Turkey’s refusal to import Russian gas fits in European diversification policy

Oil&Gas Materials 5 October 2011 16:22 (UTC +04:00)

Azerbaijan , Baku, Oct. 5 /Trend, A.Badalova/

Turkey 's decision to reduce the share of Russian gas fits in the overall policy of European countries to diversify its sources of energy supply, editor-in-chief at Eurasia Energy Observer Andrej Tibold believes.

"Almost 60 percent of Turkish gas consumption is covered with Russian gas," Tibold told Trend on Wednesday. "Turkey is in a strong position to tap alternative nearby sources in the Caspian and the Middle East, but also LNG from other sources."

Last week the Turkish state gas pipeline operator Botas informed Gazprom that it will end its contract with the Russian energy giant for the delivery of natural gas to Turkey via the western route. Turkish Energy Minister Taner Yildiz said on Saturday that Turkey had decided not to prolong its 25-year old deal with Moscow on natural gas supplies expiring in December.

Earlier Yildiz spoke of the possibility to review the contract for the supply of about 6 billion cubic meters of natural gas to Turkey annually from Russia through Ukraine, Bulgaria and Rumania, if Gazprom refused to cut the gas price.

Turkey's decision not to prolong its 25-year-old contract through the Western route, which expires in December 2011, does not mean it has terminated its contract with Gazprom or will terminate existing contracts, Tibold believes.

"Supplies based on existing contracts will continue through Blue Stream, which disposes of sufficient capacity to increase supplies in the future if needed," he said.

Russia also supplies gas to Turkey directly via the Blue Stream pipeline on the Black Sea bed. In 2010, it supplied 18 billion cubic meters to Ankara, about 60 percent of Turkey's total domestic gas consumption.

It remains to be seen whether Turkey's decision should be characterized as a deterioration in Russian-Turkish relations, Tibold said.

"If we are witnessing a deterioration, it might effect Turkey's approval of South Stream to cross Turkish waters in the Black Sea," he said.

Turkey has three contracts on gas supplies with Russia. The contract signed with Russia in 1986 to supply six billion cubic meters gas expires in December. Turkey also has two contracts with Russia to supply 16 and 8 billion cubic meters of gas annually, signed in 1997 and 1998.

"Turkey is one of many import-dependent gas consumers that want to negotiate lower prices with Russia. Its access to alternative supply only emboldens it," Andrew Reed, an ESAI analyst, told Trend.

Further to the East, China is taking a similar position in negotiations for future supply from Russia, Reed believes.

The total gas imports by Turkey in 2010 amounted to 36.68 billion cubic meters amid the demand of 39 billion cubic meters. Last year, gas consumption in Turkey's domestic market grew by 9.2 percent compared to 2009.

According to the BP Statistical Review of World Energy, in 2010, Turkey imported through pipelines from Azerbaijan 4.35 billion cubic meters of gas, Russia - 16.64 billion cubic meters, and Iran - 7.77 billion cubic meters. In addition, Trinidad and Tobago supplied to Turkey 0.26 billion cubic meters of liquefied natural gas (LNG), Belgium - 0.08 billion cubic meters, Norway - 0.26 billion, Algeria - 3.87 billion, Egypt - 0.27 billion, Nigeria - 1.26 billion and Qatar - 1.92 billion cubic meters of LNG.