Page 7 - MEOG Week 08 2021

MEOG PROJECTS & COMPANIES MEOG

Turkey’s gas contracts take centre stage

TURKEY OIL-INDEXED prices in Turkey’s natural gas the coronavirus crisis impacts. It returned to
import contracts are on track to increase con- pipeline supplies after the Q2 oil prices entered
siderably in Q2 compared to Q1, encouraging into the pipeline contract prices after end-June.
the country’s state-run pipeline operator Botas Gas flowing from Shah Deniz II is Turkey’s
to front-load its take in 2021, Argus reported on most expensive source of pipeline supply because
February 12. of high transit costs, unnamed market partici-
Botas holds a supply contract for an annual pants have told Argus. Russia has already pro-
6.6bn cubic metres (bcm) from Azerbaijan’s vided a 40% gas price discount for Bulgaria via
Shah Deniz first development phase (Shah TurkStream while Serbia will pay around $155
Deniz I), which lapses in April, and another deal for gas at the Bulgarian border, down from $240.
for 6bcm from the second development stage Due to a decline in average oil prices throughout
(Shah Deniz II) via the TANAP pipeline. 2020, Turkey’s gas import price is calculated to
The three trillion cubic-metre Shah Deniz I decline to $170 in Q1 2021 from $210 in 2020
field began production in 2006 and has delivered and $285 in 2019. Gazprom’s average gas export
more than 10bcm a year of gas to Azerbaijan, price stood at $211 in 2019.
Georgia and Turkey.
Shah Deniz II started output in 2018, adding Pipelines
16bcm of gas production capacity at its peak to Turkey’s gas imports via TANAP have risen to
bring total capacity to 26bcm. BP has a 29% stake about 1bcm to date in 2021. They were already
in Shah Deniz. The other partners are Azerbai- higher than the 941mn recorded in Q1 2020,
jan’s national oil company SOCAR, Turkey’s Turkish energy minister Fatih Donmez’s sug-
TPAO, Malaysia’s Petronas and Russia’s Lukoil. gested in comments on February 11. It was in
In January, we reported that the renewal of January 2020 that TurkStream, which reaches
the first Azerbaijani contract was seen as unlikely Turkey via a Black Sea Route from Russia, came
as Turkey already has the TANAP contract. Tur- online. The project has a total annual capacity of
key has liquefied natural gas (LNG) and Turk- 31.5 bcm.
Stream alternatives too. The first line, with a capacity of 15.75 bcm, sup-
Additionally, a 4bcm contract with Russia’s plies gas to Turkey, and the second line, with the
Gazprom and a 1.3bcm LNG contract with same capacity, goes further afield to Bulgaria
Nigeria will expire at the end of 2021. and beyond in Europe, including Greece, North
Other gas contracts totalling 4bcm that Botas Macedonia, Romania, Serbia, Bosnia and Her-
transferred to the private sector in 2007 are also zegovina. Russia now supplies gas to Turkey via
set to expire over the course of 2021. A 2.1bcm both the TurkStream and the Blue Stream, which
LNG contract with Qatar expired in September. also goes undersea to traverse the Black Sea.
The overall volume of oil-indexed long-term They have a total capacity of 32 bcm per year.
natural gas contracts that will expire in 2021 Russia controls 34% of Europe’s gas mar-
totals 15.9bcm. Turkey has 58bcm of such con- ket and plans to raise its gas exports to Europe,
tracts in total. including Turkey, to 183bcm in 2021 from
179bcm in 2020.
Prices In January 2021, Azerbaijan’s Trans Adriatic
The cost of Azerbaijani gas from Shah Deniz I Pipeline (TAP) came online. TANAP and TAP
is expected to be around $194 per 1,000 cubic are parts of the Southern Gas Corridor (SGC),
metres in Q2, above the $180 seen in Q1, accord- which runs from Shah Deniz II to southern Italy
ing to Argus’ assessment of Turkey’s long-term via Georgia, Turkey, Greece and Albania.
contract prices. Oil prices are reflected in the Azerbaijan presently plans to build up to 10
prices in Turkey’s oil-indexed natural gas con- bcm of supplied gas a year to European mar-
tracts with six to nine-month time lags. kets, including 8 bcm to Italy and 1 bcm each to
In Q2 2020, Turkey turned to LNG imports to Greece and Bulgaria.
benefit from the oil price collapse that came with The TAP stakeholders are BP (20%), SOCAR

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