Russian gas flows to Turkey stable for now as political tensions rise

Russian gas flows into Turkey were within nominated limits on Wednesday, despite growing concerns over supplies following the downing of a Russian military plane by Turkey on Tuesday.

Fears over the political tensions between Ankara and Moscow were compounded on Wednesday morning after Russia’s Gazprom announced it had halted gas supplies to Ukraine following Ukraine’s failure to prepay for gas.

Any imbalances in the Ukrainian gas system could affect the transit of natural gas including that to south-east Europe and Turkey.

A shipper said his company got confirmation of receipt for gas imports, but added that the situation was uncertain for the upcoming days.

A source close to BOTAS said the company may face supply curtailments in January if political tensions continue between Turkey and Russia and Ukraine fails to prepay for natural gas.

“According to BOTAS sources, Ukrainian storage levels would be around 16-19bcm,” the Turkish source said. “If Gazprom’s curtailment to Ukraine continues for a long period – let’s say until January – then Ukraine will start to suck Turkish gas and this would create a similar gas crisis to the one in 2008. But […] it would be destructive to Ukraine first and then to Turkey,” he added.

Electricity curve values reacted to the news, with January Baseload futures prices surging from TL160.50/MWh (€52.66/MWh) to TL163.00/MWh on the electricity screens of Borsa Istanbul.

On over-the-counter screens, January Baseload was already offered at TL166.00/MWh. The product traded at TL161.35/MWh on Tuesday.

A source from the energy sector in neighbouring Greece, which off-takes Russian gas via Bulgaria as well as gas from Turkey sourced in Azerbaijan and pumped west to the Greek border, said the country’s incumbent DEPA was monitoring the situation.

“We are exploring with BOTAS the implications on the flow of gas from Turkey to Greece. It is likely that this flow will be cut off for lack of gas in Turkey. Greece is able to substitute with both Russian gas through the Transbalkan Pipeline and contractual LNG and so will remain fully supplied without problems in the short run. If the situation continues, Greece may have to resort to spot LNG, as undoubtedly will Turkey,” the Greek industry source said.

Greece imports only small volumes from Turkey. These stood at 1.7bcm in the first nine months of 2015, compared to 1.2bcm over the same period last year.

If Russian supplies into Turkey were to be reduced or halted as a result of the political tensions, Turkey may stop the exports to Greece in order to feed it into its own system.

However, Turkish and Russian analysts agree that it is not in the interest of either country to see supplies halted. Turkey is Russia’s second largest gas market after Germany, while Turkey depends on Russian natural gas to cover demand in its high-consumption Marmara region.

Russian gas flows at the western Malkcolar entry point were hovering around 34.5mcm/day on Tuesday, some 7mcm/day below the daily contractual levels, according to latest data from the Bulgarian transmission system operator Bulgartransgaz. Volumes have been reduced because of soft demand.

Turkey has off-taken 19.3bcm of Russian gas via the Western Pipeline and the Blue Stream pipeline in the first nine months of 2015. This was 0.8bcm more than over the same period last year.

Alternative sources of pipeline gas such as volumes imported from Iran or Azerbajian are difficult to pump westward because of constraints in the Turkish transmission system.

LNG supplies could complement Russian gas and feed into the Marmara region where the bulk of demand is concentrated. However, even if Turkey were to purchase more spot volumes, its receiving capacity is limited as it only has two terminals.

Turkey has already purchased four spot LNG cargoes in November. A fifth, the 155,000cbm Gaslog Saratoga from Qatar’s RasGas currently positioned in the Suez Canal is thought to be heading to the Aliaga terminal and could arrive there on 28 November.

Another spot LNG, the 160,276cbm Lobito chartered by Germany’s RWE, is expected to lift volumes from Norway’s Snohvit and arrive at Aliaga on 14 December. aura.sabadus@icis.com and kirsty.ayakwah@icis.com