Russia regained the first place in the Turkish gas market, dislocating Azerbaijan to the second one

In September 2020, Gazprom increased gas supplies to one of the key destinations – Turkey. According to Vedomosti’s calculations, in the first month of autumn the Russian company sent 1.9 billion cubic meters to the country, which is the highest since January of this year. In general, from January to September, compared to the same period in 2019, deliveries decreased by 25% to 8.854 billion cubic meters.

Since the beginning of 2020, Gazprom has been losing its share in the Turkish market due to the rise in the price of pipeline gas, the price of which is tied to a basket of petroleum products with a lag of 6-9 months. And when on the wholesale market, gas became 2-3 times cheaper than under the contract with the Russian concern, Turkish consumers stopped selecting the contracted volumes.

According to experts interviewed by Prime, the six-month lag with oil indexation has unsettled Gazprom. However, now Russian gas has become competitive again in terms of price – the cost of LNG has gone up, and demand has increased due to the onset of the heating season.

In the first half of 2020, Azerbaijan was the main gas supplier to Turkey, having increased supplies by 23.4%. In August, Russia regained the title of the first supplier to the Turkish market – Gazprom delivered 1.37 billion cubic meters of gas. At the same time, compared to August 2019, Russia’s share in Turkish gas imports in August of this year decreased by 5.5%. Azerbaijan returned to second place – the country exported 986 million cubic meters, while Iran was in third place – it sent 406 million cubic meters of gas to Turkey in August.

Experts consider that further volumes of Russian gas exports to Turkey depend on many conditions. First, the price level plays a significant role, including for LNG. Second, the demand for gas and political stability in relations between Russia and Turkey are important.

Experts note that the record supplies of Russian gas to Turkey since the beginning of the year have no political background – everything is tied to the pricing environment, which now has turned back to Gazprom.

According to analysts, Gazprom can significantly raise its share in the Turkish market, as the entire infrastructure is ready to supply large volumes of gas. But to do this, the Russian supplier will have to reduce the prices stipulated in the contracts.