World Bank approves $600M loan for Salt Lake storage

By Nuran Erkul Kaya

ISTANBUL - The World Bank approved a $600 million loan for Turkey's Gas Storage Expansion Project, which aims to support capacity increases at the Salt Lake Natural Gas Storage Facility, the Bank announced Wednesday.

The project's aim is to increase the reliability and security of gas supplies in Turkey by expanding the underground gas storage facility near the Salt Lake in the Central Anatolia region of Turkey, the statement said.

In November 2005, the Bank approved a $325 million loan for a first gas storage project at Salt Lake, and in July 2014 it approved additional financing of $400 million to provide storage for about one billion cubic meters of gas, the statement showed.

"The Gas Storage Expansion project will support government efforts to quintuple the size of the storage facility at the same location. Turkey’s national gas company, BOTAS will implement the Gas Storage Expansion Project, which will consist of three components," the statement read.

The first component involves building an underground gas storage facility within the salt formation close to the Salt Lake to further increase capacity by approx. 4 billion cubic meters, the statement said.

The second component involves the construction, supervision, and monitoring of the environmental and social impact assessment (ESIA) and the resettlement action plans (RAP), the Bank said.

Turkey's President Recep Tayyip Erdogan announced last February that the storage capacity would increase from 1.2 billion cubic meters to 5.4 billion cubic meters.

The first phase comprises the storage of 1.2 billion cubic meters of natural gas in 12 caverns. Currently, storage works have started at six caverns this year and the remaining caverns will be stored with gas up to 2020.

The number of caverns will rise to 60 when the capacity of the project expands to 5.4 billion cubic meters. Each cavern will hold around 100 million cubic meters.

The expansion is expected for completion by 2023.

Turkey aims to have a storage capacity that will be able to meet at least 20 percent of its gas demand. The Salt Lake facility will have enough capacity to meet almost 10 percent of Turkey's current natural gas consumption of around 50 billion cubic meters per year.

The statement said, "the project is expected to help Turkey lower its greenhouse gas emissions by reducing dependence on coal, especially in the winter months. Increased flexibility in the natural gas supply will also support greater integration of renewables as they become a larger part of Turkey’s energy mix".

"Financing the proposed Gas Storage Expansion Project is an integral component of the World Bank’s program of policy, technical and financial assistance in Turkey to support energy reform in general and gas sector reform specifically.

"With this project, the World Bank is also helping Turkey raise financing from other sources, including commercial finance through due diligence on BOTAS' technical, procurement, and environment and social safeguards work on the project. The Asian Infrastructure Investment Bank is a co-financier of the project," the World Bank said. The lending for the project is based on an International Bank for Reconstruction and Development (IBRD) flexible loan with 22.5-years maturity, including a seven-year grace period, according to the statement.

- Key role in improving energy security

The Salt Lake Underground Gas Storage Facility is the first of its kind in Turkey and one of few such projects globally, Johannes Zutt, the World Bank country director for Turkey was quoted as saying.

"The facility will play a key role in improving Turkey's energy security and in enabling flexibility in meeting the growing demand for natural gas among households and businesses," Zutt continued.

"In particular, the facility will help ensure that enough natural gas is available to consumers at all times, especially when global supplies are tight or when demand escalates suddenly due to winter cold," he concluded.