The Renewal of Turkey’s Long Term Contracts: Natural gas market transition or ‘business as usual’?
Turkey’s new, timely natural gas strategy of reducing import dependence coincides with the situation that all Long Term Contracts (LTCs) with the current pipeline suppliers will expire in the 2020s. In 2021 alone, 16 bcm of LTCs will expire, of which 8 bcm is Gazprom gas and half is imported by BOTAŞ and the other half by the seven private sector importers. Consequently, the year 2021 is expected to be crucial in terms of market restructuring, with the new contracts expected to have more flexible and competitive terms, as has long been anticipated. Gazprom has already suffered from the situation of low spot gas prices and decreasing volumes as a result of demand stagnation; the Russian monopolist has already lost 30 per cent market share since 2017.
The paper concludes that as long as the market is not liberalized and liquid national or regional trading hubs are absent, any changes in long-term contract terms will not adequately reflect the market dynamic. The government/BOTAŞ does not want to liberalise the gas market but it wants the benefits of market liberalization, these aims cannot be reconciled.