Türkiye in talks with ExxonMobil over multibillion-dollar LNG deal

REGION  29 April 2024 - 12:38

Türkiye is in talks with US energy supermajor ExxonMobil over a multibillion-dollar deal to buy liquefied natural gas as Ankara seeks to curb its dependence on Russian energy. 

The country, which imports nearly all of its natural gas, is seeking to build a “new supply portfolio” that will make it less reliant on any single partner, Turkish energy minister Alparslan Bayraktar said in an interview with the Financial Times. 

The talks come amid improving relations between Türkiye and the US after Ankara dropped its veto on Sweden joining the Nato military alliance and Washington agreed to sell Türkiye billions of dollars worth of F-16 fighter jets. They also come as Türkiye is seeking to reposition itself as a regional energy hub. 

Türkiye would secure up to 2.5mn tonnes of LNG a year through the long-term deal under discussion with Exxon, Bayraktar said, adding that the pact could last for a decade.

Bayraktar said the commercial terms of the Exxon deal were still under discussion, but 2.5 million tonnes of LNG shipped to Türkiye would currently cost about $1.1 billion, according to pricing assessments by data agency Argus.

The 2.5 million tonnes of LNG under discussion would be enough to cover roughly seven per cent of Türkiye’s natural gas consumption last year, according to FT calculations based on data from the Energy Market Regulatory Authority. Last year, Türkiye imported five million tonnes of LNG from the US on the “spot” market where energy is bought and sold for imminent delivery, Bayraktar said.

Exxon has ambitious plans to expand its LNG portfolio to 40 million tonnes a year by 2030, about double what it was in 2020.

The company owns a 30 per cent stake in Golden Pass LNG, a new export terminal on the US Gulf coast that it is building with partner QatarEnergy. It has a capacity exceeding 18mn tonnes a year and is due to begin producing LNG in the first half of 2025. Exxon is also pursuing LNG projects in Papua New Guinea and Mozambique. 

Exxon said it had initial discussions with the Turkish government regarding potential LNG opportunities but would not comment on the details of its commercial strategy.

Ankara, which had also enquired with other US natural gas producers about LNG deals, is seeking to “diversify” its natural gas supplies before some of its long-term contracts with Russia expire in 2025 and those with Iran expire the following year, Bayraktar said. 

Türkiye relies heavily on natural gas for power generation and industry. Households also benefit from large and costly gas subsidies through state gas company Botas.

Russia is by far Türkiye’s biggest natural gas supplier, accounting for more than 40 per cent of its consumption last year, which mostly arrived by pipelines. Ankara currently has long-term LNG supply deals with Algeria and Oman. 

Türkiye has retained strong trade, economic and tourist ties with Russia even after Türkiye’s Nato allies shunned Moscow after it launched a full-scale invasion of Ukraine in 2022. 

Moscow is also Türkiye’s top oil supplier and will own and operate the country’s first nuclear power plant, currently under construction, on the Mediterranean coast. Russia, along with South Korea, both have “serious interest” in a similar nuclear project on the Black Sea, Bayraktar said.

Bayraktar defended his country’s relations with Russia, saying that “competitive” energy deals with Russia have helped Türkiye to avoid the energy crisis that gripped major European countries after the war began. 

“For security of supply, we need to get gas from somewhere. It could be from Russia, it could be from Azerbaijan, it could be Iran, or LNG options,” Bayraktar said, adding that “we need to look at the competitiveness edge; which gas is cheaper?”

Bayraktar added that Türkiye had made a concerted effort to expand its infrastructure for receiving and storing LNG. About 30 per cent of Turkish natural gas imports last year were LNG from 15 per cent in 2014.

Türkiye has also been launching its own exploration and production operations, including a large gas site in the Black Sea and oil drilling in the country’s south-east. The country may later this year begin exploring for oil in the Black Sea as well, Bayraktar said. 

While local projects covered only a tiny fraction of Türkiye’s energy needs currently, they had the potential to be “quite a game-changer for us,” Bayraktar said.

Caliber.Az