London — The past two years have seen Turkish gas imports and demand both fall despite continuing growth in GDP and overall energy demand -- the drivers of rising gas consumption since the turn of the century.
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This has been matched by a sharp fall in imports of Russian gas and a surge in imports of spot LNG, with Ankara announcing earlier in 2019 plans for a third floating storage and regasification unit (FSRU).
Broadly, all the changes are the result of Turkey's recent economic woes.
With dollar denominated gas imports being one of biggest contributors to Turkey's current account deficit, Ankara made efforts to reduce gas demand by imposing policies aimed at reducing the use of gas for power generation -- the main use of gas.
It has also looked to reduce the cost of gas burned by maximizing the use of cheap spot LNG in place of contracted volumes.
Reducing gas for power consumption has been possible thanks to Turkey's current excess generating capacity, which has forced down power prices on Istanbul's EPIAS power market.
State gas importer Botas, which accounts for the bulk of imports, has been able to hike gas-for-power prices without causing power shortages.
Turkey's gas burn fell 22.4% between 2014 and 2018, with 2019 expected to see a further sharp fall.
At the same time Botas has taken advantage of low LNG prices by increasing spot LNG imports by 142% between 2016 and 2018, and by another 11.9% over the first nine months of 2019, enabling it to minimizeretail gas price increases.
Both strategies have helped reduce Turkey's current account deficit, but have also caused problems.
Unable to generate at a profit, several of Turkey's main CCGT operators have been left struggling to repay project loans, with Ankara forced to propose a rescue plan aimed at reducing pressure on Turkishbanks.
Similarly, boosting imports of cheap spot LNG has undercut the six private companies that hold contracts to import a total of 10 Bcm/year of Russian gas via Turkey's western import line.
Their imports fell by 19.3% between 2017-2018, and by 83.9% over January-September this year, compared to a fall of only 11.3% in imports by Botas.
Failure to meet their take-or-pay commitments with Gazprom has left the six with combined debts estimated at as much as $2.5 billion.
Neither Ankara nor Moscow has commented openly on the issue, raising the prospect that it has been put to one side pending the completion of Gazprom's 31.5 Bcm/year TurkStream pipeline.
Moscow has been dependent on Ankara to complete the line to replace the existing export line through Ukraine, for which Gazprom's transit contract expires at the end of 2019, giving Ankara considerable leverage.
TurkStream is expected to be operating by January 1, delivering gas to Turkey through one 15.75 Bcm/year string, and transiting gas to Bulgaria through the other.
However, Ankara's leverage will not end there.
The 10 Bcm/year of gas imported by the private importers accounts for the bulk of the 14 Bcm/year currently contracted to be imported by Turkey via TurkStream, with contracts for 8 Bcm/year of that gas (4 Bcm/year private importers and 4 Bcm/year Botas) due to time out in 2022.
They are not the only contracts running down.
Contracts for 79% of Turkey's total gas import portfolio of 57.9 Bcm/year (pipeline and long-term LNG) and 80% of its 52.2 Bcm/year pipeline import portfolio are due to expire by 2026.
With Turkish gas demand falling and imports still well below Turkey's current import portfolio, Ankara has considerable potential for negotiating substantial price reductions.
The more so given that Ankara is continuing to expand the country's LNG import capacity -- with plans to add a third FRSU terminal in 2020, in addition to the two onshore plants, and increasing the country's underground gas storage from 4 Bcm to 10 Bcm by 2023.
Whether that will result in increased long-term LNG imports or higher spot imports remains to be seen.
Turkey has been importing spot LNG from Qatar under an unpublished agreement which is believed to have expired last summer, with negotiations for a renewal believed to have stalled.
And LNG may face greater competition from pipeline gas even ahead of contract renewals.
In September, Turkey passed legislation allowing for the import of spot gas volumes via pipeline. What is clear, however, is that despite recent efforts to reduce gas burn, future price reductions shouldensure that Turkish gas demand will increase again -- good news for Turkey's loss-making CCGT operators.
-- David O'Byrne, firstname.lastname@example.org
-- Edited by Alisdair Bowles, email@example.com