Privatization: Who will run Istanbul’s gas grid?

The coming tender to privatize the distribution of Istanbul’s gas to its 5.1 million customers should not be seen as a simple commercial transaction of “whoever pays the most in the bidding round will win the contract.”

It is rather strategic for many reasons affecting Turkey’s energy security, investment climate, environmental quality and trading ties.

Most of all, it is strategic due to the magnitude of Istanbul, one of the world’s largest cities. Any breakdown in the gas supply, infrastructure, distribution or operation would cause potentially immense consequences for the entire country.

Indeed, the Istanbul Gas Distribution Company (İGDAŞ) is currently the largest natural gas distribution company in Turkey. It sold 5 billion cubic meters of natural gas, had revenue of 4.6 billion Turkish Liras (about 1.65 billion euros) and posted a net income of 279 million liras in 2013.

Ä°GDAŞ is undoubtedly a prestigious and strategic asset both nationally and globally. Thus, it is expected to generate high interest from major local and international investors, despite the fact it comes at a time when investment levels are declining globally and geopolitical tension in gas producing countries and regions is on the rise. 

According to media reports, expressions of interest have already been received from Gazprom and Marubani Corp, as well as Turkish companies including EgeGaz, Enerya and Aygaz. There may also be other bidders stepping in once the tender specifications are published.

An uninterrupted and reasonably priced gas supply is a prerequisite for the success of İGDAŞ’s future owner because it currently consumes more than 12 percent of Turkey’s total gas demand. The significance of consumption...