Turkey could import spot LNG beyond April

Source: Heren

2016/03/08

State-run LNG importer BOTAS is seeking spot cargoes for April delivery, which is atypical for this buyer, one trader active in Turkey said on 8 March.

At least one independent buyer is also considering buying spot LNG for delivery in the late summer, a source close to the Turkish company told ICIS last week.

The company is in process of negotiating access to the Aliaga LNG terminal with a view of importing one cargo. The buyer is currently deciding whether to purchase the cargo independently or rely on the terminal’s operator EgeGaz as its procurement agent.

Turkey’s spot LNG prices for April are currently around $0.50/MMBtu premium to UK’s NBP, while May cargoes are priced at a $0.20-0.40/MMBtu premium.

While it could not be confirmed whether BOTAS is using NBP as its prevailing benchmark for buying LNG, sellers view the British gas hub as the closest proxy for opportunity cost, given the origin of spot cargoes delivered to Turkey so far. BOTAS typically purchases spot LNG on either a fixed-price basis or at an indexation to the 90-day average Brent crude oil benchmark.


Turkey pays premium for March

Given an ongoing shortage of pipeline gas supply, Turkey is paying a premium of $0.50-0.70/MMBtu to UK’s NBP hub prices for March LNG deliveries, market sources said.

The Q-flex vessel, Al Khuwair, is due at Aliaga on 9 March with a cargo sourced from Qatar’s RasGas. It is unclear whether this cargo is part of a string deal that BOTAS and RasGas signed in December 2015, or a purchase on top of that agreement.

BOTAS has already received two spot cargoes at the Aliaga terminal, where it has secured nearly all its capacity from EgeGaz. Aliaga is located in proximity to Turkey’s gas transmission network that serves large urban areas, including Istanbul.

The 154,000 cubic metre (cbm) Provalys arrived on 3 March with a Norway-sourced cargo, data from ICIS analytics platform LNG Edge showed.

The 134,000 cubic metre (cbm) Gallina delivered a cargo on behalf of Anglo-Dutch major Shell to Aliaga on 5 March, LNG Edge data showed.

No spot deliveries have arrived or are expected at the country’s second LNG import terminal at Marmara, which is operated by BOTAS.


Pipeline gas supply tightens

Ongoing political tensions between Russia and Turkey have resulted in lower pipeline gas flows to the Meditarrean country.

Russian gas producer Gazprom, which supplies more than half of the gas consumed in Turkey, cut its gas flows by about 10% in end-February due to a price dispute, sources said.

The price dispute arose after Gazprom allegedly revised prices on a unilateral basis and cancelled a 10.3% discount that was embedded in the long-term pipeline gas contract.

While the contract has a price revision clause that could have been evoked in April this year, such clauses typically entail bilateral negotiations.

Under the current deal, Gazprom supplies Turkey with about 30 billion cubic metres (bcm)/year of gas, of which 10bcm is allocated to six private companies. roman.kazmin@icis.com