An analysis on Turkey’s natural gas hub development through a game-theoretic model application

ABSTRACT Turkey’s natural gas hub development has been under the spotlight recently as its long-term gas supply contracts expire between 2021 and 2026. This study is an effort to investigate end-user prices and shippers’ behaviors in the natural gas hub development process through four noncooperative game models representing different maturity levels of the Turkish gas market. These models, comprising mixed complementarity problems, are solved by GAMS software using the Turkish gas market’s data. Our findings suggest that although increasing hub maturity yields decreasing end-user prices owing to the availability of more supply options and enhanced competition, a shift from long-term contracts to spot trading may result in an increase in the end-user prices due to strategic withholding by importers. Our models are pioneering as they are the first to depict the Turkish gas market with regard to shippers’ behaviors.