After ExxonMobil, Shell and TotalEnergies shake hands with BOTAŞ on 10-year LNG deals fueling Türkiye’s regional gas hub aspirations

Following in the footsteps of their U.S. counterpart, ExxonMobil, two European energy giants, Shell and TotalEnergies, have sealed multi-year liquefied natural gas (LNG) deals with the Turkish Petroleum Pipeline Corporation (BOTAŞ). While enabling Türkiye to diversify its gas resources, these LNG agreements are also anticipated to lend the country a helping hand in becoming a regional gas hub.

The signing ceremony between BOTAŞ and ExxonMobil happened in May 2024, allowing the country to receive up to 2.5 million tons of LNG annually from the U.S. energy giant for ten years. Türkiye, which has seven international natural gas pipelines, five LNG facilities, including three floating storage and regasification units (FSRU), and two underground natural gas storage facilities, aims to become a major gas hub in the region, excel as an exporter, and be an effective manager of the gas it provides.

To turn its dreams into reality, the country extended its agreement with Azerbaijan for natural gas supply in June 2024. The deal with Azerbaijan Gas Supply Company was due to expire this year, however, BOTAŞ has postponed it until the end of 2030. In addition, four other agreements were inked with SOCAR regarding the delivery and exchange of natural gas.

Alparslan Bayraktar, Türkiye’s Minister of Energy and Natural Resources, who attended the signing ceremonies for all deals, emphasized: “During our visit to Baku, we took new steps to lay the groundwork for the agreement on cooperation in the field of natural gas, which we signed with Azerbaijan’s Minister of Economy Mr. Mikail Cabbarov in Istanbul last month.

“With the four agreements signed between BOTAŞ and SOCAR Azerbaijan’s gas will be transported to Europe and Nakhchivan via Turkey, and Turkmenistan gas will be delivered to our country. We have also signed the extension of the natural gas supply agreement between BOTAŞ and Azerbaijan Gas Supply Company, which will expire this year, until the end of 2030.”

At the start of September 2024, BOTAŞ penned a ten-year LNG supply agreement with Shell International Trading Middle East (Shell) for up to 4 billion cubic meters of liquefied natural gas a year from Shell’s U.S. and global portfolio, with deliveries starting in 2027.

This deal is anticipated to open the doors for BOTAŞ to expand its LNG access and use its extensive terminal and pipeline infrastructure to boost Türkiye’s gas diversification and act as a building block in the country’s ambition to turn itself into a regional gas hub.

Türkiye’s Minister of Energy and Natural Resources and Wael Sawan, Shell’s CEO, were present during the ceremony that was held to mark the LNG agreement, which was signed by Abdulvahit Fidan, BOTAŞ’s Chairman and General Manager, and Tom Summers, Senior Vice President of Shell LNG Marketing and Trading.

Bayraktar elaborated: “Our goal in natural gas, 99% of which we imported until the discovery of Black Sea Gas, is to diversify the supply side and offer natural gas to our citizens and industry in a more competitive and affordable rate. In this context, we have strengthened our infrastructure with international pipelines, LNG terminals and underground storage projects.

“The LNG supply agreement signed with Shell today will increase the diversity and flexibility of our portfolio. We are also pleased that BOTAŞ will acquire new capabilities in the field of LNG transport via ships by receiving the LNG at the loading port within the scope of the agreement. Such agreements make significant contributions to the supply security of not only our country but also the region.”

Shell, which recently made a move to scale up its LNG portfolio with the acquisition of Singapore-based Pavilion Energy from Carne Investments, an indirect wholly-owned subsidiary of Temasek, plans to grow its LNG business by 20-30% by 2030, compared with 2022, positioning itself to deliver value as it continues its transformation journey to become a net-zero emissions energy business by 2050.

The UK-based firm’s plans are aligned with its ‘LNG Outlook 2024,’ forecasting a rise in global demand for LNG of more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China, South Asia, and Southeast Asia, which are expected to use more LNG to support their economic growth.

Commenting on the LNG deal with BOTAŞ, Sawan stated: “Building on 100 years of Shell in Türkiye, we are pleased to work with BOTAŞ and supply LNG as it diversifies Türkiye’s sources of natural gas. LNG offers a flexible and reliable source of energy and has a vital role to play in the transition to a lower carbon energy system.”

Türkiye’s latest effort to strengthen its gas arsenal will see BOTAŞ receive 1.1 million tons of LNG per year from TotalEnergies for a decade, starting in 2027, thanks to the heads of agreement (HoA) the duo has now signed.

The French energy giant views this deal as a way to fortify its long-term presence in Türkiye’s LNG market, as it is convinced that natural gas plays “a crucial role as a transition energy,” addressing the intermittency of renewable energy sources and reducing emissions by replacing coal in electricity generation.

Gregory Joffroy, Senior Vice President for LNG at TotalEnergies, remarked: “We are pleased to initiate a new long-term collaboration with BOTAŞ, a key partner for the company in Türkiye. This agreement enables us to secure long-term sales and reduce our exposure to spot market gas price fluctuations.”

According to the findings of a recent study from Compare the Market Australia, Mexico, Türkiye, and South Africa are laggards or least progressive countries in the global transition to renewable energy based on the forecasted renewable electricity generation per capita in 2028 across 39 economically developed countries.

Mexico is projected to produce 0.73 TWh of renewable energy per million people by 2028, with no net zero emissions target pledge, while Türkiye, which comes right after the North American nation, will generate 2.48 TWh in renewables for every million people by 2028 with a 2053 net zero target, followed by South Africa, where a production of 0.83 TWh per million people is expected with a slightly earlier 2050 net zero target.

Even though eight European nations are said to dominate the renewables growth with all European Union members committed to having net zero emissions by 2050 or earlier, Finland, Sweden, and Norway have topped the rankings with a high proportion of forecasted renewable energy generation relative to each nation’s projected population in 2028, in addition to more ambitious net zero emissions targets. Finland’s net zero target is 2035.

Meredith O’Brien, Compare the Market’s Head of Energy, underscored: “Renewable energy is simply cheaper to produce than relying on the highly volatile prices of coal and gas, particularly from wind and solar infrastructure. European nations led the renewables race index with stronger investment policies and more ambitious net zero emissions targets, with Finland and Sweden leading the study.”