.2 show the
impressive, albeit varied, progress of gas
penetration in the 20 new distribution regions
by the end of 2005. In the period 2003-05,
investment started in more than 10 other
distribution regions, though previous gas
connections were still pending.
This is impressive growth, given that major
investment activities only started in 2004.
Turkey’s current experience stands out among
a number of developing (and some industrial)
countries which embarked upon greenfield gas

2
As a result of the time span between EMRA’s announcement of a tender’s winner and its approval of the distribution license
of the winner, the number of distribution licenses granted each year stood at: two in 2003, 18 in 2004, and seven in 2005.
Additionally, in 2003, EMRA issued seven distribution licenses to distribution companies which had initiated their investments
before the new Natural Gas Law took effect.
3
The tender announcement for 12 of these was already made in 2005.
4
“City with an access to natural gas” is defined by the presence of a gas distribution infrastructure serving any number of
households and commercial and public consumers.
5
Commencement of gas consumption in a particular distribution region refers to the inauguration of the first gas connections
to households and commercial and public consumers by a distribution company. The number of consumers at the end of the
first month following commencement may vary depending on the season. The number of distribution regions where gas
consumption has commenced is different from numbers provided by BOTAS, which refer to provinces where the transmission
network has been completed. Accordingly, as in the end of 2005, there were 40 provinces (out of Turkey’s total of 81)
where gas was available to large consumers.

9
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

distribution projects. One common problem the number of subscribers has remained only
experienced in a number of countries (such as a few thousand. Another common problem has
Bulgaria, Bolivia and Tunisia) has been the slow been the concentration of greenfield gas
speed of gasification. Thus, after more than a distribution projects in a select number of large
decade of activity by gas distribution companies, cities, beyond which any gas distribution-

Figure 3.1: Progress in Gas Penetration in New Distribution Regions, 2005

250,000
Potential Number of Subscribers
225,000
Number of Subscribers
200,000

175,000

150,000

125,000

100,000

75,000

50,000

25,000

Usak
Konya

Yalova
Sivas

Corum

Balikesir

Gemlik
Kayseri

Kutahya

Inegol
Kirikkale-Kirsehir
Gebze.

Corlu

Aksaray

Bandirma

Konya-Eregli
Erzurum

Samsun

Catalca
Karadeniz-Eregli-Duzce
Source: EMRA.

Figure 3.2: Current Penetration Ratio (Current Subscribers to Potential Subscribers, %)

60.0

50.0

40.0

30.0

20.0

10.0

0.0
Usak
Konya

Yalova
Corum

Balikesir

Gemlik

Sivas
Inegol

Kayseri

Kutahya
Kirikkale-Kirsehir
Catalca

Konya-Eregli

Bandirma

Gebze.

Corlu

Aksaray
Erzurum

Samsun

Karadeniz-Eregli-Duzce

Source: EMRA.

10
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003

related investments has remained minimal (as
in the case of China, Brazil, India, Indonesia,
Mexico and Greece).
EMRA expected the number of cities with access
to natural gas will be as high as 55 by the end
of 2006. Having completed the tendering
process for nearly all designated distribution
regions in its more industrialized provinces
(primarily in western Turkey), the attention has
shifted toward the provinces in the Black Sea
region, eastern and south-eastern Turkey.
Meanwhile, the recent growth in the
number of cities with access to natural gas
has occurred in conjunction with a
substantial rise in Turkey’s overall residential
gas consumption. Accordingly, Dosider, the
association for gas-burning appliances,
has reported that residential consumption
reached 5.1 bcm in 2005, up from 4.3 bcm in
2004. In fact, in December 2005, Turkey’s
monthly residential consumption topped 1 bcm.
Most of this increase, however, appears to have
resulted from the ongoing investment in gas
distribution projects in Turkey’s old distribution
regions, which cover some of the most
populated cities.6 Only a small portion of this
increase has been associated with the greenfield
projects in new cities (Figure 3.3). For instance,
total residential consum ption in all of the new
gas distribution regions stood at 90 million cubic
meters in 2005. However, their share in Turkey’s
overall residential gas consumption is expected
to grow substantially in the following years.7

Figure 3.3: Residential Gas Consumption in New and Old Distribution Regions in 2001-05

5.3
Old Regions

4.3 New Regions

3.3
bcm

2.3

1.3

0.3

-0.7
2001 2002 2003 2004 2005
Source: Dosider.

6
In Istanbul alone, 400,000 new households were subscribed to have access to gas in 2005, bringing the total number of
subscribers to just over 3 million. Other cities with distribution projects initiated before Natural Gas Law #4646 also witnessed
continuing growth in their number of residential subscribers.
7
EMRA has reported that the total number of gas subscribers in the new distribution regions was only 199,094 as at the end
of 2005. Thus, their contribution to Turkey’s overall gas consumption was mainly at the industrial-user level.

11
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Participation in the Distribution • The potential size of gas demand in

Tenders and the Winning Bids the distribution region: There has been
significantly greater interest in regions
The level of participation and the where the expected gas demand can allow
distribution margin the winner to benefit from significant
economies of scale. Naturally, in such
Turkey’s gas distribution tenders have exhibited regions, the bidders have been willing to
a considerable variation both in terms of the operate at relatively lower distribution
number of participants in these tenders and the margins. In this respect, Izmir, Thrace
resulting winning bids (Figure 3.4, see also (or Trakya), Denizli and Gaziantep appear
Table A1 in Annex I). Thus, for example, the as the most significant examples;
number of bidders has varied from one to 18,
while the discrepancy between the lowest and • The expected share of industrial users
the highest winning distribution margin has in total gas demand: In a similar manner,
been equally astounding – between 0 and 0.239 regions with significant industrial activity
cents per kWh. have secured greater interest among
participants who have hoped to benefit from
Interviews with representatives of distribution scale economies; and
companies have revealed that this variation
(both in terms of the number of participants • Expectations for the distribution margin
and winning margins) has been associated after the eighth year: There has been some
primarily with the following: variation in licensee expectation about the

Figure 3.4: Winning Bids in Gas Distribution Tenders (US cents/kWh) over 2003-05

0.3 2003 2004 2005 20

18
0.25
16
Winning Bid (US cents kWh)

No. of Bidders at Tender

14
0.2
12

0.15 10

8
0.1
6

4
0.05
2

0 0
Usak
Konya

Polatli
Sivas

Corum

Balikesir

Malatya
Kutahya

Kayseri
Inegol

Yalova

Yozgat

Izmir
Sanliurfa
Kirikkale-Kirsehir
Corlu

Bilecik-Bolu

Edirne-Kirklareli-Tekirdag
Denizli
Canakkale
Catalca
Bandirma

Aksaray

Samsun

Manisa

Isparta-Burdur
Gemlik-Umurbey

Karadeniz Eregli-Duzce
Gebze.

G. Antep-Kilis
Konya Eregli

Nigde-Nevsehir
Erzurum

K. Maras
Karabuk-Kastamonu-Cankiri

Winning Bid (US cents/kWh) No. of Bidders at Tender Ave. Bid Amount in the Year (US cents/kWh)

Source: EMRA.

12
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003
distribution margin to be applied after the
eighth year. Companies accepting lower
distribution margins have usually (though
not always) expected a greater increase in
the distribution margin in the new phase of
operation in their regions.
Yet, a closer look at the tenders completed so
far reveals that the number of bidders and the
winning bid have been closely interrelated. Thus,
a higher level of competition at the tender has
often resulted in lower bids, which cannot
always be justified by referring to the
distribution companies’ expected scale
economies. Based on this correlation between
the level of competition and the size of the
winning distribution margin, it is possible to
observe the following trends related to Turkey’s
gas distribution tenders so far:
• The initial interest in gas distribution tenders
was significantly high in terms of both the
number of participants as well as the
presence of some of Turkey ’s largest
conglomerates. Thus, the first tender (for the
Kayseri distribution region) attracted 18
bidding companies, with 14 bidders at the
second tender (for Konya). After the fifth
tender (for Gebze.), most of the tenders
attracted two or three bidders. Given the
initial high interest toward the tenders, the
average distribution margin for the 13
tenders conducted in 2003 was relatively
low: 0.093 cents/kWh;
• In 2004, the applicants’ interest in the tender
never managed to reach the levels which
were present when the process was initiated
in 2003. The number of applicants varied
between one and seven. The average
distribution margin for the seven tenders
conducted throughout the year was relatively
higher than in 2003 – 0.115 cents/kWh.
EMRA recorded some of the highest winning
distribution margins within this period:
0.239 cents/kWh (for Gemlik) and 0.236
cents/kWh (for Aksaray); and
• In 2005, there was a sharp turnaround in
interest in the distribution tenders. Thus, eight
out of 15 tenders conducted in 2005
attracted nine or more bidders (up to 14).
Another indication of the growing interest
in the tenders was the participation of some
large Turkish conglomerates who had
shelved their gas distribution plans for a
while following the initial low winning bids,
as well as some large companies which
expressed interest for the first time.
The growing interest was partly a result of
tendering some large and industrialized
distribution regions (such as Izmir and
Thrace). But the interest in smaller and less
industrialized distribution regions was
markedly higher than in the previous year.
The high level of competition translated into
comparatively low distribution margins.
While the average winning margin for the
15 tenders conducted in 2005 was as low
as 0.052 cents/kWh, in three of the tenders,
the winning companies agreed to a “0” cent/
kWh distribution margin. Moreover, in one
(Thrace), the winner agreed to abstain from
any gas connection fees from households
in the first five years and make a payment
of 2.55 million YTL (about US$1.9
million) for the 30-year distribution license.
Licensees’ justifications for the low
winning bids
The considerably low distribution margins
accepted by the winners at EMRA’s distribution
tenders have resulted in heated debates about
the viability of these projects. Criticism of the
low level of margins and skepticism about the
distribution projects’ future has been abundant.
Probably, the sharpest criticism has come from
Turkey’s older distribution companies operating
in cities such as Istanbul, Ankara and Izmit,
which have been operating at margins close to
the levels found in the European Union (EU). In
fact, a comparison of the distribution margins of
these companies and those resulting from EMRA’s
tenders reveals a considerable discrepancy.
13
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
As in the beginning of 2006, the distribution
margins for the older distribution regions are
considerably higher than the winning margins
at EMRA’s tenders. Accordingly, while the
highest winning bid at EMRA’s tender through
the end of 2005 stood at 0.239 cents/kWh (for
Gemlik), the distribution margin for five of the
older distribution regions are as follows: 0.424
cents/kWh for Istanbul; 0.410 cents/kWh for
Ankara; 0.492 cents/kWh for Izmit, Adapazari
and Bahcesehir. 8 For the old distribution
regions which were originally undertaken by
BOTAS and were subsequently subject to
privatization (Eskisehir and Bursa), EMRA has
set the distribution margin at 0.235 cents/
kWh, which is fixed for the first eight years
of operation. While these margins are
slightly closer to the winning bids at EMRA’s
tenders, they still appear to be significantly
higher than most margins resulting at these
tenders (Table 3.1).
The low level of distribution margins has been
bewildering not only for the representatives
Table 3.1: Distribution Margins for Old Distribution Regions
Distribution Region
Izmit
Adapazari
Bahcesehir
Istanbul
Ankara
Eskisehir
Bursa
*Based on EMRA’s Decision #616, effective January 1, 2006.
8
The distribution margin for these five old distribution regions is set in terms of local currency per kWh. As a result, the
conversion rate of US$1=1.33 YTL is used.
14
of Turkey ’s well-established distribution
companies, but also for those who have been
involved in the process of conducting
feasibility studies for the winning companies.
The World Bank’s interviews have revealed
that on several occasions the winning bid has
been below the “pessimistic” scenarios
recommended by the company conducting
the feasibility study. This has indicated that
some bidders have been willing to take risks
above those suggested by their feasibility
study consultant.
Low winning bids continue to be a cause of
skepticism about the profitability, if not viability,
of the distribution projects in Turkey. However,
the World Bank’s interviews with distribution
companies representing 26 out of 35 new
distribution regions (as in the end of 2005) have
revealed that they have maintained much more
optimistic views about operating under low
distribution margins. It is too early to determine
the profitability of these projects. However,
Turkish gas distribution companies have
Distribution Margins (cents/kWh)*
0.492
0.492
0.492
0.424
0.410
0.235
0.235
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003
pointed out two major developments they
believe should address the widespread
skepticism regarding their projects:
• Investments have continued rapidly
despite low margins. Nearly all
distribution companies have proceeded
rapidly with their investment programs
following the tender for the respective
distribution region. In a number of
regions, gas distribution companies claim
to have reached penetration rates
significantly above their most optimistic
scenarios, which has come as a surprise
to most observers. For instance, licensees
in Corum, Konya and Catalca have been
able to subscribe more than half of their
potential consumers. In Kayseri and
Erzurum, gas distributors have subscribed
about a quarter of the potential
consumers, which is above their initial
targets. No company has expressed any
major concern about not being able to
meet the requirements determined by its
distribution license because of low
distribution margins (see “Licensees’
Progress in Meeting their Investment
Requirements”); and
• Despite growing experience in the field,
the tendency among distribution
companies has been to accept even
lower distribution margins. Several
distribution companies that were subject to
criticism about submitting “unreasonably”
low bids at the distribution tenders, have
already completed sizable distribution
networks (see Table A2 in Annex I). In
comparison to the early stage of EMRA’s
tenders, they have acquired significant
knowledge and experience in Turkey’s gas
distribution business, and, therefore, such
9
The Law defines eligible consumers as those whose annual consumption is above 15 mcm/year. In each distribution region,
this threshold is subject to a revision after the end of the fifth year of operation of the licensee.
companies are well aware of the pitfalls
of operating at low distribution margins.
Yet, they have continued applying for new
tenders and have submitted bids which
appear to be even lower than the initial
bids in 2003.
Gas distribution companies have given a
number of reasons for accepting these low
distribution margins.
• Significant revenues from gas
transportation services to “eligible
consumers” 9: Many of the distribution
licensees have acquired ownership over
high-pressure pipelines in their respective
regions, or are in the process of negotiating
with BOTAS on the transfer of such assets.
As a result, licensees perform transportation
services through high-pressure pipelines to
industrial consumers and power plants.
This is in addition to their distribution
services within their designated regions.
Thus, when EMRA issued a binding
opinion (Decision #397 issued in 2004)
which allowed them to charge “eligible
consumers” transportation fees which are
equivalent to their distribution margins, as
“eligible consumers” usually account for the
bulk of most regions’ overall gas demand,
they have been transformed into a major
source of revenue for the distribution
companies. In this respect, this represents a
major difference between older and
new distribution companies. Accordingly,
licensees in the older distribution regions
receive comparatively higher distribution
margins, but are subject to transportation
fees which are nearly a fraction of this
margin. For instance, as in 2006, six of
the older distribution companies are allowed
to charge up to 0.068 cent/kWh for
15
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

transportation services.10 In contrast, 15 out
of 35 new distribution companies are able
to charge transportation fees (in some cases
significantly) above those charged by
Turkey ’s six old gas distributors (see
Table A3 in Annex I). Figure 3.5 shows the
transportation fee schedule of all 41
distribution companies;
• Connection fees as a means for covering
most of investment costs: With very few
exceptions, the licensees collect a connection
fee standing at US$180 per residential
consumer (up to 200 m 2 ). 11 These
connection fees are essential for covering
the investment costs of the licensees in the
first eight years of their projects. Estimating
investment costs, however, is complicated,
as licensees’ capital expenditure data refers
to overall project costs rather than money
invested for residential connections.
Moreover, part of the infrastructure serves
a range of consumers apart from residential
subscribers. As a result, there is an upward
bias in the projected investment costs per
residential and commercial and public
subscribers. Licensees in charge of 18
distribution regions have provided a
rough estimate for their investment costs.
The ratio of cumulative investment costs
per residential consumer (as at the
end of the fifth year of operation) range

Figure 3.5: Transportation Fees (US cents/kWh) Across Distribution Regions

0.3

0.25

0.2

0.15

0.1

0.05

0
Usak

Konya
Yalova

Yozgat
Ankara

Malatya

Corum

Balikesir

Sivas

Polatli
Adapazari

Izmit

Izmir

Manisa

Inegol

Kayseri

Kutahva
Sanliurfa
Denizli
Edirne-Kirklareli-Tekirdag

Kirikkale-Kirsehir
Canakkale

Bilecik-Bolu

Corlu

Gebze.
Bursa

Istanbul

Catalca

Samsun

Bandirma

Aksaray
Erzurum
Isparta-Burdur

Konya Eregli
Karadeniz Eregli-Duzce
Eskisehir

G. Antep-Kilis

Gemlik-Umurbey
Bahcesehir

Nigde-Nevsehir
K. Maras

Karabuk-Kastamonu-Cankiri

Old Distribution Regions; New Distribution Regions with Low Transportation Fees
New Distribution Regions with High Transportation Fees

Source: EMRA.

10
According to EMRA Decision #616, this is the fee collected from consumers obtaining transportation services but who are
not direct consumers of Igdas (Istanbul), Ego (Ankara), Izgaz (Izmit), Bahcesehirgaz (Bahcesehir), Eskisehir (Esgaz) and
Bursagaz (Bursa). Agdas (Adapazari) has been awarded the right to charge a transportation fee of up to 0.111 cents/kWh.
11
The exceptions are for several regions where licensees agreed to lower their connection fees. As at the end of 2005, there
were three such distribution regions – Edirne-Tekirdag-Kirklareli, Gaziantep and Denizli.

16
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003

between US$144 and US$288. The average
is US$186.2 for the 18 distribution
regions. 12 Naturally, regions with low
population and a dominant role for
industrial consumers will have a higher
investment cost per residential subscriber.
Thus, most licensees claim that the
US$180 connection fee determined by
EMRA will be enough or close enough to
cover their costs related to residential
consumers. Yet, the relation between
investment costs and connection fees per
subscriber is closely related to the stage
of project development. Accordingly, initial
costs per subscriber are relatively high and
tend to decrease as the number of
connected consumers per given km
of completed infrastructure grows.
Subsequently, when licensees start
connecting households in areas with lower
densities, connection costs will grow
again. As a result, licensees face the
prospect of connecting areas with lower
population densities, where investment
costs will exceed connection fees;
• A long-term perspective on the gas
distribution initiatives projects: Gas
distribution companies have consistently
indicated that they have acquired licenses
which secure the right for operating their
networks for at least 30 years. As the
currently low distribution margins are valid
only for the first eight years, many of them
hope to benefit from a significant rise in
these margins in the remaining period of
their license (see below);
• Lower investment and operation costs:
Representatives of distribution companies
have indicated that nearly 15 years of
experience with gas distribution in Turkey
has significantly reduced investment and
operation costs. Unlike the pioneers in the
industry, new distributors have access to
a sizable domestic industry,13 securing
nearly all of the required equipment and
materials for investing in a distribution
network. Igdas also claims to benefit from
a large reduction in investment costs.14 In
addition, they have rarely needed to
rely on importing management and
expertise from abroad, which has
helped to further reduce their costs.
Finally, they have expressed concerns
about ongoing cross-subsidization
among some of the municipally owned
distribution companies, which has resulted
in higher operating costs; and
• Benefiting from horizontal integration:
Few companies have justified their low
winning bids by pointing to plans to get
involved in electricity distribution in their
gas distribution regions. Such horizontal
integration is common in some EU
countries and aims to reduce some
operating costs.
Licensees’ Progress in Meeting their
Investment Requirements
EMRA has determined three major milestones
regarding the investment requirements for
licensees. This section examines the licensees’
ability to meet these requirements.

12
The estimates for connection costs per subscriber belong to distribution companies, which have presented data. These are
only estimates and the exact value for each licensee may appear different (though most likely in the provided range, as
variations in terms of costs are minimal across the country).
13
Based on Dosider’s estimates, at the end of 2005, there were 20 indigenous companies producing gas pipes, 50 companies
producing gas valves, and four companies producing gas meters.
14
One source claims that Igdas’ costs have dropped from US$1,000 to US$150 per residential connection in 15 years
(“Dogalgaz Dagitim Piyasasinda Tek Rekabet Unsuru Fiyat Olmamali,” PetroGas, July 20, 2004).

17
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

The six-month requirement 18 months of acquiring a distribution license.

Licensees are required to commence investment
within six months of acquiring a distribution
license. This requirement is set in very broad
terms and does not require licensees to invest
specific amounts in the projected distribution
network. Partly because of this, none of the
interviewed distribution companies have
experienced any major problems regarding this
requirement. A few of them have reported some
minor delays related to seasonal causes, such
as the need to postpone investment until spring
due to winter weather conditions. The regulatory
agency has maintained an accommodating
approach toward such delays.
The 18-month requirement
Distribution companies are required to have
completed their first gas connections within
This requirement has also been set in
relatively broad terms. It does not require
distribution companies to connect a certain
number of consumers within the 18-month
period. It gives a high degree of flexibility
to licensees regarding the scope and
specifics (such as focusing on a certain part
of a distribution network region) of their
investment program. In the event of a
violation of this requirement, EMRA warns
the licensees and they may incur penalties
which could include suspension of their
l i c e n s e . B a s e d o n t h e Wo r l d B a n k ’s
interviews with licensees, none of them
have experienced problems regarding this
rule. They have all regarded this
requirement as one that provides sufficient
time to meet the minimum requirement of
connecting their first consumers.

Box 3.1: The Case of the Lowest Winning Bids

Companies which have agreed to operate with the lowest distribution margins for the first eight years
(0 cents/kWh) have justified their low bids by referring mainly to the industrialized nature of their
respective regions. The associated size of the overall gas demand is considered a potential source
of significant distribution margins and transportation revenues for the future. The most surprising
winning bid has come from a company which has agreed to collect no connection fees or to keep
them at extremely low levels (such as US$30). This is in addition to “0” distribution margins. Its
justification has been based on the following:

• The sizable potential demand in their respective regions;

• The large share of industrial consumers (for example, 92 percent in Thrace and 41 percent in
Gaziantep at the end of the fifth year);

• Expectations for a significant revision in the distribution margins after an eight-year period
(2 cents/kWh or more anticipated for the post8th-year period);

• The opportunity to provide gas to industries belonging to the same holding company which
operates the gas distribution project in the respective region*;

• Plans to get involved in other parts of the gas chain (such as upstream and wholesale) which may
reduce overall operating costs*; and

• The process of enhancing a positive public image for the holding company.

* As the Natural Gas Law and associated regulations prohibit cross-subsidization, some of these
expected benefits may not be justified.

18
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003
The five-year requirement
Licensees are required by law to connect all
consumers within their settlement zone (imarli
alan) to the distribution network, upon
consumers’ request, by the end of five years.
This obligation depends on the availability of
system capacity and on whether the
requested connection is economically and
technically feasible. According to EMRA, the
legislation requires distribution companies to
complete their distribution network, including
service lines and service boxes needed for
connecting consumers, in the first five years.
Connection fee covers this part of the
infrastructure and the meter. Further
installations, such as internal piping and
installing gas-burning appliances, are not the
responsibility of licensees.15
The main criterion for success would be the
ability of licensees to complete the whole
distribution network, plans for which they
have communicated to EMRA in their
engineering studies. The real success
criterion, however, will be the absence of
potential consumers who have expressed
willingness to connect but have been rejected
by a licensee despite its inability to prove that
they are located in a region where it is not
technically and economically feasible to
connect them to the network.
Many of the interviewed distribution
companies believe that they will not have any
significant problems in meeting their five-year
requirements. Some of them (located
primarily in smaller municipalities, such as
Corum) believe that they will be able to gasify
the whole settlement zone, eliminating any
possibilities for disputes with the regulatory
body. Several others have reported that the
potential consumers who will fall outside the
15
As a result, consumers are required to hire companies other than the distribution company in charge of their region for this
type of installations.
“economically and technically feasible”
category will constitute only about 1 to 2
percent of the households in their settlement
zones, even though this may refer to about
15 to 20 percent of the geographic size of
the settlement zone. This is largely because
most distribution companies initially focus on
areas with a higher population density,
whereas areas they deem unfeasible have
relatively few potential consumers.
Meanwhile, distribution companies have
regarded the five-year period as being
sufficiently long enough to complete their
required investments. Moreover, many
companies have indicated that they will be
able to complete the required investments in
a significantly shorter period (such as three
years). Some companies have already
reached gas penetration rates above
50 percent, being able to subscribe the
majority of the potential consumers (such as
Corum, Catalca and Konya) (Figure 3.2; see
also Table A2 in Annex I). This has occurred
in a time span as short as about two years.
EMRA’s data about penetration rates (Table
A2 in Annex I) is based on licensees’
assumptions about the number of potential
consumers in their regions, and hence there
is a potential for a slight upward bias.
Generally, these numbers appear to be
significantly below the actual number of
dwellings in their current distribution regions.
Table 3.2 provides an alternative estimate of
the current residential penetration rates.
This is based on data provided by licensees,
rather than the TSI. The licensees’ claim that
TSI’s estimates are not updated, as they are
based on a census undertaken almost six
years ago (in 2000). As a result, each
licensee has come with its own estimates
about the actual number of dwellings, which
19
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Table 3.2: Alternative Estimates for Residential Penetration Rates (Based on the Number
of Dwellings and Installed Meters)

Distribution Number of Estimated Number Number of Estimated Residential

Region Dwellings as in of Dwellings Meters Installed Penetration Rate
the Beginning of in 2000-01 for Residential (Number of Meters/
2006 (Licensee’s (According to TSI) Users (As in the Number of
Own Estimates) Beginning of 2006) Dwellings in 2006) (%)

Kayseri – 169,302 (a) – –

Konya 237,664 172,043 (a) 16,411 6.9

Erzurum – 71,511 (a) – –

Çorlu 72,000 54,253 (b) 1,851 2.6

Gebze. – 81,239 (b) – –

Inegol – 31,092 (b) – –

Catalca 13,500 6,176 (b) 2,163 16.0

Bandirma 67,713 40,568 (b) 4,299 6.3

Balikesir 127,185 64,145 (a) 4,647 3.7

Sivas 87,850 66,249 (a) 2,189 2.5

Kutahya – 55,537 (a) – –

Konya-Eregli 20,316 27,743 (b) 1,604 7.9

Corum 52,204 43,520 (a) 26,015 49.8

Samsun – 118,580 (a) – –

Aksaray – 38,641 (a) – –

Karadeniz- 101,100 45,910 (b) 610 0.6

Eregli-Duzce

Kirikkale-Kirsehir – 89,814 (a) –

Gemlik 33,250 24,179 (b) 492 1.5

Yalova 60,000 17,798 (a) 543 0.9

Usak 48,066 48,586 (a) 643 1.3

Note: (a) estimates are provided by TSI based on 2001 data about the number of residential water subscribers in the given
cities. Residential water subscription figures are used as a potential measure for the number of dwellings. Such figures are
available only for the select number of cities; and (b) estimates are provided by TSI based on the 2000 census on the number
of dwellings in all of Turkey’s municipalities.

has been included in their feasibility requirement remains. Addressing this

studies. It is, however, tbetweenoo early to
conclude whether licensees will experience
any major difficulties in meeting this
requirement or not. Some uncertainty
pertaining to precise definitions of this
requirement, to a large extent, will hinge
upon resolving several definitional issues
between EMRA and the distribution
companies. These issues are examined in
the last section.

20
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003

Based on data on the actual number of
dwellings and installed meters for residential
purposes, the penetration rate for each of the
cities for which information is available shown
in Figure 3.6 (and Table 3.2) appears
significantly lower in Figure 3.2 (and Table A2
in Annex I). This is partly because some of these
dwellings are not in the officially recognized
settlement zone (imarli alan) and licensees are
not liable to connect them. In some of the areas,
however, the high penetration rates are
associated with the connection of larger
consumers, such as commercial and public
buildings, rather than achieving significant
progress in residential penetration. Each of these
consumers are equivalent to multiple
While, for most regions, current penetration
rates appear to be significantly low, most
companies estimate that by the end of their
five-year period, their penetration rates will be
equivalent to (or in some cases even above)
those in Istanbul and Ankara. According to
licensees’ feasibility studies, the average
residential penetration rate expected at the
end of the fifth year of operation in 25
distribution regions stands at 69.5 percent.
In the older distribution regions reaching
penetration rates of 80 percent took as long
as 15 years to achieve, and so new
distribution companies hope to have a
more accommodating attitude from the
regulatory agency.

Figure 3.6: Estimated Residential Penetration Rate (Number of Meters/Number of Dwellings in

the Beginning of 2006, %)

50
45
40
35
30
25
20
15
10
5
0
Usak
Konya
Corum

Balikesir

Sivas

Gemlik

Yalova
Corlu

Karadeniz-
Catalca

Bandirma
Konya-Eregli

Eregli-Duzce

Note: Residential penetration rate calculated on the basis of licensees’ estimates of the number of meters installed as a
proportion of number of dwellings.

(sometimes hundreds) subscription units. This Figure 3.7 displays the completion rate for
can provide a slightly upward bias about investments of distribution companies
progress in achieving high subscription rates. (cumulative investment as at the end of 2005/
Yet, as long as distribution companies continue planned total investment within 30 years) as at
to establish the distribution network in their the end of 2005. This type of information is
designated region by connecting all potential regarded as crucial by EMRA, as it provides
consumers, access to which is economically and an indication of progress. Meanwhile, it
technically feasible, licensees are considered to reflects licensees’ projections of the
be meeting EMRA’s five-year requirement. In cumulative investment requirements for the
fact, from EMRA’s perspective, the penetration 30-year period of the license. Such
rate is not a criterion for meeting the five-year projections are communicated to EMRA
requirement following the tender and before EMRA’s

21
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

decision to grant the winner its license. Within substantial infrastructure, which facilitates their
this short time span, EMRA examines the goals in rapidly gasifying their respective
winner’s projections and compares them to regions. Table 3.3 highlights the importance of
its commitment to invest in a network whose such asset transfers for gas distribution
capacity will be sufficient for the duration of licensees. For some companies asset transfers
the license. have constituted more than half of the

Figure 3.7: Completion Rate of Distribution Company Investments, End-2005 (%)

80

70

60

50

40

30

20

10

Usak
Konya
Yalova
Corum

Gemlik

Balikesir

Sivas
Konya-Eregli

Corlu

Catalca

Bandirma

Gebze.
Erzurum

Karadeniz-Eregli-Duzce
Source: Distribution companies.

Accordingly, in nine distribution regions, the
licensees have invested more than half of
the total amount planned to be invested during
the 30-year license period. In four out
of these nine regions, the completion
rate for investments is above 70 percent. In five
of the remaining regions, the completion rate
has remained below 50 percent. However, these
numbers are subject to a downward bias, as
they refer to 30-year projections, and the
required investments in the first five years are
slightly lower (see Table A4 in Annex I).
Meanwhile, part of the investment costs have
been associated with assets transferred from
BOTAS. Such costs imply that actual greenfield
investment has been slightly lower than what
figures for total investments so far would imply.
However, such costs constitute an integral part
of a licensee’s 30-year investment program and
are often associated with the transfer of a
cumulative investment costs as at the end
of 2005.
Table 3.4 highlights the physical progress of
investment in infrastructure by distribution
companies. As at this point, the investment
needed for meeting EMRA’s five-year requirement
(such as connecting all willing potential
consumers) is not clear – partly due to the lack of
clarity on which potential consumers will be
considered economically and technically not
feasible – the information provided is only
indicative of the ongoing infrastructure
investments. Except in a few distribution regions
(such as Kayseri, Konya, Balikesir, and Samsun),
progress measured in terms of km of pipelines
appears significantly below older distribution
regions. Besides the starting date, what accounts
for the comparatively larger physical investment
in the older regions is the relatively larger size
of their population.

22
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003

Table 3.3: Asset Transfers from BOTAS – Costs for Licensees

Distribution Payment for Share in Cumulative Winning Date of Date of Asset

Region BOTAS Assets Investment as at the a Tender for Transfer
(US$ million) End of 2005 (%) Distribution License

Kayseri 4.5 16.7 6/19/2003 10/1/2004

Çorum 1.9 15.5 12/18/2003 10/12/2004

Konya 2.6 18.8 7/31/2003 10/27/2004

Kütahya 3.7 30.6 11/6/2003 1/4/2005

Balikesir 1.6 15.5 10/16/2003 1/5/2005

Bandirma 1.2 21.7 10/9/2003 1/7/2005

Gemlik 2.3 47.5 4/22/2004 2/2/2005

Gebze. 9.9 50.9 9/11/2003 4/2/2005

Yalova 3.6 36.4 7/1/2004 4/11/2005

Kdz.Eregli-Duzce 5.7 55.4 4/8/2004 9/28/2005

Uº ak 2.3 49.1 12/2/2004 10/1/2005

Konya-Eregli 1.4 58.0 12/4/2003 10/13/2005

Samsun 2.2 10.5 1/22/2004 10/27/2005

Aksaray 1.3 23.4 2/12/2004 11/22/2005

Kirikkale-Kirº ehir 2.7 23.8 1/8/2004 1/18/2006

Polatli 1.6 NA 1/13/2005 2/9/2006

Bilecik-Bolu 5.9 NA 6/9/2005 3/3/2006

Sivas 1.1 15.4 10/30/2003 4/1/2006

Erzurum 0.0 0 8/13/2003 –

Corlu 0.0 0 8/28/2003 –

Inegol 0.0 0 9/18/2003 –

Catalca 0.0 0 9/25/2003 –

Source: BOTAS.

23
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Table 3.4: Investment Progress in Turkey’s Gas Distribution Regions as on

February 2006

Distribution Starting Date Steel Pipes Polyethylene Service Lines District

Region of License* (Meters) Pipes (Meters) Number Length (Meters) Regulators
(Number)

Old Distribution Regions

Adapazan December 1993 45,794 338,013 11,918 78,563 20

Ankara November 1988 854,520 3,112,232 130,591 194,577 245

Bahçeº ehir NA 9,432 55,623 1,616 12,400 4

Bursa December 1992 184,373 1,628,550 79,898 673,776 84

Eskiº ehir October 1996 84,996 395,307 25,411 313,971 37

Istanbul January 1992 1,044,000 8,712,000 471,000 235,500 595

Izmit September 1996 231,706 1,200,260 49,225 417,632 64

New Distribution Regions

Kayseri 10/2/2003 120,200 312,000 9,800 148,000 48

Konya 12/5/2003 68,550 239,365 6,864 56,664 19

Çorlu 1/27/2004 43,408 108,365 2,064 16,341 2

Erzurum 2/6/2004 20,000 158,250 2,588 31,172 8

Gebze. 2/10/2004 27,000 105,000 2,200 NA 7

Inegöl 2/10/2004 3,269 74,644 2,962 18,934 2

Çatalca 2/23/2004 20,743 44,446 1,436 8,765 3

Çorum 3/16/2004 25,320 231,854 4,999 NA 5

Bandirma 3/23/2004 19,126 96,258 4,219 28,360 5

Balikesir 3/30/2004 40,766 207,648 8,111 50,818 4

24
REVIEW OF TURKEY’S PROGRESS WITH GREENFIELD GAS DISTRIBUTION PROJECTS SINCE 2003

Distribution Starting Date Steel Pipes Polyethylene Service Lines District

Region of License* (Meters) Pipes (Meters) Number Length (Meters) Regulators
(Number)

Sivas 4/6/2004 25,113 140,430 3,148 23,361 6

Aksaray 5/25/2004 21,583 110,298 289 2,333 3

Samsun 7/6/2004 43,911 174,528 4,106 27,685 18

Gemlik 9/21/2004 7,664 67,250 1,463 8,400 3

Uº ak 4/14/2005 NA NA 600 5,000 3

Source: Dosider. No data are available for several distribution regions where gas consumption by residential consumers has
already commenced. Data on length of steel pipelines include assets transferred from BOTAS.
* Starting data for old distribution regions refer to the date when first residential gas consumption commenced. Following
NGML #4646, these companies were required to obtain new distribution licenses.

25
4. Major Drivers in Turkey’s Recent
Experience with Greenfield Gas
Distribution Projects

Turkey’s recent experience with gas distribution
has benefited from a range of factors. There is
a wide consensus among representatives of
Turkey’s gas sector that the presence of a well-
structured tendering process, under the
guidance and supervision of an independent
regulatory body, has constituted the principal
driver for Turkey’s rapid progress with greenfield
gas distribution projects. Indeed, the process
has had some major strengths.
• Simple and transparent bidding system:
Only one criterion (the bid for the distribution
margin) has been used to select the winners
at the gas distribution tenders. This has
contributed to avoiding any major delays
and has left limited room for distorting
the procedures;
• Autonomous regulatory body: EMRA has
remained largely autonomous of political
pressures. This has been particularly true for
gas distribution tenders;
• Limited interference by EMRA in
investment decisions: EMRA determines
the requirements for licensees, but it has
avoided interfering in the investment
decisions of the distribution companies.
Thus, companies have been able to
customize their investment strategies (such
as those related to the speed of investment,
partnerships, etc.) based on the needs of
their respective distribution regions;
• Setting the right connection fee: The
standard connection fee for licensees
is US$180 per residential consumer (up to
200 m3). Distribution companies strongly
appreciate this choice by EMRA, claiming
that a higher fee could have discouraged
consumers from switching to gas, while a
lower fee would have affected their balance
sheets negatively. Based on licensees’
feasibility studies, for most of them the
connection fee appears sufficient to cover
the investment costs in the first phase of their
license (first eight years). This US$180
connection fee may appear relatively low
based on international comparisons; 16
however, Turkey ’s gas distribution
regulations require this fee only to maintain
the right of the potential consumer to be
connected to gas and obtain a meter (the
cost of which stands around US$30).
Distribution companies are not involved

16
For instance, the average connection costs that gas distributors are allowed to recover in Egypt stands at US$460. However,
this fee includes a range of activities which are not included in the connection fee charged by distribution companies in Turkey.
In Egypt, as in several other places, connection fees include everything from construction of the pipeline which connects the
household to the distribution main network, to installing all internal and external equipment, the meter and the conversion of
existing appliances. “Arab Republic of Egypt: Connecting Residential Households to Natural Gas – An Economic and Financial
Analysis,” The Global Partnership on Output-based Aid, The World Bank, March 2006.

27
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

in investing in infrastructure beyond the outcome of a long debate between EMRA

service box17 of the consumer, and as a and BOTAS, as the latter disagreed with
result are not liable for these additional costs allowing distribution companies to charge
such as internal installations or conversion transportation fees which, in many cases,
of appliances. To promote competition in appear to be higher than BOTAS’
this segment, EMRA has assigned the task transmission fees. Transportation fees have
for building this type of an infrastructure to emerged as a major source of cash flows
installation companies. Such companies are for distribution companies, particularly at the
in charge of constructing the lines from the initial stage of investment, which has often
service box and the internal piping, as well focused on large industrial consumers. Such
as installing any requested appliances at the fees have been especially important in
expense of consumers; regions with a predominant share of gas
consumption for “eligible consumers.” As
• EMRA’s decision related to transportation illustrated in Figure 4.1, gas sold or transited
fees: Distribution companies claim to benefit to eligible consumers (including power
significantly by EMRA’s decision to allow them plants) forms the bulk of the gas handled
to charge transportation fees (for “eligible by licensees. Thus, in 2005, in most
consumers”) which are equivalent to their distribution regions, sales to residential
distribution margins. This decision was an consumers constituted only a fraction of the

Figure 4.1 : Share of Industrial and Residential Gas Consumption (%), 2005

100

90

80

70

60

50

40

30

20

10

0
Usak

Konya
Balikesir

Corum

Sivas
Kayseri
Corlu

Gebze

Bandisma

Catalca

Aksaray

Samsun

Erzurum

Share of Industrial Consumption (%) Share of Residential Consumption (%)

Source: Dosider.

17
The NGMDCR defines a service box as follows: “Box containing the service regulator-meter set and/or the valve, or the main
valve itself, installed at the end of a service line or a connection line.” It defines service line as follows: “Pipeline and the
relevant equipment including the service box or pressure-reducing and metering station, connecting the distribution network
to the noneligible consumer’s service box or pressure-reducing and metering station.” Connection line is defined as: “Pipeline
and the relevant equipment including the service box or pressure-reducing and metering station, connecting the national
transmission network or a distribution network to an eligible consumer’s service box or pressure-reducing and
metering station.”

28
MAJOR DRIVERS IN TURKEY’S RECENT EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION PROJECTS

gas sold or transited to industrial users.
Transportation fees collected from eligible
consumers will continue to constitute a
significant part of the licensees’ revenues.
Based on a questionnaire (see Annex II)
responded to by licensees of 25 gas
distribution regions, the expected share of
gas sold or transported to industrial users,
who are eligible consumers, is substantial.
According to the feasibility studies of these
licensees, industrial consumers (purchasing
gas from the distribution company or paying
for its transportation services) will constitute,
on an average, 48.9 percent of total gas
volume sold or transported at the end of
the fifth year of operation;18
• EMRA’s willingness to improve its
regulations: EMRA has remained open to
revising the legislation related to gas
distribution. For example, following
widespread criticism by licensees, it has
taken some major measures aimed at
securing larger economies of scale for
licensees. Thus, on the one hand, it has twice
revised the number of distribution regions
in which a particular company can
participate.19 This has contributed to a
significant level of market consolidation
based on three or four large players who
are in charge of most of the distribution regions
tendered so far. On the other hand, a major
feature of its more recent tenders has been
the larger geographic size of the distribution
regions. The tenders for Izmir20 and Thrace
appear as major examples. Meanwhile,
EMRA has recently allowed licensees to
expand their distribution regions to include
new areas which are within their
province’s boundaries but are not part of
their license.21 The result has been some
consolidation in Turkey’s gas distribution
business, where several players have
acquired a dominant role (Figure 3.7);
• EMRA’s choice of sequencing gas market
reforms: EMRA’s choice regarding gas
market reforms was based on a careful
sequencing. Accordingly, gas distribution
tenders have preceded other measures
aimed at liberalizing Turkey’s gas wholesale
and import business. In fact, distribution
tenders have created strong interest in favor
of a liberalized gas market, and EMRA has
already taken major steps in this area (contract
transfer being a major example); and
• A role for municipalities in gas
distribution: The legislation has allowed
municipalities to acquire 10 percent in the
distribution company in their region without
requiring a deposit of any capital. Licensees
are obliged to invite the municipality to
become a shareholder.22 This has provided

18
The expected high share of industrial users is partly because most new distribution regions have a relatively small
population (compared to the old distribution regions). As a result, the presence of several industrial users can often account
for the bulk of the gas sold or transported. By contrast, the expected share of commercial and public consumers at the end of
the fifth year of operation in the 25 distribution regions stands at 5.5 percent of total gas sales.
19
The initial regulation allowed a distribution company to hold licenses in only two distribution regions. Subsequently, this
number was raised to five and, further, to eight distribution regions. As most of the remaining distribution regions are
relatively small in terms of potential demand, this regulation has also aimed at ensuring that interest in new tenders does
not subside.
20
For example, the distribution region for Izmir covers 178 counties, districts and villages, whereas initially EMRA had
tendered distribution regions covering a single small city (such as Konya-Eregli).
21
The new regulation requires the licensee to apply to EMRA if it is willing to expand its existing distribution region. EMRA has
the right to announce a new tender for these additional regions. If other companies show no interest or abstain from offering
a bid lower than the existing distribution margin of the applicant company, EMRA revises the license of the latter to include the
additional areas in its distribution region.
22
A municipality is allowed to acquire another 10 percent stake in the distribution company in its region, if it has paid its debts
to Turkey’s Iller Bank and pays for the stake. The value of the additional stake is based on negotiation between the two parties.
Since most municipalities continue to owe substantial debts to Iller Bank, they have not been able to benefit from this clause
and raise their stakes.

29
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

a significant motivation for municipal
governments to facilitate the investment
activities related to gas distribution
in their regions.23 Meanwhile, as municipal
governments are not required to make
any financial contribution for their 10 percent
stake, this has alleviated potential delays
associated with financial difficulties on the
part of municipalities.
Other major factors which have contributed
to Turkey’s recent impressive progress with
greenfield gas distribution are:
• Benefiting from Turkey ’s past
experience with gas distribution: By the
time EMRA announced its first tenders for
gas distribution licenses, Turkey had
already acquired some major experience in
the field for more than a decade and
a half. Thus, by 2002, Turkey’s pioneers
in gas distribution had already
connected 2.9 million residential and
commercial consumers.25 This helped new
distributors to benefit from multiple
externalities, such as access to a well-
established domestic industry for materials
and equipment associated with gas
distribution, and access to the expertise of
the older distribution companies. For
example, many of the new distribution
companies have greatly benefited from
transferring managerial skills from older gas
distributors, such as Istanbul’s Igdas. Igdas
itself has established a training center,
International Gas Training Technology
Research Center (UGETAM), which has

Figure 4.2: Turkey’s Gas Distribution Regions24

23
Some minor problems have been reported. Thus, in several cases, municipal governments have exerted pressure on the
distribution companies to obtain materials (mainly for road construction, such as asphalt) from the municipal company.
24
EYH, AKSA/Anadolu and Zorlu each have more than one distribution region license. The “Others” typically represent
single region licensees.
25
Source: Dosider (www.dosider.org).

30
MAJOR DRIVERS IN TURKEY’S RECENT EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION PROJECTS

acquired an indispensable role in knowledge expected deficits in gas supply occasionally

transfer to the new gas distributors;26
• Vigorous program for completing
Turkey’s transmission network: Before
EMRA initiated its tenders, BOTAS had
already established a comprehensive
transmission network. Meanwhile, between
2003-2005 there has been a vigorous
investment program by BOTAS in new
transmission lines. Accordingly, at the end
of 2003, the length of the transmission
network was about 4,500 km. It reached
5,952 km by the end of 2005, and because
of ongoing investments, BOTAS estimates
that the transmission network reached 7,689
km toward the end of 2006.27 Most of
this investment by BOTAS has been
related to providing access to gas to the
provinces where EMRA has announced gas
distribution tenders;
• Concerns about excess gas supply: The
economic downturns of 1999 and 2001
raised concerns about Turkey’s gas demand
prospects. This resulted in heated debates
about potential implications related to
Turkey’s “take-or-pay” agreements. Partly
related to such concerns, consumption of
natural gas has often been promoted in a
variety of areas, such as power generation,
industry and households. BOTAS officials
have frequently associated their drive to
expand Turkey’s transmission network
with the need to expand gas usage as a
means to address “take - or-pay ”
requirements. This appears to be in stark
contrast with part of the 90s, when
interrupted gas distributors’ campaigns
for new subscriptions;
• Addressing environmental concerns:
Gasification of Ankara and Istanbul
provided major examples for success in
addressing these cities’ environmental
predicaments in the late 80s and early 90s.
These two cities, which once had alarming
levels of air pollution, now rank far behind
cities with major air pollution problems.
Similarly, many of the new gas distribution
projects have garnered widespread support
(especially from municipal governments)
due to environmental concerns.
Distribution companies have widely
advertised the environmental advantages
of natural gas in their respective regions.
Some of them already claim to have
significantly reduced air pollution in their
distribution regions;28
• Natural gas – a relatively inexpensive
fuel: Distribution companies have actively
advertised natural gas as a means for
providing households with significant cost
savings. Indeed, a study on the relative fuel
costs in Turkey found that natural gas is
significantly cheaper than fuels such as
electricity, diesel fuel, fuel oil, and Liquefied
Petroleum Gas (LPG). Occasionally, the price
of coal (both domestic and imported
from Siberia) has constituted the only
exception, but its price advantage has been
relatively small and has recently
disappeared (Figure 4.3, see also Table
A6 in Annex I); 29

26
From 2002 to March 2005, UGETAM trained 5,600 people, of which 2,300 were not employees of Igdas.
27
“Natural Gas Projects in Turkey – Recent Developments,” UNECE –16th Session of the Working Party on Gas,
January 24-25, 2006, presentation by Hulya Aktan, Strategy and Business Development Department, BOTAS.
28
For example, Corumgaz, which has achieved the highest gas penetration rate among the new distribution companies, claims
to have reduced air pollution by nearly 50 percent toward the end of 2005.
29
The study on relative fuel prices conducted by Dosider covers only five major cities (Istanbul, Ankara, Izmit, Bursa and
Eskisehir). As distribution companies operating in distribution regions tendered by EMRA charge significantly lower distribution
margins, the final cost of natural gas for the consumer in these regions is generally lower than in the above-mentioned five
cities. As a result, coal’s price advantage in these regions is even smaller.

31
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Figure 4.3: Relative Prices of Select Fuels Consumed by Households, 2005

0.30

0.25

0.20
YTL/1,000 kcal

0.15

0.10

0.05

0.00
LPG (Aygaz) Electricity Domestic Lignite Gas (Istanbul) Imported
(TEDAS) (Soma) Russian Lignite
Coal (Eskisehir)
Source: Dosider (as on April 14, 2005); Prices include Value-Added Tax (VAT).

• Cross- subsidization in favor of the presence of some degree of cross-

residential consumers: The price subsidization between eligible consumers
advantage of natural gas used by residential and households. Compared to a number
consumers has been possible partly due to of other Organization for Economic

Figure 4.4: Industrial and Household Gas Prices ($/toe), 2005

1200

1000

800

600

400

200

0
Ireland
Spain

Poland

Hungary
Switzerland

Finland

Turkey
Portugal

France

Slovak Republic
Mexico

United States
New Zealand

Czech Republic

Gas Prices in Industry Gas Prices in Households

Source: International Energy Agency (IEA).

32
MAJOR DRIVERS IN TURKEY’S RECENT EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION PROJECTS
Co-operation and Development (OECD)
countries, residential consumers in Turkey
have been required to pay only slightly more
than large consumers (Figure 4.4, see also
Table A7 in Annex I). For instance, households
in 2005 paid on an average only 18.9 percent
more than industrial users. EMRA’s regulations
which allow licensees in new distribution
regions to charge eligible consumers
transportation fees equivalent to the distribution
margin faced by residential consumers, has also
implied some degree of cross-subsidization of
the latter by the former; and
• Favorable investment environment:
Following the economic downturn in 2001,
Turkey ’s economy has experienced
impressive growth levels for four consecutive
years. In the meantime, both inflation rates
and real interest rates have dropped
significantly, which has facilitated decisions
related to long-term investments. Many
participants in the gas distribution business
believe that Turkey’s current drive toward
gasifying its major cities would not have
achieved similar success rates in the
preceding decade.
33
5. Primary Constraints on Further
Progress in Turkey’s Greenfield
Gas Distribution Projects
Some Shortcomings of
the Licensing Process
The World Bank ’s interviews with gas
distribution companies in Turkey have revealed
that, overall, these companies strongly support
the existing licensing process undertaken by
EMRA. While they have emphasized several
points which could help to facilitate progress
with greenfield gas distribution, only a few of
them have been related to the existing tendering
system and the regulatory body. In general, they
have perceived the regulatory body as their
major partner in resolving a number of issues.
The following are the areas where distribution
companies have expressed concerns about
EMRA’s regulations and its tendering process.
• The lack of requirement for a feasibility
study: Many representatives of the
distribution business have considered this a
potential cause for the involvement of an
“excessively” large number of bidders at the
tender and the resulting low winning bids.
The major concern has been that some
companies which have poor knowledge of
the project’s expected returns may become
involved in bidding;
• Relatively easy prequalification for the
tenders: It is important to prequalify a
reasonable number of suitable firms.
Many licensees believe that toughening
the criteria for prequalification may
help to reduce the number of bidders,
which may eventually result in higher
winning bids;
• Short time to prepare for the
prequalification: Once EMRA announces
a tender, interested parties have been
provided with a relatively short period to
prepare their prequalification documents
(between two and six weeks);
• Presence of multiple bidding rounds: For
most licensees, this has been another cause
for low winning bids at the tenders. There
have been cases where the winner was
determined after more than 70 rounds
(for example, Thrace);
• Varying perceptions of investment
targets: In some key areas related to
progress in meeting the investment
requirements, the regulations are subject to
interpretation. As a result, some licensees
have prepared their investment plans having
read the regulations differently from what
EMRA intended. The regulations may need
to be further clarified for licensees to meet
these requirements (see below);
• Uncertainty about the distribution
margins after the eighth-year period:
The profitability of distribution projects
hinges upon EMRA’s decisions regarding
the price cap after the eighth year of the
licensee’s operation. Distributors have
been concerned about the lack of a clear
methodology for estimating distribution
35
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

margins after the eighth-year period
ends (see below); and
• The need for standardization in gas
distribution: EMRA’s regulations require
companies to abide by Turkey’s standards
for infrastructure development, household
internal installations, and metering (set by
the TSI). Many insiders believe that the
existing standards are not applied strictly,
which may result in problems related to
the quality and safety of distribution projects.
Meanwhile, progress in standardization
is believed to facilitate the supervisory
functions of EMRA.
While concerns about these issues have been
shared widely within the gas distribution
industry in Turkey, some of them have appeared
to be relatively inconsequential in practice.
For instance, the lack of a requirement for
conducting a feasibility study may have
contributed to “too many” bidders participating
in the tenders. However, all interviewed gas
distributors (representing 26 distribution
regions) have noted that they did carry
out a feasibility study prior to the tender.
Evidently, those that have abstained from
conducting a feasibility study have not won
a distribution tender.
Another example is related to the length of the
preparation period for the tenders. Many gas
distributors have noted that preparing for a
tender started long before EMRA’s tender
announcement (sometimes as long as one to
two years before the announcement). As a
result, not all bidders have been practically
constrained by the officially short preparation
period. Meanwhile, the criteria for the
prequalification stage have remained relatively
easy for applicants to meet, but EMRA appears
to have made these requirements stricter, as
evidenced by the increased number of
disqualified applicants in 2005.
Constraints on Expanding the
Licensee’s Consumer Base
Distribution companies have referred to a
number of challenges in their experience with
gas distribution in the past two to three years.
Many of these challenges could be instructive
for what may cause delay in a greenfield gas
distribution project.
• Cultural preference among households
in favor of individual heating systems:
Households in Turkey predominantly prefer
individual heating systems, both before and
after switching to natural gas. Only a very
small percentage of households relies on
central heating. 30 Households hope to
benefit in the long run by opting for
individual heating, as it provides a
better control over gas bills; however, this
has two-fold implications. First, it has raised
the overall investment costs of distribution
companies. Naturally, they prefer central
heating systems, as they collect connection
fees for each household, and the connection
costs are considerably lower for buildings
with such systems. Second, internal heating
appliances constitute the largest cost
component for households, yet the actual
cost depends primarily on whether they
rely on individual or central heaters.
The appliance cost per household with

30
Dosider reports that, as in August 2005, Turkey’s total gas subscribers were 4,774,937, of which 3,245,791 used individual
heating systems. Within this total, there were only 42,421 buildings with central heating, which was equal to 691,774
individual subscribers. As most of the buildings with central heating are located in Turkey’s largest cities, many of the new
distribution companies (operating in Turkey’s remaining smaller cities) have to rely predominantly on consumers preferring
individual heating systems. Meanwhile, according to data from the State Statistics Institute, there were 12.5 million dwellings
in Turkey in 2000, 16 percent of which used central heating systems (Source: “Arastirma Dosyasi – Sehirlerde Dogal Gaz
Kullaniminin Guncel Durumu,” Dogal Gaz Dergisi, October 2005; www.dogalgaz.com.tr).

36
PRIMARY CONSTRAINTS ON FURTHER PROGRESS IN TURKEY’S GREENFIELD GAS DISTRIBUTION PROJECTS

central heaters is estimated to be nearly a
fraction of the cost of individual heaters.31
This cost is a major hindrance for most
households to shift to natural gas. In this
respect, distribution companies have been
often at odds with companies marketing
internal appliances, which have widely
advertised the convenience of individual
heating systems;
• Issues related to companies in charge
of internal installations: Distribution
companies, as required by law, are not
directly involved in installing the internal
infrastructure of households and
commercial consumers. Instead, this is
performed by specialized companies which
need to be approved by the distribution
companies. Several issues have surfaced
regarding such companies. First, in many
regions, their number has been too small
to meet existing requests for gas
connections, leading to delays and
disillusionment among subscribers.32 In most
cases, subscribers have blamed their
distribution company for not being aware
of the source of the problem. Second,
distribution companies have been accorded
limited advantage against companies in
charge of internal gas infrastructure.
If quality or safety issues arise, the gas
distributor may decline to approve the
installation, but this often results in additional
expenses for the distribution company, as costs
related to the approval process are not fully
covered in the current legislation.33 Finally, the
lack of standardization regarding the
contracts between distribution companies and
firms installing internal installations leads to
additional delays because of quality and
safety problems;34
• Relaxed environmental requirements:
At the beginning of 2005, Turkey’s Ministry
of Environment and Forestry issued a
regulation (#25699, Article 20) which
required households, businesses and
industrial consumers to use natural
gas for their heating purposes, if there is
access to gas in their location. This
regulation was subsequently revised
and softened (Regulation #25758) and,
as a result, these users are promoted,
but not required to consume natural
gas and renewables. However, several
municipalities have adopted a tougher
attitude toward consumption of less
environment-friendly fuels;
• Subsidized coal for low-income families:
In many cities, local governments have
provided subsidized coal to low-income
families. Given the competitive pricing for
coal, this has weakened their incentive to
switch to natural gas. Distribution
companies have called for government
subsidies directed at covering the
installation and equipment costs of low-
income households; however, no progress
has been achieved;

31
One licensee estimates that the cost for individual heating systems (with combined functions for space heating, water
heating and cooking) stands between 2,000 and 3,500 YTL (US$1,503-2,631). The cost of a central heating system (serving the
same purpose) per subscriber depends on the number of units in a building. Such costs usually range from 500 to 1,000
YTL (US$376-752).
32
For example, Aksa has reported that in some of its distribution regions, subscribers have been required to wait three to four
months to switch to gas due to the lack of a sufficient number of installation companies.
33
Companies in charge of installing internal equipment and piping are required to pay certain fees to the licensee for the
approvals and tests related to their projects. According to EMRA’s Decision #617, currently such fees stand at 12.5 YTL
(= US$9.4) for households (using the typical G4-type household gas meters). Fees for larger consumers are slightly higher. If
such companies fail to get approval at the first round, they are liable to pay half of the charge in the second approval round.
In the third round, they pay 25 percent of the original approval fee. After the third round, there is no charge.
34
There is no single standard contract between distribution companies and companies in charge of installing internal
installations. There have been proposals to adopt Igdas’ installation contract as a framework for a standard contract.

37
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
• Households’ conservative approach
toward gas: In most distribution regions,
households have been worried about the
safety of switching to gas. Some distribution
companies and Dosider, the association for
gas appliances, have been involved in
educating consumers about the safety and
benefits of natural gas;
• Issues related to city planning and
mapping: In a number of cities, distribution
companies have complained about excessive
costs resulting from infrastructure-related
problems, such as the lack of sufficiently
wide roads. Occasionally, because of the
lack of detailed maps for underground
infrastructure, they have had to delay their
investments and prepare their own studies;
• Problems in the procurement of
infrastructure materials: As over a dozen
greenfield gas distribution projects have
commenced simultaneously, some companies
have experienced delays in procuring the
necessary equipment and materials for their
infrastructure purposes; and
• Lack of funding for public buildings:
Gas distributors can benefit greatly from
connecting some major public entities,
but limited progress has been achieved in
gas connections due to the latter ’s
financial constraints.
Difficulties Related to BOTAS
Overall, gas distributors’ relations with BOTAS
have been devoid of any serious problems. For
instance, all interviewed licensees have praised
BOTAS for completing the required transmission
network and securing an adequate capacity for
35
EMRA agreed to become directly involved in cases of problems associated with licensee nonpayment to BOTAS.
36
In some distribution regions, BOTAS has owned distribution networks and a certain number of noneligible consumers.
Following a tender for that particular region, BOTAS is required to transfer these assets (and the consumers as well).
37
In general, distribution companies have not had objections related to the presence of BOTAS assets. Usually, the size of the
assets subject to transfer is associated with the presence of large consumers in the designated distribution region.
38
the coming years. Some minor problems, such
as the requirement for licensees to provide a
payment guarantee on their gas purchases
from BOTAS, have been resolved through
EMRA’s mediation.35
The major issue between the national pipeline
operator and the distribution licensees is the
transfer of assets.36 The legislation requires that
distribution companies pay for the existing
assets belonging to BOTAS in their designated
regions.37 BOTAS determines the value of these
assets and specifies it in the distribution license.
Problems in transferring such assets have arisen
when BOTAS is involved in an ongoing
investment activity related to the asset. As a
result, BOTAS and gas distribution licensees are
often drawn into disputes about revising the
value of the particular asset. Distribution
companies have often associated delays
in their investment programs with asset
transfer problems.
Distributors also cite BOTAS’ inability to provide
discounts to some of its consumers, namely
those in the so-called organized industrial
zones. Because of this, distribution companies
have had repeated complaints from consumers
within organized industrial zones who do not
benefit from this discount because they are
located within a certain gas distribution region.
This problem was partially resolved at the
beginning of 2006. Accordingly, an EMRA
decision (#616) required BOTAS to secure gas
for all of its consumers at the same rate.
However, there are two reasons for continued
price differences across various consumers in
Turkey: first, the difference in distribution
margins across distribution regions causes
some consumers to benefit from overall lower
PRIMARY CONSTRAINTS ON FURTHER PROGRESS IN TURKEY’S GREENFIELD GAS DISTRIBUTION PROJECTS
gas tariffs; and, second, consumers served
directly from BOTAS’ transmission grid are able
to avoid transportation charges paid by similar
consumers located within distribution regions.
As a result, eligible consumers appear to be at
a disadvantage by being located within regions
designated for distribution companies.
Finally, the massive spread of gasification
projects in Turkey may require commensurate
adjustments within BOTAS. Due to the growing
number of gasified cities, BOTAS’ tasks will
expand significantly. A particular focus will be
necessary for meeting transmission capacity
requirements in a growing number of gasified
regions in Turkey. This concern appears to be
valid for the long run when growing
consumption may call for expanding part of the
transmission network. Meanwhile, both in the
short and long run, issues such as balancing
demand and supply for a growing number of
participants in Turkey’s gas sector will need to
be addressed, and BOTAS will need to play an
important role in these efforts because of its
major role in wholesale and transmission
network control.
39
6. Major Challenges Ahead
Securing and Measuring Progress
One of the major responsibilities of a regulatory
body lies in ensuring that distribution
companies meet license requirements. Success
in this area requires elaborate supervision of
licensee activities. Such supervision will benefit
highly from efforts aimed at resolving problems
associated with potential sources of vagueness
in the investment requirements set for licensees.
The World Bank ’s interviews with gas
distribution companies have revealed that
licensees have different interpretations about a
number of issues central to the investment
requirements. Major areas where definitional
problems have remained on the ground are
described as follows:
• Requirements in the first five-year
period: According to EMRA, the tender
document requires distribution companies
to complete the whole distribution
network in the settlement zone of their
distribution region. This includes the steel
and polyethylene (PE) network, as well as
the service lines and service boxes needed
for connecting consumers. Some companies
perceive that this requirement encompasses
completing the main steel and PE network
only. Their investment plans envision
investment in service lines and service boxes
based on consumer demand. This will
involve making such investments throughout
the 30-year period determined in their
licenses. As a result, some distribution
companies do not plan to install service lines
and service boxes throughout the settlement
zone in their distribution regions;
• Definition of a “technically and
economically feasible” connection:
Licensees are required to connect all
potential consumers if the requested
connection is economically and technically
feasible. The current legislation does
not determine an objective test of
feasibility. This is partly because ex ante
determination regarding technical and
economic feasibility is hardly possible.
EMRA’s evaluation is envisaged to be
made after a dispute arises on an ad hoc
basis. However, as a result of this lack
of an objective test for feasibility, licensees
have different assumptions about the
potential consumers that fall into the
category of being “technically and
economically feasible.” Thus far, EMRA
reports that no potential consumers
have had complaints about not being
connected because they were located in
an area deemed unfeasible by the
licensee. However, this is partly due
to licensees’ initial focus on areas with
higher population density, as well as
higher income;
• Definition of “settlement zone:”
Licensees are required to connect all
potential consumers in their settlement zones
(imarli alan). Settlement zones are areas
41
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
subject to the jurisdiction of a certain
municipality. The size of such areas is subject
to periodic revisions, and it has been a
common tendency among municipalities to
include new areas within their jurisdiction.
Such new areas are often located at a
considerable distance from regions with
dense population. Some distribution
companies are worried that connecting most
of such areas will raise their costs, and,
therefore, they will most likely regard such
connections as “technically and economically
not feasible;”
• Connection fees applying to commercial
consumers: According to EMRA, connection
fees collected from “commercial consumers
involved in the production of goods and
services” are subject to the same rules as
those for industrial consumers: licensees are
allowed to charge up to 10 percent above
the exact cost of the connection. Some gas
distributors have reported that their
feasibility studies are based on the
assumption that commercial consumers will
be treated in the same way as residential
consumers.38 Their justification is that it is
hard to create a viable definition about what
constitutes a connection cost for commercial
consumers. This is especially true when the
consumer in question, such as a large hotel,
is expected to consume relatively large
volumes which will necessitate investment
in a steel and PE network with a larger
capacity. Resolving this vagueness is of
particular importance for a number of
companies for whom commercial
consumers constitute a large chunk of the
potential demand; and
• Revenues from gas connections for some
of the licensees: Connection fees constitute
a crucial element in the investment program
38
This implies that commercial consumers are expected to pay the usual US$180 for the first 200 m2, and an additional US$150
for each 100 m2 thereafter.
42
of gas distribution companies. As a rule, a
licensee collects a US$180 connection fee
per residential consumer for the first 200 m2,
and US$150 for each additional 100 m2.
However, it is not clear what rule will apply
to companies who have agreed to collect
connection fees below US$180 and whether
they have to accept a discount for each
additional 100 m2. Due to the larger physical
space occupied by commercial consumers,
this issue will be of special importance if
EMRA decides to treat commercial
consumers in the same way as they do
residential consumers.
Part of the challenge of supervising Turkey’s
greenfield gas distribution projects arises due
to the lack of intermediate targets
until the end of the fifth year of operation.
The legislation sets six- and 18-month
requirements; however, these are relatively easy
to meet as no certain investment limits are
specified. Licensees seem to have differing
perceptions of what their requirements actually
are.Within this context, EMRA has been
developing a complex system for monitoring
the performance of distribution companies
which aims to ensure that they comply with the
terms of their licenses. Indeed, successful
realization of the gas distribution projects hinges
largely upon this monitoring process. EMRA’s
monitoring has focused on the following areas:
• Submission of progress reports by
licensees: Distribution companies are
obliged to provide frequent updates on their
investment progress. They are required to
submit periodic reports (weekly, monthly,
and annual) which include details on
progress made in their gas distribution
networks. Misrepresentation of such reports
is subject to serious fines (determined by
Article 9, NGML #4646). These reports
MAJOR CHALLENGES AHEAD
provide the regulator valuable grounds
to assess the progress in the greenfield gas
distribution projects it supervises, and
provides it with the opportunity to
communicate its concerns to licensees
during their investment process;
• Supervision of compliance with
required standards: Upon EMRA’s
request, licensees need to submit certificates
obtained from TSI which verifies that the
equipment and material used in the
infrastructure complies with the relevant
legislation and standards. However,
compliance with required standards is
further supervised through EMRA-certified
companies whose representatives are
authorized to observe the process of network
construction in the distribution regions. Gas
distribution licensees are required to pay for
such companies’ expenses;
• Supervision of compliance with the
license: Based on decision #4872, the
regulator has started developing an
additional mechanism aimed at supervising
distribution licensees. The development of
this new mechanism is in progress and is
expected to be enforced in 2006 following
the authorization of companies certified to
implement the decision. The new mechanism
provides an additional authority to EMRA in
supervising gas distribution companies.
EMRA is authorized to determine the issues
to be supervised, their duration, and the
number of people who will be involved in
the supervision. The authorized company
can supervise both the distribution
companies as well as the certified companies
which examine their compliance with
required standards and relevant regulation.
The decision for supervision is made by EMRA
on an ad hoc basis, and it can result in
unscheduled supervisor visits at distribution
licensee sites. One of the primary purposes
of this mechanism is to ensure that
distribution companies comply with all the
details listed in their licenses. As a result, the
authorized entity is required to prepare
reports which outline how the license terms
are implemented; and
• Financial supervision of licensees:
Financial supervision of distribution
companies is essential not only for their
compliance with accounting standards but
also for assessing the actual progress of
licensees’ investment programs. The
legislation requires licensees to be audited
by independent companies (authorized by
EMRA) who need to submit annual reports
to the regulator. Besides the annual audit
reports prepared based on accepted
standards in Turkey, the auditing companies
are required to submit additional data
(capital structure, annual sales, insurance
coverage, license holder income, etc.) on
the gas distribution licensees.
In addition to its authority to supervise the
licensees, the regulator also has the power to
force them to comply with their commitments.
Accordingly, there are significant fines for
violations of the license terms (ranging
between US$600,000 to US$1.5 million in
2006). If a distribution company fails to meet
its investment requirements, EMRA is
empowered to revoke the company’s license
and call in the performance bond, which,
depending on the size of the distribution
region, ranges from US$500,000 to US$5
million. Following a license revocation, EMRA
retenders the distribution region within four
months. The value of the license and the terms
of the tender are determined by EMRA.
Yet, resorting to such means is highly
undesirable for both EMRA and the licensees.
If the former licensee has failed to meet its
investment requirements on the grounds that
the gasification of some regions is unfeasible,
this will very likely remain as a challenge for the
new license owner as well. The new license can
hardly be offered to the new owner on improved
43
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
terms, as this may lead to legal proceedings
between EMRA and the old licensee. As a result,
EMRA’s attempts to establish a complex
monitoring system of the distribution
companies constitute a valuable initiative which
can help to minimize such problems.
Tariff Regulation after the Eight-year
Period of Fixed Distribution Margins
The legislation requires the distribution
companies to operate at fixed distribution
margins for the first eight years of the project.
The margins for the remainder of the period
clearly appear to be of the utmost importance
in determining the profitability of a greenfield
distribution project.
The regulatory body has announced that after
the eighth year, the distribution margin will be
set in accordance with the price cap method.
However, the methodology for applying the price
cap is not clear at this stage, and there is work in
progress to determine the types of expenditures
which will be included in the licensees’ asset base.
EMRA believes that the details of the new model
determining the tariffs will get clearer as multiple
licensees achieve significant project completion
rates. This will provide the regulatory body with
the ability to compare investment and operation
costs in various distribution regions. As a result,
EMRA hopes to prepare the requested
methodology and determine the price cap for
each of the designated regions.
To prepare the price cap methodology, EMRA
collects detailed information on each of the
companies through the various monitoring
mechanisms examined earlier. Among these,
the mechanism for financial supervision of the
licensees is of utmost importance. However,
EMRA may need to improve this mechanism to
fully benefit from it when establishing the
methodology for determining the regulatory
asset base and the posteighth-year period
distribution margin.
44
The lack of uniform accounting requirements
for distribution companies may lead to problems
at a later stage. Licensees have been allowed
to choose between two different accounting
reporting models, one based on the capital
markets board and the other prepared on
principles adopted by the Ministry of Finance.
As various distribution companies have opted
for one of the two reporting models, this is likely
to cause difficulties in comparing licensee
income and expenditures.
The methodology for determining the price
cap in the second phase is not totally clear,
leading to uncertainty among licensees.
Ideally, having a clear methodology from the
start of the tendering process would help
determine financial reporting requirements
specific to assessing licensee regulatory asset
bases. In addition to standard audit
reports, the current reporting by auditing
companies, requested by EMRA, appears to
be beneficial for determining unforeseen
changes in licensees’ cash flows and
governance structure.
Uncertainty about the tariff after the eighth year
of operation has led to different expectations
among licensees. With the tenders conducted
in 2005, it has become clear that the profitability
of some of the distribution projects will depend
solely on the distribution margin in the second
phase (that is, after the eighth year). Without a
considerably higher margin, projects may not
be profitable well into the second phase for
companies who have accepted “0”
distribution margins and agreed to
significantly reduce the connection fees for
households. As many of these companies rely
on bank loans, future margins will have debt-
servicing implications.
In principle, the connection fees should cover
all or most of the investment costs for the first
eight years of the project, while distribution
margins (and transportation fees) should cover
the operational costs. Investment costs are
MAJOR CHALLENGES AHEAD
expected to be quite marginal in the second
phase of the project, when the distributor will
undertake fewer new connections. Thus,
operational costs will constitute the bulk of the
costs in the second phase. According to a the
World Bank questionnaire responded to by 18
licensees, the annual average for 30 years
ranges between US$4.5 and US$20 per
subscription unit. The average for the 18
licensees stands at US$12.7. The new
distribution margin should be able to cover
these operational costs, as well as secure some
rate of return determined by the distribution
company. Most distribution companies
interviewed by the World Bank have been
guided by this principle when estimating the
profitability of their projects.
Based on licensees’ feasibility studies, most gas
distributors expect to have positive cash flows
between the fifth and eighth years of operation.
However, since 2005, a growing number of
companies have been willing to operate under
distribution margins which will be insufficient
for securing positive cash flows until the second
phase. These licensees have viewed their
projects as a means to secure themselves the
right to be the sole gas distributor in a
designated region for 30 years and possibly
longer. They have viewed the tenders as a kind
of a “concession” which has a certain cash
value. To acquire this “concession,” they have
been willing to accept very low distribution
margins in the first phase of operation (the first
eight years) and occasionally reduce the
connection fees for their consumers.39 For
such companies, the overall profitability of the
project is much more sensitive to EMRA’s
decision about the distribution margin in the
second phase.
As in the case of the considerable discrepancy
in the winning bids, licensees’ assumptions
39
One licensee (in charge of the Denizli gas distribution region), which has submitted a “0” winning bid and agreed to slightly
reduce its connection fees, claims that the connection fees will be sufficient to cover the investment costs.
about the distribution margin in the second
phase have also varied. Quite commonly,
licensees oppose the idea of applying a certain
percentage increase in the distribution margin.
Instead, they prefer to focus on a certain range
for these margins, below which they may not
be willing or able to operate their distribution
licenses. Based on interviews with gas
distributors, the expected margin in the price
cap period has varied from 1 cent to 2.5 cents
per m3. While some companies have claimed
that 1 cent/m3 will be sufficient for the overall
profitability of the project, a more common
expectation is that the distribution margin
should be between 2 cents and 2.5 cents per
m3. A widely stated claim is that this is the current
margin determined by EMRA for two of the
privatized gas distributors (Bursa and Eskisehir),
and, therefore, they expect similar margins in
their second phase.
Although the regulatory framework for the
posteight-year period is not clear, most
distribution companies have faith in the
regulatory framework, and are of the view that
margins in the second phase will be reasonable
and will enable recovery of current as well as
past costs. A common justification among them
is that, as a rule of thumb, the additional cost
(for consumers) of increasing the distribution
margin by 1 cent/m3 is considerably small.
Based on an assumption that the average
annual consumption per household will be
1,500 m3, this implies US$15 additional costs
for the consumers.
Meanwhile, EMRA recently reduced the
distribution margins for five of Turkey’s older
gas distributors. As in 2006, EMRA decided to
lower their distribution margins by nearly five
percent. EMRA’s move is partly explained by the
growing discrepancy between the distribution
margins in the old and new distribution regions.
45
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003
In addition, the reduction has aimed to
promote improvements in efficiency in
operating the old distribution networks.
Another major question is about the future of
transportation fees collected by distribution
companies. Currently, licensees in Turkey’s new
distribution regions are allowed to charge
transportation fees in an amount up to their
distribution margins. This secures the licensees
significant revenues, particularly from large
consumers, such as eligible consumers and
power plants that purchase gas from BOTAS
(and other wholesalers in the future).
The transportation fees appear fixed for the first
eight years, as they are the equivalent of the
distribution margin. However, it is not clear at
this point whether EMRA will revise this policy in
the second phase. In case a revision of this
rule results in a relative reduction in the
transportation margins (compared to a
licensee’s new distribution margins), licensees
are expected to demand even larger increases
in their distribution margins as a means
of compensation.
Transformation in the Distribution
Companies’ Main Activity
As distribution companies are required to gasify
the entire region designated in their license
within five years, most of their investments will
be completed in that period. After a point,
investment in infrastructure will remain a
secondary activity for the licensees, as their
priorities will shift toward operating
their networks.
In this new phase of their licenses, distribution
companies will need to prepare for various
challenges. One of them is related to revenues
from connection fees, which will be minimal,
and licensees will need to rely mainly on
distribution margins (and transportation fees).
Another challenge for distribution companies
is that they will need access to expertise and
new types of skills for managing the existing
46
network and its associated consumer base.
In this regard, two issues, safety and consumer
satisfaction, will become increasingly important.
Companies will need to possess adequate
capacity to respond to safety-related issues. The
safety of their networks will largely hinge upon
the quality of the investment materials they use
today. EMRA has charged a number of
companies with the specific responsibility of
examining the quality of the ongoing
investments. Distribution companies are
required to disclose all necessary information
to such companies, as well as fund their
expenses. As a result, this promising
mechanism may enhance the safety of the
distribution infrastructure in the future.
Consumer satisfaction is another area where
licensees will have to channel a larger share
of their resources. This will particularly be the
case when wholesale competition begins and
the threshold for “eligible” consumers is
reduced. However, to ensure quality of
service, distribution companies will need to
be prepared for a differentiation in
transportation fees and distribution margins,
as at some point they may emerge as service
providers (rather than gas sellers) for most
of their current consumers.
Upfront Capital Costs for Co7nsumers
Estimates of upfront costs for consumers are
primarily the costs related to installing heating
systems, piping and related infrastructure.
These costs vary significantly, depending on
whether it is a central heating system or an
individual one. Quick estimates based on
discussions with some licensees and some
industry associations suggest that the cost for
individual heating systems (with combined
functions for space heating, water heating, and
cooking) could vary between 2,000 and 3,500
YTL (US$1,500-2,630). The cost of a central
heating system (serving the same purpose) per
subscriber depends on the number of units
MAJOR CHALLENGES AHEAD
in a building. Such costs are typically found
to be lower, and usually range from 500 to
1,000 YTL (US$376-752). In August 2005,
only 42,421 buildings in Turkey had central
heating, which is equal to 691,774 individual
subscribers. As most of the buildings with
central heating are located in the larger cities,
many of the new distribution companies
(operating in Turkey’s remaining smaller cities)
may have to rely predominantly on individual
heating systems. The challenge, therefore, will
be to convince consumers of the long-term
benefits of the upfront costs. In some cases,
licensees may be required to provide financing
to consumers, to enable them to bear the
upfront costs.
47
 Annex I
Table A1: Participation in Gas Distribution Tenders and Their Results

Regions Winner Winning Starting Date Winning Bid Connection Number of Number of Number of Bid Bond Performance
Date of License (cents/kWh) Fee (US$) Bidders at Applicants for Prequalified (US$) Bond (US$)
Tender Prequalification Firms

2003 0.0926

Kayseri HSV 6/19/2003 10/2/2003 0.076 180 18 27 23 1,000,000 2,000,000

Konya Gaznet 7/31/2003 12/5/2003 0.064 180 14 35 29 1,500,000 3,000,000

Erzurum Palen 8/13/2003 2/6/2004 0.046 180 5 19 16 1,000,000 2,000,000

Corlu Arsan 8/28/2003 1/27/2004 0.036 180 6 24 23 1,000,000 2,000,000

Gebze. Palgaz 9/11/2003 2/10/2004 0.052 180 8 32 29 1,000,000 2,000,000

Inegol Kalen 9/18/2003 2/10/2004 0.061 180 2 29 26 500,000 1,000,000

Catalca Anadolu 9/25/2003 2/23/2004 0.044 180 7 29 27 250,000 500,000

Bandirma Anadolu 10/9/2003 3/23/2004 0.174 180 2 19 19 1,000,000 2,000,000

Balikesir Aksa 10/16/2003 3/30/2004 0.112 180 2 21 20 1,000,000 2,000,000

Sivas Anadolu 10/30/2003 4/6/2004 0.164 180 3 13 13 1,000,000 2,000,000

Kutahya Ongaz 11/6/2003 1/13/2004 0.124 180 3 17 17 1,000,000 2,000,000

Konya Eregli Gaznet 12/4/2003 6/22/2004 0.172 180 2 15 14 500,000 1,000,000

Corum Gaznet 12/18/2003 3/16/2004 0.079 180 5 21 19 1,000,000 2,000,000

(Corumgaz)

49
50
Regions Winner Winning Starting Date Winning Bid Connection Number of Number of Number of Bid Bond Performance
Date of License (cents/kWh) Fee (US$) Bidders at Applicants for Prequalified (US$) Bond (US$)
Tender Prequalification Firms

2004 0.115

Kirikkale- Gunay 1/8/2004 6/4/2004 0.158 180 1 20 18 1,000,000 2,000,000

Kirsehir

Samsun Cengiz 1/22/2004 7/6/2004 0.055 180 7 19 19 1,000,000 2,000,000

Aksaray Ers 2/12/2004 5/25/2004 0.236 180 2 14 12 1,000,000 2,000,000

Karadeniz Aksa 4/8/2004 8/3/2004 0.034 180 5 19 18 1,000,000 2,000,000

Eregli-Duzce

Gemlik- Anadolu 4/22/2004 9/21/2004 0.239 180 3 16 16 500,000 1,000,000

Umurbey

Yalova Arsan 7/1/2004 11/9/2004 0.031 180 7 22 20 1,000,000 2,000,000

TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Usak Udas (STFA) 12/2/2004 4/14/2005 0.055 180 11 24 23 1,000,000 2,000,000

2005 0.052

Polatli Delta 1/13/2005 6/23/2005 0.23 180 2 22 20 1,000,000 2,000,000

Izmir Kolin 1/27/2005 7/7/2005 0.012 180 11 21 14 2,000,000 5,000,000

Manisa Aksa 2/24/2005 10/27/2005 0.016 180 9 27 17 1,000,000 2,000,000

Nigde- Metangaz 3/17/2005 9/29/2005 0.098 180 3 14 12 1,000,000 2,000,000

Nevsehir

Bilecik-Bolu Aksa 6/9/2005 11/28/2005 0.016 180 13 30 25 1,000,000 2,000,000

 Regions Winner Winning Starting Date Winning Bid Connection Number of Number of Number of Bid Bond Performance
Date of License (cents/kWh) Fee (US$) Bidders Applicants for Prequalified (US$) Bond (US$)
at Tender Prequalification Firms

Karabuk- Corumgaz 6/16/2005 2/9/2006 0.069 180 7 25 18 1,000,000 3,000,000

Kastamonu-
Cankiri
ANNEX I: STATISTICAL ANNEX

Edirne- Zorlu 6/23/2005 1/25/2006 0 0 14 32 25 2,000,000 4,000,000

Kirklareli-
Tekirdag

Yozgat Corumgaz 6/30/2005 1/25/2006 0.176 180 4 21 18 1,000,000 2,000,000

Malatya Peker 7/7/2005 10/20/2005 0.037 180 5 23 18 1,000,000 2,000,000

K. Maras Arsan 7/14/2005 12/23/2005 0.009 180 10 21 18 1,000,000 2,000,000

Denizli Metangaz 7/21/2005 2/16/2006 0 149 10 30 25 1,000,000 3,000,000

G.Antep- Zorlu 7/28/2005 2/24/2006 0 30 10 31 25 1,000,000 4,000,000

Kilis

Sanliurfa Gur-Dag 11/9/2005 Pending 0.095 180 24 21 1,000,000 2,000,000

Canakkale Aksa 12/16/2005 Pending 0.001 180 9 29 28 1,000,000 2,000,000

Isparta- Sel-Tan 12/23/2005 Pending 0.015 180 7 22 21 1,000,000 3,000,000

Burdur

51
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Table A2: Progress in Gas Penetration in New Distribution Regions as at the End of 2005

Distribution Number of Potential Number Current

Regions Subscribers* of Subscribers** Penetration Ratio

Kayseri 56,967 250,000 22.79

Konya 38,088 70,000 54.41

Erzurum 20,134 83,000 24.26

Corlu 2,109 58,000 3.64

Gebze. 6,051 75,000 8.07

Inegol 8,000 35,000 22.86

Catalca 2,933 6,000 48.88

Bandirma 4,441 40,000 11.10

Balikesir 5,756 30,000 19.19

Sivas 1,722 86,000 2.00

Kutahya 4,318 65,000 6.64

Konya-Eregli 2,944 10,000 29.44

Corum 29,374 50,000 58.75

Samsun 6,070 80,000 7.59

Aksaray 1,081 47,318 2.28

Karadeniz-Eregli-Duzce 1,200 18,000 6.67

Kirikkale-Kirsehir 4,101 40,000 10.25

Gemlik 717 23,000 3.12

Yalova 2,312 50,000 4.62

Usak 776 10,000 7.76

Total 199,094 1,126,318 17.68

Source: EMRA.

* The number of subscribers is based on EMRA’s definition of residential equivalent subscription: one unit of residential
equivalent subscription refers to households or commercial and public services with a size of up to 200 m2. For spaces above
200 m2, each additional 100 m2 refers to an additional unit of residential equivalent subscription.
** Distribution companies provide the potential number of subscribers, and, as a result, penetration ratios are subject to the
bias of licensees’ estimates.

52
ANNEX I: STATISTICAL ANNEX

Table A3: Transportation Fees Charged in Old and New Distribution Regions

Distribution Regions Transportation Fee (Cents/kWh)

Old Regions

Adapazari 0.111

Ankara 0.068

Bahcesehir 0.068

Bursa 0.068

Eskisehir 0.068

Istanbul 0.068

Izmit 0.068

New Regions with Comparatively Low Transportation Fees

Denizli 0

Edirne-Kirklareli-Tekirdag 0

G.Antep-Kilis 0

Canakkale 0.001

K. Maras 0.009

Izmir 0.012

Isparta-Burdur 0.015

Bilecik-Bolu 0.016

Manisa 0.016

Yalova 0.031

Karadeniz Eregli-Duzce 0.034

Corlu 0.036

Malatya 0.037

Catalca 0.044

Erzurum 0.046

53
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Distribution Regions Transportation Fee (Cents/kWh)

Gebze. 0.052

Samsun 0.055

Usak 0.055

Inegol 0.061

Konya 0.064

New Regions with Comparatively High Transportation Fees

Karabuk-Kastamonu-Cankiri 0.069

Kayseri 0.076

Corum 0.079

Sanliurfa 0.095

Nigde-Nevsehir 0.098

Balikesir 0.112

Kutahya 0.124

Kirikkale-Kirsehir 0.158

Sivas 0.164

Konya-Eregli 0.172

Bandirma 0.174

Yozgat 0.176

Polatli 0.23

Aksaray 0.236

Gemlik-Umurbey 0.239

Source: EMRA.

54
ANNEX I: STATISTICAL ANNEX

Table A4: Cumulative and Projected Investments by Distribution Companies in Regions

where Residential Consumption has Already Commenced*

Distribution Cumulative Investment Planned Total Completion Rate for

Regions as at the End of 2005 Investment Within Investments as at
(US$ million) 30 Years (US$) the End of 2005 (%)

Kayseri 26.7 NA NA

Konya 13.8 38 36.4

Erzurum 10.2 18 56.4

Corlu 12.0 17 70.6

Gebze. 19.4 50 38.5

Inegol 5.0 NA NA

Catalca 4.2 7 63.9

Bandirma 5.4 10 52.8

Balikesir 10.2 20 51.2

Sivas 7.4 19 39.4

Kutahya 12.0 NA NA

Konya-Eregli 2.3 3 75.2

Corum 12.0 16 75.5

Samsun 20.9 NA NA

Aksaray 5.7 0

Karadeniz-Eregli-Duzce 10.4 23 46.0

Kirikkale-Kirsehir 11.2 NA NA

Gemlik 4.8 7 71.1

Yalova 10.0 17 58.8

Usak 4.7 24 .5

Total 208.3 NA NA

Source: Distribution companies.

* Cumulative investments include payments for assets transferred by BOTAS. Such payments are required in several regions
with BOTAS assets, and are part of the 30-year investment plan. Data for companies with information available only for
cumulative investments has been obtained from EMRA.

55
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Table A5: The Share of Industrial Consumption in Licensees’ Distribution Regions in 2005*

Distribution Total Residential Gas Consumption by Share of

Regions Gas Consumption Industry in a Licensee’s Industrial
in Licensee’s Region Region in 2005 Consumption (%)
in 2005 (cubic meters) (cubic meters)

Kayseri 38,769,028 204,925,886 84.1

Konya 17,540,930 15,018,950 46.1

Erzurum 4,658,900 13,409,491 74.2

Corlu 392,081 137,373,109 99.7

Gebze. 2,632,907 68,992,000 96.3

Inegol 4,048,680 NA NA

Catalca 145,965 1,807,209 92.5

Bandirma 1,084,943 23,311,498 95.5

Balikesir 1,463,379 8,794,654 85.7

Sivas 1,796,181 899,135 33.3

Kutahya NA NA NA

Konya-Eregli NA NA NA

Corum 17,479,280 21,290,400 54.9

Samsun 426,202 2,675,718 86.2

Aksaray 125,358 1,015,963 89.0

Karadeniz-Eregli-Duzce NA NA NA

Kirikkale-Kirsehir NA NA NA

Gemlik NA 15,784,005 NA

Yalova NA NA NA

Usak 22,000 30,000 57.7

Source: Dosider.

* Industrial consumption includes gas consumed by power plants.

56
ANNEX I: STATISTICAL ANNEX

Table A6: Ranking of Relative Prices for Selected Fuels Consumed by Households

Type of Fuel Minimum Heat Unit Cost YTL/m3 Assumed Cost per
(Location) Value or YTL/kg or Efficiency 1,000 kcal
YTL/kWh

Gas (Eskisehir) 8,250 kcal/m3 0.484 93% 0.063

Gas (Bursa) 8,250 kcal/m3 0.484 93% 0.063

Gas (Ankara) 8,250 kcal/m3 0.512 93% 0.069

Gas (Istanbul) 8,250 kcal/m3 0.518 93% 0.068

Imported Siberian Lignite Coal (Istanbul) 6,000 kcal/kg 0.244 60% 0.068

Gas (Izmit) 8,250 kcal/m3 0.530 93% 0.069

Domestic Soma Coal (Mugla) 4,661 kcal/kg 0.227 60% 0.081

Imported South African Coal (Ankara) 6,500 kcal/kg 0.260 65% 0.062

Imported Russian Lignite Coal (Eskisehir) 6,200 kcal/kg 0.255 65% 0.063

Domestic Soma Coal (Istanbul) 5,500 kcal/kg 0.210 60% 0.064

Fuel Oil (Istanbul) 9,875 kcal/kg 1.380 80% 0.175

Electricity (TEDAS) 860 kcal/kWh 0.158 99% 0.186

LPG (Aygaz) 11,000 kcal/kg 2.708 90% 0.274

Diesel Fuel (Istanbul) 10,256 kcal/kg 2.485 84% 0.289

Source: Dosider (as on April 14, 2005); Prices include Value-Added Tax (VAT).

Table A7: End user Average Gas Prices in Industry and Households in 2005 –
International Comparisons

Country Gas Prices in Gas Prices in Difference Between

Industry ($/toe) Households Household and
($/toe) Industrial prices (%)

Hungary 385.2 406.0 5.4

Turkey 338.6 402.6 18.9

Slovak Republic 319.3 465.6 45.8

Czech Republic 325.0 476.9 46.7

United States 373.7 578.8 54.9

Finland 211.3 331.2 56.7

Switzerland 446.7 744.0 66.6

57
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Country Gas Prices in Gas Prices in Difference Between

Industry ($/toe) Households Household and
($/toe) Industrial prices (%)

New Zealand 445.6 755.6 69.6

Ireland 415.6 730.8 75.8

Mexico 396.8 702.1 76.9

France 351.4 656.1 86.7

Poland 249.6 492.5 97.3

Spain 282.4 760.7 169.4

Portugal 378.2 1070.6 183.1

Source: International Energy Agency (IEA).

58
Annex II
Questionnaire for Gas
Distribution Companies
Data on the following:
• Number of households connected; and
• Specifics about households connected:
– Density;
– Types of predominant heating
systems used;
– Share of eligible consumers in total
consumption so far; visions about their
share in future (five to 10 years); and
– The average investment costs in the
licensed area (for example, US$ per
supplied 1000 cm of gas)? How different
are they from the investment costs of
distcos in other regions?
Thoughts on the tendering process:
• Any strengths and weaknesses of the
tendering process?
• Any possibilities for improvements? In what
specific areas?
The investment process up to five
(or eight) years:
• What type of consumers are the first
connections for?
• How do companies decide where to start
their investment process which will be
the showcase for meeting the EMRA
requirements up to 18 months?
• For companies that have not fulfilled their
18-month requirements:
• Reasons:
– What has been EMRA’s response? What
type of warnings?
– Any problems which can cause delay in
the investment process up to five years?
Any request due to these problems
forwarded to EMRA which have not been
fulfilled, or plans for requests?
– What is the company’s understanding
of imarli alan? How different is it from
EMRA’s understanding? What part of
the cities will most likely be left without
gas connections? Any idea about
their potential size in terms of their
share in the total population of the
licensed area?
– What are the estimated sales per
household?
– What are the sources of income in the
first five (and up to eight) years? Will they
be enough to make the project feasible
within the 30-year period of the license?
Or how will it affect the overall feasibility
of the project?
– How do companies finance the project
in the initial period (up to five or
eight years)?
59
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Investments after Year 8: Future trends in gas market

liberalization – implications:
• What will be the sources of income after Year 8?
• What will be the impact of a change in
• What is the expectation for the price cap
the definition of “eligible consumers” after
after Year 8?
Year 5?
• What are the expectations for asset base
Transfer of BOTAS assets:
estimates for the posteight-year period?

• How will the company finance investments • What are the assets that need to be
after Year 8? transferred?

Relations with EMRA: • What are (were) the problems in relations

with BOTAS so far? Reasons?
• What kind of data do distcos provide
to EMRA? Relations with city government:

Relations with “financially • Any problems, etc?

supervisory” (mali denetim) and
control (teknik denetim) companies: Consumers in the license area:

• What type of data is provided to each type • Who are they?

of companies?
• Why do they shift to gas? What fuels are
• Evaluation of the relations with primarily replaced?
such companies.

60
List of Formal Reports
Region/Country Activity/Report Title Date Number

SUB-SAHARAN AFRICA (AFR)

Africa Regional Anglophone Africa Household Energy Workshop (English) 07/88 085/88
Regional Power Seminar on Reducing Electric Power System
Losses in Africa (English) 08/88 087/88
Institutional Evaluation of EGL (English) 02/89 098/89
Biomass Mapping Regional Workshops (English) 05/89 --
Francophone Household Energy Workshop (French) 08/89 --
Interafrican Electrical Engineering College: Proposals for Short-
and Long-Term Development (English) 03/90 112/90
Biomass Assessment and Mapping (English) 03/90 --
Symposium on Power Sector Reform and Efficiency Improvement
in Sub-Saharan Africa (English) 06/96 182/96
Commercialization of Marginal Gas Fields (English) 12/97 201/97
Commercializing Natural Gas: Lessons from the Seminar in
Nairobi for Sub-Saharan Africa and Beyond 01/00 225/00
Africa Gas Initiative — Main Report: Volume I 02/01 240/01
First World Bank Workshop on the Petroleum Products
Sector in Sub-Saharan Africa 09/01 245/01
Ministerial Workshop on Women in Energy 10/01 250/01
and Poverty Reduction: Proceedings from a Multi-Sector 03/03 266/03
and Multi-Stakeholder Workshop Addis Ababa, Ethiopia,
October 23-25, 2002
Opportunities for Power Trade in the Nile Basin: Final Scoping Study 01/04 277/04
Energies modernes et réduction de la pauvreté: Un atelier
multi-sectoriel. Actes de l'atelier régional. Dakar, Sénégal,
du 4 au 6 février 2003 (French Only) 01/04 278/04
Énergies modernes et réduction de la pauvreté: Un atelier
multi-sectoriel. Actes de l'atelier régional. Douala, Cameroun 09/04 286/04
du 16-18 juillet 2003. (French Only)
Energy and Poverty Reduction: Proceedings from the Global Village
Energy Partnership (GVEP) Workshops held in Africa 01/05 298/05
Power Sector Reform in Africa: Assessing the Impact on Poor People 08/05 306/05
The Vulnerability of African Countries to Oil Price Shocks: Major 08/05 308/05
Factors and Policy Options. The Case of Oil Importing Countries
Angola Energy Assessment (English and Portuguese) 05/89 4708-ANG
Power Rehabilitation and Technical Assistance (English) 10/91 142/91
Africa Gas Initiative - Angola: Volume II 02/01 240/01

61
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

Benin Energy Assessment (English and French) 06/85 5222-BEN

Botswana Energy Assessment (English) 09/84 4998-BT
Pump Electrification Prefeasibility Study (English) 01/86 047/86
Review of Electricity Service Connection Policy (English) 07/87 071/87
Tuli Block Farms Electrification Study (English) 07/87 072/87
Household Energy Issues Study (English) 02/88 --
Urban Household Energy Strategy Study (English) 05/91 132/91
Burkina Faso Energy Assessment (English and French) 01/86 5730-BUR
Technical Assistance Program (English) 03/86 052/86
Urban Household Energy Strategy Study (English and French) 06/91 134/91
Burundi Energy Assessment (English) 06/82 3778-BU
Petroleum Supply Management (English) 01/84 012/84
Burundi Status Report (English and French) 02/84 011/84
Presentation of Energy Projects for the Fourth Five Year Plan
(1983-1987) (English and French) 05/85 036/85
Improved Charcoal Cookstove Strategy (English and French) 09/85 042/85
Peat Utilization Project (English) 11/85 046/85
Energy Assessment (English and French) 01/92 9215-BU
Cameroon Africa Gas Initiative – Cameroon: Volume III 02/01 240/01
Cape Verde Energy Assessment (English and Portuguese) 08/84 5073-CV
Household Energy Strategy Study (English) 02/90 110/90
Central African
Republic Energy Assessment (French) 08/92 9898-CAR
Chad Elements of Strategy for Urban Household Energy
The Case of N'djamena (French) 12/93 160/94
Comoros Energy Assessment (English and French) 01/88 7104-COM
In Search of Better Ways to Develop Solar Markets:
The Case of Comoros 05/00 230/00
Congo Energy Assessment (English) 01/88 6420-COB
Power Development Plan (English and French) 03/90 106/90
Africa Gas Initiative – Congo: Volume IV 02/01 240/01
Côte d'Ivoire Energy Assessment (English and French) 04/85 5250-IVC
Improved Biomass Utilization (English and French) 04/87 069/87
Power System Efficiency Study (English) 12/87
Power Sector Efficiency Study (French) 02/92 140/91
Project of Energy Efficiency in Buildings (English) 09/95 175/95
Africa Gas Initiative – Côte d'Ivoire: Volume V 02/01 240/01
Ethiopia Energy Assessment (English) 07/84 4741-ET
Power System Efficiency Study (English) 10/85 045/85
Agricultural Residue Briquetting Pilot Project (English) 12/86 062/86
Bagasse Study (English) 12/86 063/86
Cooking Efficiency Project (English) 12/87
Energy Assessment (English) 02/96 179/96
Gabon Energy Assessment (English) 07/88 6915-GA
Africa Gas Initiative – Gabon: Volume VI 02/01 240/01
The Gambia Energy Assessment (English) 11/83 4743-GM
Solar Water Heating Retrofit Project (English) 02/85 030/85
Solar Photovoltaic Applications (English) 03/85 032/85
Petroleum Supply Management Assistance (English) 04/85 035/85

62
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Ghana Energy Assessment (English) 11/86 6234-GH

Energy Rationalization in the Industrial Sector (English) 06/88 084/88
Sawmill Residues Utilization Study (English) 11/88 074/87
Industrial Energy Efficiency (English) 11/92 148/92
Corporatization of Distribution Concessions through Capitalization 12/03 272/03
Guinea Energy Assessment (English) 11/86 6137-GUI
Household Energy Strategy (English and French) 01/94 163/94
Guinea Bissau Energy Assessment (English and Portuguese) 08/84 5083-GUB
Recommended Technical Assistance Projects (English &
Portuguese) 04/85 033/85
Management Options for the Electric Power and Water Supply
Subsectors (English) 02/90 100/90
Power and Water Institutional Restructuring (French) 04/91 118/91
Kenya Energy Assessment (English) 05/82 3800 KE
Power System Efficiency Study (English) 03/84 014/84
Status Report (English) 05/84 016/84
Coal Conversion Action Plan (English) 02/87 --
Kenya Solar Water Heating Study (English) 02/87 066/87
Peri-Urban Woodfuel Development (English) 10/87 076/87
Power Master Plan (English) 11/87 --
Power Loss Reduction Study (English) 09/96 186/96
Implementation Manual: Financing Mechanisms for Solar
Electric Equipment 07/00 231/00
Lesotho Energy Assessment (English) 01/84 4676-LSO
Liberia Energy Assessment (English) 12/84 5279-LBR
Recommended Technical Assistance Projects (English) 06/85 038/85
Power System Efficiency Study (English) 12/87 081/87
Madagascar Energy Assessment (English) 01/87 5700-MAG
Power System Efficiency Study (English and French) 12/87 075/87
Environmental Impact of Woodfuels (French) 10/95 176/95
Malawi Energy Assessment (English) 08/82 3903-MAL
Technical Assistance to Improve the Efficiency of Fuelwood
Use in the Tobacco Industry (English) 11/83 009/83
Status Report (English) 01/84 013/84
Mali Energy Assessment (English and French) 11/91 8423-MLI
Household Energy Strategy (English and French) 03/92 147/92
Islamic Republic
of Mauritania Energy Assessment (English and French) 04/85 5224-MAU
Household Energy Strategy Study (English and French) 07/90 123/90
Mauritius Energy Assessment (English) 12/81 3510-MAS
Status Report (English) 10/83 008/83
Power System Efficiency Audit (English) 05/87 070/87
Bagasse Power Potential (English) 10/87 077/87
Energy Sector Review (English) 12/94 3643-MAS
Mozambique Energy Assessment (English) 01/87 6128-MOZ
Household Electricity Utilization Study (English) 03/90 113/90
Electricity Tariffs Study (English) 06/96 181/96
Sample Survey of Low Voltage Electricity Customers 06/97 195/97
Namibia Energy Assessment (English) 03/93 11320-NAM

63
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

Niger Energy Assessment (French) 05/84 4642-NIR

Status Report (English and French) 02/86 051/86
Improved Stoves Project (English and French) 12/87 080/87
Household Energy Conservation and Substitution (English
and French) 01/88 082/88
Nigeria Energy Assessment (English) 08/83 4440-UNI
Energy Assessment (English) 07/93 11672-UNI
Strategic Gas Plan 02/04 279/04
Rwanda Energy Assessment (English) 06/82 3779-RW
Status Report (English and French) 05/84 017/84
Improved Charcoal Cookstove Strategy (English and French) 08/86 059/86
Improved Charcoal Production Techniques (English and French) 02/87 065/87
Energy Assessment (English and French) 07/91 8017-RW
Commercialization of Improved Charcoal Stoves and Carbonization
Techniques Mid-Term Progress Report (English and French) 12/91 141/91
SADC SADC Regional Power Interconnection Study, Vols. I-IV (English) 12/93 -
SADCC SADCC Regional Sector: Regional Capacity-Building Program
for Energy Surveys and Policy Analysis (English) 11/91 -
Sao Tome
and Principe Energy Assessment (English) 10/85 5803-STP
Senegal Energy Assessment (English) 07/83 4182-SE
Status Report (English and French) 10/84 025/84
Senegal Industrial Energy Conservation Study (English) 05/85 037/85
Preparatory Assistance for Donor Meeting (English and French) 04/86 056/86
Urban Household Energy Strategy (English) 02/89 096/89
Industrial Energy Conservation Program (English) 05/94 165/94
Seychelles Energy Assessment (English) 01/84 4693-SEY
Electric Power System Efficiency Study (English) 08/84 021/84
Sierra Leone Energy Assessment (English) 10/87 6597-SL
Somalia Energy Assessment (English) 12/85 5796-SO
Republic of
South Africa Options for the Structure and Regulation of Natural
Gas Industry (English) 05/95 172/95
Sudan Management Assistance to the Ministry of Energy and Mining 05/83 003/83
Energy Assessment (English) 07/83 4511-SU
Power System Efficiency Study (English) 06/84 018/84
Status Report (English) 11/84 026/84
Wood Energy/Forestry Feasibility (English) 07/87 073/87
Swaziland Energy Assessment (English) 02/87 6262-SW
Household Energy Strategy Study 10/97 198/97
Tanzania Energy Assessment (English) 11/84 4969-TA
Peri-Urban Woodfuels Feasibility Study (English) 08/88 086/88
Tobacco Curing Efficiency Study (English) 05/89 102/89
Remote Sensing and Mapping of Woodlands (English) 06/90 --
Industrial Energy Efficiency Technical Assistance (English) 08/90 122/90
Power Loss Reduction Volume 1: Transmission and Distribution
System Technical Loss Reduction and Network Development
(English) 06/98 204A/98
Power Loss Reduction Volume 2: Reduction of Non-Technical
Losses (English) 06/98 204B/98

64
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Togo Energy Assessment (English) 06/85 5221-TO

Wood Recovery in the Nangbeto Lake (English and French) 04/86 055/86
Power Efficiency Improvement (English and French) 12/87 078/87
Uganda Energy Assessment (English) 07/83 4453-UG
Status Report (English) 08/84 020/84
Institutional Review of the Energy Sector (English) 01/85 029/85
Energy Efficiency in Tobacco Curing Industry (English) 02/86 049/86
Fuelwood/Forestry Feasibility Study (English) 03/86 053/86
Power System Efficiency Study (English) 12/88 092/88
Energy Efficiency Improvement in the Brick and
Tile Industry (English) 02/89 097/89
Tobacco Curing Pilot Project (English) 03/89 UNDP
Terminal
Report
Energy Assessment (English) 12/96 193/96
Rural Electrification Strategy Study 09/99 221/99
Zaire Energy Assessment (English) 05/86 5837-ZR
Zambia Energy Assessment (English) 01/83 4110-ZA
Status Report (English) 08/85 039/85
Energy Sector Institutional Review (English) 11/86 060/86
Power Subsector Efficiency Study (English) 02/89 093/88
Energy Strategy Study (English) 02/89 094/88
Urban Household Energy Strategy Study (English) 08/90 121/90
Zimbabwe Energy Assessment (English) 06/82 3765-ZIM
Power System Efficiency Study (English) 06/83 005/83
Status Report (English) 08/84 019/84
Power Sector Management Assistance Project (English) 04/85 034/85
Zimbabwe Power Sector Management Institution Building (English) 09/89 --
Petroleum Management Assistance (English) 12/89 109/89
Charcoal Utilization Pre-feasibility Study (English) 06/90 119/90
Integrated Energy Strategy Evaluation (English) 01/92 8768-ZIM
Energy Efficiency Technical Assistance Project:
Strategic Framework for a National Energy Efficiency
Improvement Program (English) 04/94 --
Capacity Building for the National Energy Efficiency
Improvement Programme (NEEIP) (English) 12/94 --
Rural Electrification Study 03/00 228/00
Les réformes du secteur de l’électricite en Afrique: Evaluation
de leurs conséquences pour les populations pauvres 11/06 306/06

EAST ASIA AND PACIFIC (EAP)

Asia Regional Pacific Household and Rural Energy Seminar (English) 11/90 --
China County-Level Rural Energy Assessments (English) 05/89 101/89
Fuelwood Forestry Preinvestment Study (English) 12/89 105/89
Strategic Options for Power Sector Reform in China (English) 07/93 156/93
Energy Efficiency and Pollution Control in Township and
Village Enterprises (TVE) Industry (English) 11/94 168/94
Energy for Rural Development in China: An Assessment Based
on a Joint Chinese/ESMAP Study in Six Counties (English) 06/96 183/96
Improving the Technical Efficiency of Decentralized Power
Companies 09/99 222/99

65
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

Air Pollution and Acid Rain Control: The Case of Shijiazhuang City 10/03 267/03
and the Changsha Triangle Area
Toward a Sustainable Coal Sector In China 07/04 287/04
Demand Side Management in a Restructured Industry: How
Regulation and Policy Can Deliver Demand-Side Management
Benefits to a Growing Economy and a Changing Power System 12/05 314/05
Fiji Energy Assessment (English) 06/83 4462-FIJ
Indonesia Energy Assessment (English) 11/81 3543-IND
Status Report (English) 09/84 022/84
Power Generation Efficiency Study (English) 02/86 050/86
Energy Efficiency in the Brick, Tile and
Lime Industries (English) 04/87 067/87
Diesel Generating Plant Efficiency Study (English) 12/88 095/88
Urban Household Energy Strategy Study (English) 02/90 107/90
Biomass Gasifier Preinvestment Study Vols. I & II (English) 12/90 124/90
Prospects for Biomass Power Generation with Emphasis on
Palm Oil, Sugar, Rubberwood and Plywood Residues (English) 11/94 167/94
Lao PDR Urban Electricity Demand Assessment Study (English) 03/93 154/93
Institutional Development for Off-Grid Electrification 06/99 215/99
Malaysia Sabah Power System Efficiency Study (English) 03/87 068/87
Gas Utilization Study (English) 09/91 9645-MA
Mongolia Energy Efficiency in the Electricity and District
Heating Sectors 10/01 247/01
Improved Space Heating Stoves for Ulaanbaatar 03/02 254/02
Impact of Improved Stoves on Indoor Air Quality in
Ulaanbaatar, Mongolia 11/05 313/05
Myanmar Energy Assessment (English) 06/85 5416-BA
Papua New
Guinea Energy Assessment (English) 06/82 3882-PNG
Papua New
Guinea Status Report (English) 07/83 006/83
Institutional Review in the Energy Sector (English) 10/84 023/84
Power Tariff Study (English) 10/84 024/84
Philippines Commercial Potential for Power Production from
Agricultural Residues (English) 12/93 157/93
Energy Conservation Study (English) 08/94 --
Strengthening the Non-Conventional and Rural Energy
Development Program in the Philippines:
A Policy Framework and Action Plan 08/01 243/01
Rural Electrification and Development in the Philippines:
Measuring the Social and Economic Benefits 05/02 255/02
Solomon Islands Energy Assessment (English) 06/83 4404-SOL
Energy Assessment (English) 01/92 979-SOL
South Pacific Petroleum Transport in the South Pacific (English) 05/86 --
Thailand Energy Assessment (English) 09/85 5793-TH
Rural Energy Issues and Options (English) 09/85 044/85
Accelerated Dissemination of Improved Stoves and
Charcoal Kilns (English) 09/87 079/87
Northeast Region Village Forestry and Woodfuels
Preinvestment Study (English) 02/88 083/88
Impact of Lower Oil Prices (English) 08/88 --

66
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Coal Development and Utilization Study (English) 10/89 --

Why Liberalization May Stall in a Mature Power Market: A Review 12/03 270/03
of the Technical and Political Economy Factors that Constrained the
Electricity Sector Reform in Thailand 1998-2002
Reducing Emissions from Motorcycles in Bangkok 10/03 275/03
Tonga Energy Assessment (English) 06/85 5498-TON
Vanuatu Energy Assessment (English) 06/85 5577-VA
Vietnam Rural and Household Energy-Issues and Options (English) 01/94 161/94
Power Sector Reform and Restructuring in Vietnam: Final Report
to the Steering Committee (English and Vietnamese) 09/95 174/95
Household Energy Technical Assistance: Improved Coal
Briquetting and Commercialized Dissemination of Higher
Efficiency Biomass and Coal Stoves (English) 01/96 178/96
Petroleum Fiscal Issues and Policies for Fluctuating Oil Prices
In Vietnam 02/01 236/01
An Overnight Success: Vietnam's Switch to Unleaded Gasoline 08/02 257/02
The Electricity Law for Vietnam — Status and Policy Issues —
The Socialist Republic of Vietnam 08/02 259/02
Petroleum Sector Technical Assistance for the Revision of the 12/03 269/03
Existing Legal and Regulatory Framework
Western Samoa Energy Assessment (English) 06/85 5497-WSO

SOUTH ASIA (SAS)

Bangladesh Energy Assessment (English) 10/82 3873-BD

Priority Investment Program (English) 05/83 002/83
Status Report (English) 04/84 015/84
Power System Efficiency Study (English) 02/85 031/85
Small Scale Uses of Gas Pre-feasibility Study (English) 12/88 --
Reducing Emissions from Baby-Taxis in Dhaka 01/02 253/02
India Opportunities for Commercialization of Non-conventional
Energy Systems (English) 11/88 091/88
Maharashtra Bagasse Energy Efficiency Project (English) 07/90 120/90
Mini-Hydro Development on Irrigation Dams and
Canal Drops Vols. I, II and III (English) 07/91 139/91
WindFarm Pre-Investment Study (English) 12/92 150/92
Power Sector Reform Seminar (English) 04/94 166/94
Environmental Issues in the Power Sector (English) 06/98 205/98
Environmental Issues in the Power Sector: Manual for
Environmental Decision Making (English) 06/99 213/99
Household Energy Strategies for Urban India: The Case of
Hyderabad 06/99 214/99
Greenhouse Gas Mitigation In the Power Sector: Case
Studies From India 02/01 237/01
Energy Strategies for Rural India: Evidence from Six States 08/02 258/02
Household Energy, Indoor Air Pollution, and Health 11/02 261/02
Access of the Poor to Clean Household Fuels 07/03 263/03
The Impact of Energy on Women's Lives in Rural India 01/04 276/04
Environmental Issues in the Power Sector: Long-Term Impacts
And Policy Options for Rajasthan 10/04 292/04
Environmental Issues in the Power Sector: Long-Term Impacts 10/04 293/04

67
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

And Policy Options for Karnataka

Nepal Energy Assessment (English) 08/83 4474-NEP
Status Report (English) 01/85 028/84
Energy Efficiency & Fuel Substitution in Industries (English) 06/93 158/93
Pakistan Household Energy Assessment (English) 05/88 --
Assessment of Photovoltaic Programs, Applications, and
Markets (English) 10/89 103/89
National Household Energy Survey and Strategy Formulation
Study: Project Terminal Report (English) 03/94 --
Managing the Energy Transition (English) 10/94 --
Lighting Efficiency Improvement Program
Phase 1: Commercial Buildings Five Year Plan (English) 10/94 --
Clean Fuels 10/01 246/01
Household Use of Commercial Energy 05/06 320/06
Regional Toward Cleaner Urban Air in South Asia: Tackling Transport 03/04 281/04
Pollution, Understanding Sources.
Sri Lanka Energy Assessment (English) 05/82 3792-CE
Power System Loss Reduction Study (English) 07/83 007/83
Status Report (English) 01/84 010/84
Industrial Energy Conservation Study (English) 03/86 054/86
Sustainable Transport Options for Sri Lanka: Vol. I 02/03 262/03
Greenhouse Gas Mitigation Options in the Sri Lanka
Power Sector: Vol. II 02/03 262/03
Sri Lanka Electric Power Technology Assessment
(SLEPTA): Vol. III 02/03 262/03
Energy and Poverty Reduction: Proceedings from South Asia 11/03 268/03
Practitioners Workshop How Can Modern Energy Services
Contribute to Poverty Reduction? Colombo, Sri Lanka, June 2-4, 2003

EUROPE AND CENTRAL ASIA (ECA)

Armenia Development of Heat Strategies for Urban Areas of Low-income 04/04 282/04
Transition Economies. Urban Heating Strategy for the Republic
Of Armenia. Including a Summary of a Heating Strategy for the
Kyrgyz Republic
Bulgaria Natural Gas Policies and Issues (English) 10/96 188/96
Energy Environment Review 10/02 260/02
Central Asia and
The Caucasus Cleaner Transport Fuels in Central Asia and the Caucasus 08/01 242/01
Central and
Eastern Europe Power Sector Reform in Selected Countries 07/97 196/97
Increasing the Efficiency of Heating Systems in Central and
Eastern Europe and the Former Soviet Union (English and Russian) 08/00 234/00
The Future of Natural Gas in Eastern Europe (English) 08/92 149/92
Kazakhstan Natural Gas Investment Study, Volumes 1, 2 & 3 12/97 199/97
Kazakhstan &
Kyrgyzstan Opportunities for Renewable Energy Development 11/97 16855-KAZ
Poland Energy Sector Restructuring Program Vols. I-V (English) 01/93 153/93
Natural Gas Upstream Policy (English and Polish) 08/98 206/98
Energy Sector Restructuring Program: Establishing the Energy
Regulation Authority 10/98 208/98

68
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Portugal Energy Assessment (English) 04/84 4824-PO

Romania Natural Gas Development Strategy (English) 12/96 192/96
Private Sector Participation in Market-Based Energy-Efficiency 11/03 274/03
Financing Schemes: Lessons Learned from Romania
and International Experiences.
Slovenia Workshop on Private Participation in the Power Sector (English) 02/99 211/99
Turkey Energy Assessment (English) 03/83 3877-TU
Energy and the Environment: Issues and Options Paper 04/00 229/00
Energy and Environment Review: Synthesis Report 12/03 273/03
Turkey’s Experience with Greenfield Gas Distribution since 2003 03/07 325/05

MIDDLE EAST AND NORTH AFRICA (MENA)

Turkey Turkey’s Experience with Greenfield Gas Distribution since 2003 05/07 325/07
Arab Republic
of Egypt Energy Assessment (English) 10/96 189/96
Energy Assessment (English and French) 03/84 4157-MOR
Status Report (English and French) 01/86 048/86
Morocco Energy Sector Institutional Development Study (English and French) 07/95 173/95
Natural Gas Pricing Study (French) 10/98 209/98
Gas Development Plan Phase II (French) 02/99 210/99
Syria Energy Assessment (English) 05/86 5822-SYR
Electric Power Efficiency Study (English) 09/88 089/88
Energy Efficiency Improvement in the Cement Sector (English) 04/89 099/89
Energy Efficiency Improvement in the Fertilizer Sector (English) 06/90 115/90
Tunisia Fuel Substitution (English and French) 03/90 --
Power Efficiency Study (English and French) 02/92 136/91
Energy Management Strategy in the Residential and
Tertiary Sectors (English) 04/92 146/92
Renewable Energy Strategy Study, Volume I (French) 11/96 190A/96
Renewable Energy Strategy Study, Volume II (French) 11/96 190B/96
Rural Electrification in Tunisia: National Commitment,
Efficient Implementation and Sound Finances 08/05 307/05
Yemen Energy Assessment (English) 12/84 4892-YAR
Energy Investment Priorities (English) 02/87 6376-YAR
Household Energy Strategy Study Phase I (English) 03/91 126/91
Household Energy Supply and Use in Yemen. Volume I:
Main Report and Volume II: Annexes 12/05 315/05

LATIN AMERICA AND THE CARIBBEAN REGION (LCR)

LCR Regional Regional Seminar on Electric Power System Loss Reduction

in the Caribbean (English) 07/89 --
Elimination of Lead in Gasoline in Latin America and
the Caribbean (English and Spanish) 04/97 194/97
Elimination of Lead in Gasoline in Latin America and
the Caribbean - Status Report (English and Spanish) 12/97 200/97
Harmonization of Fuels Specifications in Latin America and
the Caribbean (English and Spanish) 06/98 203/98
Energy and Poverty Reduction: Proceedings from the Global Village
Energy Partnership (GVEP) Workshop held in Bolivia 06/05 202/05

69
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

Power Sector Reform and the Rural Poor in Central America 12/04 297/04
Estudio Comparativo Sobre la Distribución de la Renta Petrolera
en Bolivia, Colombia, Ecuador y Perú 08/05 304/05
OECS Energy Sector Reform and Renewable Energy/Energy 02/06 317/06
Efficiency Options
The Landfill Gas-to-Energy Initiative for Latin America
and the Caribbean 02/06 318/06
Bolivia Energy Assessment (English) 04/83 4213-BO
National Energy Plan (English) 12/87 --
La Paz Private Power Technical Assistance (English) 11/90 111/90
Pre-feasibility Evaluation Rural Electrification and Demand
Assessment (English and Spanish) 04/91 129/91
National Energy Plan (Spanish) 08/91 131/91
Private Power Generation and Transmission (English) 01/92 137/91
Natural Gas Distribution: Economics and Regulation (English) 03/92 125/92
Natural Gas Sector Policies and Issues (English and Spanish) 12/93 164/93
Household Rural Energy Strategy (English and Spanish) 01/94 162/94
Preparation of Capitalization of the Hydrocarbon Sector 12/96 191/96
Introducing Competition into the Electricity Supply Industry in
Developing Countries: Lessons from Bolivia 08/00 233/00
Final Report on Operational Activities Rural Energy and Energy
Efficiency 08/00 235/00
Oil Industry Training for Indigenous People: The Bolivian
Experience (English and Spanish) 09/01 244/01
Capacitación de Pueblos Indígenas en la Actividad Petrolera. Fase II 07/04 290/04
Boliva-Brazil Best Practices in Mainstreaming Environmental & Social Safeguards
Into Gas Pipeline Projects 07/06 322/06
Estudio Sobre Aplicaciones en Pequeña Escala de Gas Natural 07/04 291/04
Brazil Energy Efficiency & Conservation: Strategic Partnership for
Energy Efficiency in Brazil (English) 01/95 170/95
Hydro and Thermal Power Sector Study 09/97 197/97
Rural Electrification with Renewable Energy Systems in the
Northeast: A Preinvestment Study 07/00 232/00
Reducing Energy Costs in Municipal Water Supply Operations 07/03 265/03
"Learning-while-doing" Energy M&T on the Brazilian Frontlines
Chile Energy Sector Review (English) 08/88 7129-CH
Colombia Energy Strategy Paper (English) 12/86 --
Power Sector Restructuring (English) 11/94 169/94
Energy Efficiency Report for the Commercial
and Public Sector (English) 06/96 184/96
Costa Rica Energy Assessment (English and Spanish) 01/84 4655-CR
Recommended Technical Assistance Projects (English) 11/84 027/84
Forest Residues Utilization Study (English and Spanish) 02/90 108/90
Dominican
Republic Energy Assessment (English) 05/91 8234-DO
Ecuador Energy Assessment (Spanish) 12/85 5865-EC
Energy Strategy Phase I (Spanish) 07/88 --
Energy Strategy (English) 04/91 --
Private Mini-hydropower Development Study (English) 11/92 --
Energy Pricing Subsidies and Interfuel Substitution (English) 08/94 11798-EC

70
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Energy Pricing, Poverty and Social Mitigation (English) 08/94 12831-EC

Guatemala Issues and Options in the Energy Sector (English) 09/93 12160-GU
Health Impacts of Traditional Fuel Use 08/04 284/04
Haiti Energy Assessment (English and French) 06/82 3672-HA
Status Report (English and French) 08/85 041/85
Household Energy Strategy (English and French) 12/91 143/91
Honduras Energy Assessment (English) 08/87 6476-HO
Petroleum Supply Management (English) 03/91 128/91
Jamaica Energy Assessment (English) 04/85 5466-JM
Petroleum Procurement, Refining, and
Distribution Study (English) 11/86 061/86
Energy Efficiency Building Code Phase I (English) 03/88 --
Energy Efficiency Standards and Labels Phase I (English) 03/88 --
Management Information System Phase I (English) 03/88 --
Charcoal Production Project (English) 09/88 090/88
FIDCO Sawmill Residues Utilization Study (English) 09/88 088/88
Energy Sector Strategy and Investment Planning Study (English) 07/92 135/92
Mexico Improved Charcoal Production Within Forest Management for
the State of Veracruz (English and Spanish) 08/91 138/91
Energy Efficiency Management Technical Assistance to the
Comisión Nacional para el Ahorro de Energía (CONAE) (English) 04/96 180/96
Energy Environment Review 05/01 241/01
Proceedings of the International Grid-Connected Renewable
Energy Policy Forum (with CD) 08/06 324/06
Nicaragua Modernizing the Fuelwood Sector in Managua and León 12/01 252/01
Policy & Strategy for the Promotion of RE Policies in
Nicaragua. (Contains CD with 3 complementary reports) 01/06 316/06
Panama Power System Efficiency Study (English) 06/83 004/83
Paraguay Energy Assessment (English) 10/84 5145-PA
Recommended Technical Assistance Projects (English) 09/85
Status Report (English and Spanish) 09/85 043/85
Reforma del Sector Hidrocarburos (Spanish Only) 03/06 319/06
Peru Energy Assessment (English) 01/84 4677-PE
Status Report (English) 08/85 040/85
Proposal for a Stove Dissemination Program in
the Sierra (English and Spanish) 02/87 064/87
Energy Strategy (English and Spanish) 12/90 --
Study of Energy Taxation and Liberalization
Peru of the Hydrocarbons Sector (English and Spanish) 120/93 159/93
Reform and Privatization in the Hydrocarbon
Sector (English and Spanish) 07/99 216/99
Rural Electrification 02/01 238/01
Saint Lucia Energy Assessment (English) 09/84 5111-SLU
St. Vincent and
the Grenadines Energy Assessment (English) 09/84 5103-STV
Sub Andean Environmental and Social Regulation of Oil and Gas
Operations in Sensitive Areas of the Sub-Andean Basin

71
TURKEY’S EXPERIENCE WITH GREENFIELD GAS DISTRIBUTION SINCE 2003

Region/Country Activity/Report Title Date Number

(English and Spanish) 07/99 217/99

Trinidad and
Tobago Energy Assessment (English) 12/85 5930-TR

GLOBAL

Energy End Use Efficiency: Research and Strategy (English) 11/89 --

Women and Energy -A Resource Guide
The International Network: Policies and Experience (English) 04/90 --
Guidelines for Utility Customer Management and
Metering (English and Spanish) 07/91 --
Assessment of Personal Computer Models for Energy
Planning in Developing Countries (English) 10/91 --
Long-Term Gas Contracts Principles and Applications (English) 02/93 152/93
Comparative Behavior of Firms Under Public and Private
Ownership (English) 05/93 155/93
Development of Regional Electric Power Networks (English) 10/94 --
Round-table on Energy Efficiency (English) 02/95 171/95
Assessing Pollution Abatement Policies with a Case Study
of Ankara (English) 11/95 177/95
A Synopsis of the Third Annual Round-table on Independent Power
Projects: Rhetoric and Reality (English) 08/96 187/96
Rural Energy and Development Round-table (English) 05/98 202/98
A Synopsis of the Second Round-table on Energy Efficiency:
Institutional and Financial Delivery Mechanisms (English) 09/98 207/98
The Effect of a Shadow Price on Carbon Emission in the
Energy Portfolio of the World Bank: A Carbon
Backcasting Exercise (English) 02/99 212/99
Increasing the Efficiency of Gas Distribution Phase 1:
Case Studies and Thematic Data Sheets 07/99 218/99
Global Energy Sector Reform in Developing Countries:
A Scorecard 07/99 219/99
Global Lighting Services for the Poor Phase II: Text
Marketing of Small "Solar" Batteries for Rural
Electrification Purposes 08/99 220/99
A Review of the Renewable Energy Activities of the UNDP/
World Bank Energy Sector Management Assistance
Program 1993 to 1998 11/99 223/99
Energy, Transportation and Environment: Policy Options for
Environmental Improvement 12/99 224/99
Privatization, Competition and Regulation in the British Electricity
Industry, With Implications for Developing Countries 02/00 226/00
Reducing the Cost of Grid Extension for Rural Electrification 02/00 227/00
Undeveloped Oil and Gas Fields in the Industrializing World 02/01 239/01
Best Practice Manual: Promoting Decentralized Electrification
Investment 10/01 248/01
Peri-Urban Electricity Consumers — A Forgotten but Important
Group: What Can We Do to Electrify Them? 10/01 249/01
Village Power 2000: Empowering People and Transforming

72
LIST OF FORMAL REPORTS

Region/Country Activity/Report Title Date Number

Markets 10/01 251/01

Private Financing for Community Infrastructure 05/02 256/02
Stakeholder Involvement in Options Assessment: 07/03 264/03
Promoting Dialogue in Meeting Water and Energy Needs:
A Sourcebook
A Review of ESMAP's Energy Efficiency Portfolio 11/03 271/03
A Review of ESMAP's Rural Energy and Renewable Energy 04/04 280/04
Portfolio
ESMAP Renewable Energy and Energy Efficiency Reports 05/04 283/04
1998-2004 (CD Only)
Regulation of Associated Gas Flaring and Venting: A Global 08/04 285/04
Overview and Lessons Learned from International Experience
ESMAP Gender in Energy Reports and Other related Information 11/04 288/04
(CD Only)
ESMAP Indoor Air Pollution Reports and Other related Information 11/04 289/04
(CD Only)
Energy and Poverty Reduction: Proceedings from the Global Village
Energy Partnership (GVEP) Workshop on the Pre-Investment
Funding. Berlin, Germany, April 23-24, 2003. 11/04 294/04
Global Village Energy Partnership (GVEP) Annual Report 2003 12/04 295/04
Energy and Poverty Reduction: Proceedings from the Global Village
Energy Partnership (GVEP) Workshop on Consumer Lending and
Microfinance to Expand Access to Energy Services,
Manila, Philippines, May 19-21, 2004 12/04 296/04
The Impact of Higher Oil Prices on Low Income Countries 03/05 299/05
And on the Poor
Advancing Bioenergy for Sustainable Development: Guideline 04/05 300/05
For Policymakers and Investors
ESMAP Rural Energy Reports 1999-2005 03/05 301/05
Renewable Energy and Energy Efficiency Financing and Policy
Network: Options Study and Proceedings of the International
Forum 07/05 303/05
Implementing Power Rationing in a Sensible Way: Lessons 08/05 305/05
Learned and International Best Practices
The Urban Household Energy Transition. Joint Report with 08/05 309/05
RFF Press/ESMAP. ISBN 1-933115-07-6
Pioneering New Approaches in Support of Sustainable Development
In the Extractive Sector: Community Development Toolkit, also
Includes a CD containing Supporting Reports 10/05 310/05
Analysis of Power Projects with Private Participation Under Stress 10/05 311/05
Potential for Biofuels for Transport in Developing Countries 10/05 312/05
Experiences with Oil Funds: Institutional and Financial Aspects 06/06 321/06
Coping with Higher Oil Prices 06/06 323/06

73
Energy Sector Management Assistance Program (ESMAP)
1818 H Street, NW
Washington, DC 20433 USA
Tel: 1.202.458.2321
Fax: 1.202.522.3018
Internet: www.esmap.org
Email: esmap@worldbank.org