By: AGBI

Turkey has moved further to reduce its reliance on Russian energy, scaling back gas imports while limiting the terms of new contracts, though the shift away from Moscow could come at a cost.

Previously, Turkey had multi-year gas contracts with Russia, committing to long-term purchases at set prices and volumes. However, energy minister Alparslan Bayraktar said last week that it had signed a one-year deal for Russian supplies through the Turkstream and Bluestream pipelines running beneath the Black Sea.

The 12-month extension will see Turkey import 22 billion cubic metres of Russian gas in 2026.

While the agreement commits Ankara to importing Russian gas through 2027, the deal sees Moscow’s overall input to Turkey’s energy mix fall. Flows through the Black Sea pipelines linking Russia with Turkey now account for less than 40 percent of Turkish gas imports, down from more than 50 percent in 2018.

Russia’s losses in the Turkish market are Washington’s gain, with Turkey increasing imports of US liquified natural gas (LNG). Shipments of gas from the US now account for 14 percent of imports – equating to 5.5 billion cubic metres this year.

Turkey has agreed to import 1,500 LNG cargoes from the US over the next 15 years. Bayraktar also told the media that Ankara is considering whether to invest in US gas production capacity, with state-owned energy company TPAO in talks with energy majors such as Chevron.

“To hedge our position and create the whole value chain, we are considering investing in the upstream US market,” Bayraktar said. That chain, or even just the LNG links, are likely to come at a cost.

Turkey faces pressure from the Trump administration and the European Union over purchases of Russian gas and oil and is trying to offset this against its energy needs, said Mehmet Öğütçü, CEO of investment firm Global Resources Partners.

“Ankara is trying its best in a balancing act but the costs to be passed on to consumers will be high,” Öğütçü, who also chairs the London Energy Club/Bosphorus Energy Club industry bodies, told AGBI. “We are paying the price of fragilities in geopolitics and in our economy.”

Pivoting to US LNG will add to overall costs and feed into inflation, Öğütçü said. “Although Russian gas is not the cheapest, we will face price increases because gas coming by pipeline from Russia costs less than buying more US LNG.”

Turkey reduced imports of Russian flagship Urals crude oil last month, shipping data from energy consultancy Kpler showed, as Western sanctions on Russian energy suppliers tightened and Turkish refineries shifted to alternative grades.