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Turkey cools on Moscow’s natural gas to snap up cheaper Russian LNG

Russia’s Yamal LNG plant delivered a spot cargo to Turkey last month, trading sources said and data showed, only the second such delivery to date as lower LNG prices undermine Moscow’s natural gas pipeline exports to a key market.

In Russia, only state giant Gazprom can export natural gas via pipeline – a practice which has been long but unsuccessfully challenged by competitors – but private gas producer Novatek has the right to export LNG.

Supplies of Russian natural gas via pipelines and LNG are mainly sent to Europe and Asia but to different customers. Moscow has long said that its gas exports should not compete but rather complement each other.

However, with demand weak amid the coronavirus pandemic, super-cooled LNG is much cheaper than gas via the pipelines, where pricing terms are largely fixed.

According to two traders and LNG tracking data, Turkish state energy company Botas last month bought a Yamal LNG cargo in the spot market from Total, one of Novatek’s partners at the Yamal plant.

Rebecca Chia, an analyst with data intelligence firm Kpler which tracks LNG shipments globally, told Reuters that a 65,000-tonne cargo originating from Yamal was delivered to Botas on April 13 after a ship-to-ship (STS) transfer.

A Total spokeswoman confirmed the spot cargo delivery but declined to comment further. Botas declined to comment and Novatek did not reply to a Reuters request to comment.

Chia said that the only previous Yamal-origin LNG cargo was delivered to Turkey in early 2019.

Russia supplies gas to Turkey, one of its key customers, via the TurkStream and Blue Stream undersea pipelines which have a total capacity of 32 billion cubic metres (bcm) per year.

Gazprom sales to Turkey fell by 35% to 15.5 bcm last year, or half of the pipelines’ capacity. Gazprom planned maintenance at Blue Stream for May 13-19 but a Turkish official told Reuters works will be extended by 10 days.

A Turkish energy source told Reuters that Botas is expected to buy more LNG in the spot market, while the Blue Stream maintenance allowed the company to limit purchases from Gazprom.

“For Botas it makes sense to reduce pipeline imports from Russia and substitute this with spot LNG supplies as LNG is currently much cheaper,” said Carlos Torres Diaz, head of gas markets at Oslo-based energy consultancy Rystad Energy.

He estimates that the price for pipeline imports from Russia to Turkey will stand at around $6.5 per million British Thermal Units (MMBtu) in the second quarter compared to $1.5-2 per MMBtu for spot LNG deliveries.

“A fall (in gas sales to Turkey) will be even deeper in the second quarter,” a Gazprom source told Reuters, adding that overall shipments to Europe, including Turkey, were down 19.2% year-on-year to 39.62 bcm in the first quarter. Gazprom declined to comment.
Source: Reuters (Reporting by Maria Grabar in MOSCOW, Orhan Coskun in ISTANBUL and Jessica Jaganathan in SINGAPORE; Additional reporting by Bate Felix in PARIS and Vladimir Soldatkin in MOSCOW; Writing by Katya Golubkova; Editing by Kirsten Donovan)

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