Turkey facing tough winter amid high gas demand, expiring contracts

Winter is likely to pose a challenge for Turkey this year, as the country’s demand for natural gas soars while Ankara looks to renew expiring long-term contracts, Reuters said on Tuesday.

The country has managed to renew just one of four long term contracts expiring this year totalling 16 billion cubic metres (bcm) annually, it said, leaving it with three contracts to scramble for.

Last month, Turkey and Azerbaijan concluded a new deal to replace the 20-year-old contract that had governed their gas trade, which expired in April. 

The contract, which sees Turkey import 6.6 billion cubic meters a year of gas from Azerbaijan's Shah Deniz Caspian gas field, delivered through the South Caucasus or Baku-Tbilisi-Erzurum pipelines via Georgia, is now only based on a “temporary agreement,” Eurasianet website reported, citing Azeri officials.

Turkey still has three contracts to roll over, Reuters said,  two for state and private sector imports via pipeline from Russia’s Gazprom of 4 bcm each, expiring at the end of the year, and 1.3 bcm of Nigerian LNG expiring later this month.

Meanwhile, the country's daily peak consumption expected to hit 300 million cubic metres this winter, industry consultant Arif Aktürk told Reuters, with Turkey having to renew all expiring contracts with at least the same volumes, and top up its supply with expensive LNG.

The country has around 48 bcm/year of import contracts in place, which would require that it import a little shy of 13 bcm LNG from spot markets now seeing sky high prices, according to official data. Spot LNG imports so far this year stand at 2 bcm, Reuters said.

“Turkey could use spot imports of LNG or Azeri pipeline gas to fulfil the shortfall... The only downside would be extra costs incurred from buying on the spot market, but Turkey would most likely not face an availability problem,” according to Sohbet Karbuz, director for hydrocarbons at think tank OME in Paris.

Last year, Turkey consumed 48 bcm of natural gas, Energy and Natural Resources Minister Fatih Dönmez said earlier this month. “This year, probably natural gas consumption will be 10 bcm more than that.”

Dönmez, for his part, has assured that the country would not face any energy shortage in winter, saying that  Turkey’s national pipeline company Botaş and private importers were in close contact with their counterparts in natural gas supplier countries Russia, Iran and Azerbaijan.-

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