07 August 2014 | Aura Sabadus
Latest draft amendments to Turkey’s natural gas market law could turn incumbent BOTAS into a key regional LNG buyer, although much of the spare capacity that will become available globally in the medium term has already been snapped up by Asian customers.
Proposals published on the Grand National Assembly’s website this week renew requests outlined in the existing law for BOTAS to reduce its share of imported gas to 20% of the country’s annual gas consumption. The 20% ceiling applies to all other private shippers who already import gas, or intend to do so.
The restriction effectively bars BOTAS, whose market share currently exceeds 70%, from signing new pipeline gas import contracts.
Under the latest amendments, that restriction does not apply to the import of LNG.
“It is clear that they [the government] see LNG, rather than pipeline gas, as a means to ensure security of supply in the medium to long term,” a source active in the Turkish gas market said.
Furthermore, BOTAS may sign new piped gas import contracts if they are deemed to respond to security of supply concerns. Such an exemption will be granted subject to approval from the Council of Ministers, although the draft law does not define the concept of security of supply concern.
The new proposals also stress the role of LNG terminals as importing facilities rather than storage units.
The amendments envisage the unbundling of BOTAS into three entities – transmission system operator (TSO), LNG terminal operator and storage operator. Crucially, they do not spell out the separation of BOTAS’s current transmission operations from that of its trading arm which Turkish private shippers have persistently asked for.
The unbundling is scheduled for early 2015, although there are doubts that BOTAS may stick to the timeline since the law would have to be approved by the parliament first and sources say this is unlikely to happen before the end of the year.
Looking for LNG
Excluding private shippers who purchase LNG for transport, BOTAS has so far been the sole buyer of volumes for use on the domestic market because of constraints caused by an internal cross-subsidies system.
This meant that BOTAS has often purchased at a loss, buying at expensive international market prices and selling cheaply, at the domestic regulated price.
Nevertheless, uncertainty over potentially new pipeline gas imports from Iraq or Israel, combined with concerns over transit supplies from Russia to Turkey via Ukraine has prompted the government to look for new sources of LNG.
It recently announced it had signed a strip deal for the delivery of nine cargoes from Qatar this winter.
Turkey’s Algerian long-term contract for the delivery of 4 billion cubic meters (bcm) per year will expire at the end of this year. Sources active in the market say the agreement had been renewed, although this could not be confirmed. It has another long-term contract for the delivery of 1.2bcm/year from Nigeria and has actively been courting suppliers from Norway, Qatar, Yemen and Algeria over the past few months.
ICIS offers market participants vital LNG information to support their trading decisions with reliable pricing data, keep track of shifts in trade dynamics, as well as analyse the markets with our historical data and long-term trends.
ICIS publishes daily and weekly LNG reports covering: