Turkey Signs 10-Year LNG Supply Deal With TotalEnergies

Turkey’s ambitions to become a regional gas hub just received a fresh boost after the country signed a 10-year agreement with French energy giant TotalEnergies (NYSE:TTE), Turkey’s Daily Sabah reported on Wednesday.  

Under the terms of the deal, the oil and gas supermajor will supply Turkish state energy firm BOTAS with 1.1 million metric tons annually (mtpa) of liquefied natural gas (LNG) for 10 years starting in 2027. This marks the fourth long-term import deal BOTAS has signed with non-state-owned firms this year, having signed a similar deal with Shell Plc (NYSE:SHEL), Exxon Mobil Corp. (NYSE:XOM) and Oman. 

According to Turkish Energy Minister Alparslan Bayraktar, the supply deals will give Turkey 25 billion cubic meters (bcm) of surplus gas above the country’s annual consumption of 50 bcm.

“We can supply to European markets, particularly to the ones in south-east Europe that are in need of gas,” said Bayraktar, who was in Houston to sign the deal, as reported by Reuters. 

The surplus gas gives Turkey extra flexibility to negotiate better terms or even cut gas imports from Russia and Iran, with contracts with Gazprom Export and the National Iranian Gas Company set to expire in 2025 and 2026.

“Turkey has two goals in its gas import drive: one, to lower the import volumes from Russia and Iran. Second, Turkey hopes to position itself as a gas supply hub … since European buyers have not signed sufficient long-term gas contracts,” Professor Brenda Shaffer, an energy expert at the US Naval Postgraduate School, told Reuters.

Back in July, Turkey said it was prepared to significantly increase natural gas exports to the European Union. Ankara is keen to play the role of savior and boost its leverage with respect to Brussels, but it wants some demand guarantees before it starts spending on the necessary infrastructure.

In an interview with Bloomberg, Turkish Energy Minister Alparslan Bayraktar pushed hard for a Bulgaria route, noting a potential for increasing volumes to the EU up to 10 billion cubic meters per year, while sending a clear message to Brussels: It won’t happen without some demand guarantees. According to Bayraktar, the capacity to export via Bulgaria right now is only around 3.5 billion cubic meters a year. But “from a technical point of view”, Turkey is capable of boosting this interconnection.

By Alex Kimani for Oilprice.com

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