Ankara seeking better terms to renew gas supply contracts

Ankara expects gas suppliers to offer more competitive pricing and flexibility 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 longterm gas contracts expire next year, including imports via pipeline from Russia’s Gazprom and Azerbaijan’s SOCAR and a liquefied natural gas (LNG) deal with Nigeria.

Competition from cheap U.S. LNG and the potential for Turkey to start its own gas production in the Black Sea have changed market dynamics, the ministry official told reporters.

“Old-fashioned” gas contracts, which are often indexed to oil prices and commit buyers to penalties if they do not buy their full quota, no longer match market realities, he said, and prices should be set against those at major gas hubs.

“We started to discuss whether we are going to renew (or) whether we are going to find an alternative supply,” said the official, who spoke at a briefing on condition of anonymity. The decision would depend on whether suppliers “approach with same old habits – no flexibility, not very competitive price offers”.

In that case “I don’t think we will see the existing contracts continue,” he said.

Ankara relies on imports for nearly all its oil and gas needs. In the first half of this year imports from Russia and Iran fell back, while supplies from Azerbaijan increased and purchases of U.S. gas rose sharply.

“The U.S. all of a sudden became the second largest (LNG) supplier to the Turkish market in the first part of 2020,” the official said. “The main reason was they were very competitive.” REUTERS

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