High national gas demand notwithstanding, Turkey’s LNG imports have been trailing their year-on-year counterparts. Imports are held back by relatively little remaining fixed supply, few available spot cargoes and high spot prices. A silver lining has transpired by a rekindling in Turkish-Egyptian diplomatic relations in early 2021, which was followed by record-high Egyptian exports to Turkey since October.
Nevertheless, with Turkish gas demand expected to have increased by 20pct year-on-year at the end of 2021, national gas champion BOTAŞ remains under pressure.
Turkey has been among leading European LNG importers towards the end of this year as the country is scrambling to secure gas supply in a very tight market.
Nonetheless, Turkish LNG exports have suffered from sustained high LNG spot prices, which had risen to above US$56/mmBtu in early October and remained high at around US$35/mmBtu on Friday last week, according to the S&P JKM benchmark. This time last year, spot prices stood at around US$9/mmBtu.
Concurrent to high prices, LNG imports have struggled to match their year-on-year equivalents despite high national gas demand.
Growing gas demand
BOTAŞ – Turkey’s national energy champion mainly responsible for gas procurement – has little choice other than trying to secure as many spot LNG cargoes as it can, however.
Notably, the country is expected to have recorded a significant increase in natural gas demand this year.
Deputy Energy and Natural Resources Minister Alparslan Bayraktar highlighted at Gastech 2021 in September that Turkish gas consumption will reach around 60 billion cubic metres this year, up 20pct year-on-year.
Strict negotiation stance
Last year, Turkey began to tackle a protracted energy market reform backlog whilst also announcing a strict negotiating stance, eschewing ‘old-style’ supply contracts.
At the time, existing headroom in LNG import capacity as well as lower energy demand and prices made Turkish demands for more favourable supply terms from both pipeline gas and LNG suppliers appear viable. Accordingly, the LNG Journal observed this position gaining traction in line with an increase in flexible US and Qatari supply.
Whilst supply from the United States has continued to grow robustly year-on-year, shipments from Qatar almost vanished, plummeting from 2.31mmt in 2020 to just 0.13mmt in 2021 at the time of writing.
Limited long-term supply
Concurrently, only one of Turkey’s long-term LNG supply contracts – with Algeria’s state-controlled Sonatrach – remains active as others with Nigeria have expired in October this year.
Although the Algerian contract is only due to expire in 2024, it is nowhere near enough to cover Turkey’s gas requirements.
At the time of writing, Algeria had supplied 3.83mmt to Turkey, broadly steady year-on-year. Nigeria’s exports to Turkey, on the other hand, had decreased from 1.24mmt in 2020 to 0.93mmt for 2021 at the time of writing.
There had been no Nigerian exports to Turkey since the end of October, our data showed.
A silver lining can be observed in several regular shipments from Egypt's two LNG export terminals -the 7.2mtpa, Shell-operated Idku plant and the 5mtpa, Eni-operated Damietta SEGAS facility.
Egyptian exports to Turkey resumed in October and quickly rose to a record high of 0.26mmt in November, our data showed.
The new source of LNG supply arrived in the wake of a rekindling of formal Turkish-Egyptian diplomatic relations in early 2021.
The climate between the two countries had cooled since 2012 when a military coup toppled Egypt's first Islamist president Mohamed Morsi.