Page 6 - GLNG Week 49

GLNG COMMENTARY GLNG
Turkey, US to negotiate
increased LNG trade in 2020
The US and Turkey are set to discuss ramping up LNG trade early next year
POLICY
WHAT:
The US is expected to hold talks with Turkey on stepping up LNG trade between the two countries.
WHY:
The US is seeking to expand markets for its LNG as its trade war with China continues.
WHAT NEXT:
Other countries in the region, including Bulgaria, are also exploring increased imports of US LNG.
Turkey has become the second-biggest LNG importer from the US
in Europe and Central Asia, after Spain.
TURKEY and the US are planning to step up LNG trade, and intend to hold meetings to discuss the subject at the start of next year. This comes as the two countries are targeting $100bn in bilateral trade volume over the next 10 years – a goal set by Turkish President Recep Tayyip Erdoğan and his US counterpart, Donald Trump. Energy trade – and LNG in particular – is regarded as an important part of this target.
US-based think-tank the Atlantic Council’s director in Turkey, Defne Sadiklar Arslan, told Anadolu Agency (AA) last week that the Trump administration’s policy of ramping up exports including LNG would allow Turkey to benefit from price advantages. According to her, LNG imports could offer Turkey leverage for new gas agreements, as its existing long-term contracts, covering 15bn cubic metres, are due to expire in 2021.
Turkey is already taking steps to increase LNG purchases while reducing the overall share of pipeline gas within its energy imports. The country’s LNG imports rose to over 22% – or 11.3 bcm – in 2018, while its pipeline gas imports fell below 78%. Pipeline gas imports accounted for around 88% in 2017. In order to accommo- date rising LNG imports, Turkey is expanding infrastructure to handle the fuel, and has com- missioned four LNG terminals. This includes two floating storage and regasification units (FSRUs), one of which – in Hatay Province’s Dörtyol district – is the world’s largest LNG storage facility, with a capacity to hold 263,000 cubic metres.
In July, AA reported that Turkey’s total name- plate capacity for LNG had reached 42.7 bcm per year of gas.
On the up
Turkey is already a significant buyer of US LNG. The North American country only began LNG exports in 2016 and since then, Turkey has become the second-biggest LNG importer from the US in Europe and Central Asia, after Spain, based on recent data from the US Department of Energy (DoE). Turkey also imports LNG from Algeria, Nigeria and Qatar.
Data from Turkey’s Energy Market Regu- latory Authority (EMRA) show that the coun- try imported 884mn cubic metres of US LNG between January and September 2019. This marks a 363% increase on the previous year, when Turkey’s LNG imports from the US amounted to 191 mcm. The rise also comes
despite the fact that according to EMRA, Tur- key did not receive any LNG between July and September.
The US’ increasing focus on Europe and nearby regions comes as the North Ameri- can country’s trade war with China continues, though talks to resolve the dispute are ongoing. China was initially a major buyer of US LNG but its imports of the fuel have dropped off. Indeed, China hiked its tariff on US LNG from 10% to 25% earlier this year, further discouraging pur- chases of the super-cooled fuel from US sources.
There are hopes that a trade deal will soon be announced, but in the meantime the US is step- ping up its attempts to target other markets.
What next?
There are options for stepping up Turkish imports of US LNG. The Atlantic Council’s Arslan sug- gested that Turkey could take advantage of com- petitive pricing by introducing new LNG trade regulations. Specifically, these could include allowing private Turkish firms to import US LNG.
Meanwhile, an Atlantic Council senior fellow, Matthew Bryza – who is a former US diplomat – proposed that Turkish players partner with US LNG producers in order to boost trade.
“If a private company in Turkey is able to partner with a US LNG producer for invest- ments inside Turkey, it might make sense for the US party to export LNG to Turkey at a lower price,” he was quoted by AA as saying.
The Turkish government does not currently allow for such partnerships to be created, but Bryza suggested that a bilateral trade agreement with the US could involve the relaxation of the relevant restrictions.
Further details of whether Turkey could indeed be willing to amend regulations in order to boost LNG trade can be expected to emerge in early 2020. What is more certain, though, is that the US will continue to target not just Turkey but the surrounding region. LNG trade has also been under discussion recently between Trump and Bulgarian Prime Minister Boyko Borissov.
Bulgaria is one among a number of coun- tries in the region that are heavily dependent on Russian gas, and is keen to diversify its energy sources. In late November, Washington said it would dispatch a technical team to Bulgaria to explore the potential for increased LNG trade. It would not be surprising if Washington also stepped up efforts to grow LNG in nearby coun- tries, including Turkey.™
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w w w . N E W S B A S E . c o m Week 49 12•December•2019