Turkey is on track to significantly enhance its gas supply strategy, aiming to cover more than half its needs by 2028. This shift is pivotal as it poses challenges to Russia and Iran, the last remaining significant suppliers in the European market.
Turkey’s Gas Supply Future
The country’s primary strategy involves ramping up domestic production and boosting imports, notably from the United States. This adjustment comes amidst ongoing U.S. pressure for allies to reduce reliance on Russian and Iranian energy sources.
Reducing Dependencies
During a meeting on September 25, U.S. President Joe Biden urged Turkish President Recep Tayyip Erdogan to decrease energy transactions with Russia. Turkey’s energy ambitions are not just about meeting demand but also about enhancing energy security and establishing itself as a regional gas hub.
- Current Turkish gas demand: ~53 billion cubic meters (bcm)
- Projected domestic production and LNG imports by 2028: >26 bcm
- Current Russian market share: 37%
Turkey is planning to re-export liquefied natural gas (LNG) to European markets while continuing to utilize Russian and Iranian gas domestically. Analysts indicate that Turkey is positioning itself to capitalize on the global LNG market.
Pipeline Contracts and Future Strategies
Significantly, Russia’s long-term pipeline contracts with Turkey, which supply 22 bcm annually through the Blue Stream and TurkStream pipelines, are nearing expiration. Concurrently, Iran’s contract for 10 bcm is set to expire mid-next year. Azerbaijan’s agreements, totaling 9.5 bcm, extend until 2030 and 2033.
While extensions of some contracts are anticipated, Turkey is likely to demand more flexible terms and lower volumes, aiming to diversify its energy sources.
Expanding LNG Capabilities
Turkey’s state-owned TPAO is increasing output from local gas fields. Meanwhile, both state and private companies are enhancing LNG import terminals to facilitate gas imports from the U.S. and Algeria. Turkey has already established a robust LNG import capacity of 58 bcm annually, sufficient to cover projected demands.
- LNG deals signed with U.S. suppliers: $43 billion
- 20-year agreement with Mercuria established in September
The anticipated decline in Russian gas reliance, prompted by increased domestic production and LNG imports, could reduce Turkey’s need for pipeline imports significantly.
Future Energy Landscape
Evidently, despite the efforts to diversify, Russian gas continues to flow into Turkey. Analysts note that cooperation between Moscow and Ankara remains strong. Turkey’s Energy Minister Alparslan Bayraktar reiterated the importance of sourcing gas from multiple suppliers, including Russia and Iran. However, he acknowledged that U.S. LNG presents cheaper alternatives.
With energy demands expected to shift and the potential bans on Russian energy imports by Europe by 2028, Turkey’s role in the gas market is likely to evolve. Importantly, Turkey has already initiated gas supply agreements with Hungary and Romania, reinforcing its regional trading hub aspirations.
In summary, as Turkey redefines its energy relationships amid geopolitical shifts, it is strategically positioning itself to navigate the future gas landscape while challenging the long-standing dominance of Russian and Iranian suppliers.
