For Turkey's post 2021 energy supply contracts, the import of further volumes of LNG could well be on the cards, according to Danila Bochkarev, a senior fellow at the EastWest Institute, an international affairs think tank on Monday.
Bochkarev told Anadolu Agency that LNG is here to stay but Turkey's LNG volumes will mainly be determined by their costs comparative to pipeline supply pricing.
"LNG should be cheaper than pipeline gas in order to gain an additional share of the Turkish market," he said.
According to Bochkarev, "most pipeline imports are priced on oil indexation with a time lag. Oil was peaking last year thus making pipeline deliveries to Turkey more expensive."
He said that new LNG is set to arrive on the markets, both from the U.S., and from Russia via Novatek. He explained that with these increased volumes on the market, it would be advantageous for Turkish consumers to buy LNG with no destination clauses allowing buyers to either use it domestically or sell to clients abroad.
"According to the ICIS data [world’s largest petrochemical market information provider], LNG prices in Turkey might be slightly lower than Russian pipeline gas until October thus increasing interest in LNG but as of the late fall 2019, Russian gas will become cheaper than LNG. In this situation buyers obviously are interested in taking minimal take-or-pay volumes from the pipeline and for the rest - buy LNG," he said.
As a result of more LNG market injection, "LNG imports might be used in negotiations in the new post-2021 supply contracts: consumers in Turkey will try to get price, take-or-pay or destination clause concessions," Bochkarev explained.
Some of Turkey's long-term natural gas contracts, corresponding to 16 billion cubic meters, will expire in 2021. Therefore, the country is considering its supply options in preparation for their renewal. The contracted capacity is around 30 percent of Turkey's natural gas consumption, equivalent to around 50 billion cubic meters annually.
- Asian buyers ready to pay more
Professor Jonathan Stern, distinguished research fellow and founder of Natural Gas Research Program at Oxford Institute for Energy Studies, also said that further LNG imports would be an advantage for Turkey in allowing diversification away from Russian gas.
Nonetheless, Stern warned that it would not be an advantage in the case of a tight LNG market in which Asian buyers are prepared to pay more.
He said that Turkey may import more LNG both this year and in 2020 because the market will be in surplus.
"The price will depend on the global LNG market - at the moment spot prices are low; six months ago they were very high. It’s not really possible to make a general statement," he claimed.
- 2018 import calculations
Turkey's natural gas consumption amounted to around 48.9 billion cubic meters in 2018, according to the Anadolu Agency's calculations from figures provided by Turkey's Energy Market Regulatory Authority (EMRA).
Turkey imported 50.34 billion cubic meters of natural gas in 2018, a decrease of 8.88 percent from the imports in 2017 of 55.25 billion cubic meters of gas.
The calculations showed that Turkey imported around 11.32 billion cubic meters of gas as LNG and the rest via pipelines in 2018.
This means LNG's share in Turkey's gas imports was around 22.5 percent last year, compared to 19 percent in 2017.
December 2018 was the month which saw the most LNG imported at 2.1 billion cubic meters corresponding to 34.69 percent of LNG's share.
By Murat Temizer