ISTANBUL (Reuters) – Turkey expects gas suppliers to be flexible and offer more competitive pricing if they want to renew long-term contracts totaling 16 billion cubic meters a year, a senior energy ministry official said.
More than a quarter of Turkey's long-term contracts expire in 2021, including contracts with Russian Gazprom and Azerbaijani SOCAR, as well as a deal for the supply of liquefied natural gas (LNG) from Nigeria.
Competition from cheap US LNG and the ability for Turkey to start its own gas production in the Black Sea have changed the dynamics of the market, a Turkish ministry official told reporters.
“Old-fashioned” gas contracts, which are often tied to oil prices and penalize buyers if they do not buy back the full volume on a quota, are no longer in line with market realities, he said.
“We started discussing whether we are going to renew (existing contracts or) find an alternative,” said the official, who spoke on condition of anonymity. The decision will depend on whether suppliers maintain “the same old habits – no flexibility, with not very competitive pricing.”
“(In this case) we are unlikely to see a continuation of the existing contracts,” he said.
Almost all of Turkey's oil and gas needs are met by imports. In the first half of this year, imports from Russia and Iran declined, while supplies from Azerbaijan increased and purchases of American gas increased sharply.
“The US suddenly became the second largest supplier (LNG) to the Turkish market in the first half of 2020,” the official said. “The main reason was that they were very competitive.”
While gas consumption in Turkey is likely to increase despite the push for renewable and alternative energy sources such as nuclear power plants, the discovery of a major gas field in the Black Sea last month is opening the door for domestic production.
(Dominic Evans. Translated by Olga Vishnevskaya. Editor Anna Kozlova)