After years of agreements and protocols between Türkiye and Turkmenistan, the long-awaited flow of natural gas seems imminent. Energy and Natural Resources Minister Alparslan Bayraktar announced that, barring any setbacks, natural gas from Turkmenistan will begin flowing to Türkiye starting on March 1st. This follows a new agreement between BOTAŞ, Türkiye's state-owned pipeline company, and Türkmengaz, Turkmenistan's state-owned gas company.
While this development is an important step for Türkiye in terms of energy supply security, the most critical details of the agreement remain unclear. In particular, there is still no clear information about the volume of gas to be supplied, the pricing policy, the conditions for transit through Iran, and the associated geopolitical risks, The Caspian Post reports citing Yetkin Report.
Turkmen natural gas: Uncertainties and risks
Minister Bayraktar had previously stated that it would be possible to import 2 billion cubic meters of natural gas annually from Turkmenistan. However, the exact volume of the current agreement has not yet been disclosed. This amount corresponds to about one-fifth of the gas currently imported from Iran.
In Türkiye’s energy supply structure, the price of Turkmen gas stands out as the most decisive factor. Since 2001, the high price of Iranian gas has often been criticized, and it remains to be seen whether Turkmen gas will offer a competitive price.
Route
The most logical route for Turkmen gas to reach Türkiye currently seems to be through Iran’s existing natural gas infrastructure. However, there are serious concerns about the reliability of this route. Iran often faces difficulties in supplying gas to Türkiye during the winter months due to increased domestic demand. The country is in the midst of an energy crisis.
Additionally, Iran’s situation under sanctions and the possibility of an Israeli attack could further complicate transit security and economic conditions.
An alternative pipeline route via the Caspian Sea, through Azerbaijan and Georgia, to Türkiye is currently not on the agenda due to high costs and political challenges created by Russia and Iran.
Renegotiation of the Iran Agreement
Türkiye’s 1996 agreement with Iran, which provides for the supply of 10 billion cubic meters of natural gas annually, came into effect in 2021 and will end in 2026, i.e., next year.
This agreement is still under renegotiation, but Türkiye aims to secure better terms this time. The key strategic questions include whether the gas from Turkmenistan can temporarily fill this gap and how Iran might benefit from this situation. It is likely that Iran has included provisions in the agreement to prevent losing the Turkish market to Turkmen gas.
Natural gas price: An indispensable factor
Türkiye is one of the countries that pays the highest prices for natural gas from Iran. While exact prices are classified as commercial secrets, there is a significant price difference between the natural gas purchased by Türkiye, the European Union, and the United States in 2024.
Türkiye’s natural gas prices, which vary depending on the supply sources, were around 12-14 US dollars per thousand cubic meters last year.
In Europe, natural gas prices reached as high as 44.32 Euros/MWh in the Netherlands’ TTF reference contracts, equivalent to about 15-16 US dollars/MMBtu. The United States, largely due to domestic production, has the lowest natural gas prices. Last year, natural gas prices in the US ranged from 2.5-3 US dollars/MMBtu.
Since LNG is more expensive than pipeline gas, Türkiye’s LNG purchases are made at higher prices.
However, Türkiye’s efforts to diversify its supply sources and increase domestic production may allow prices to stabilize in the coming years.
Turkmen gas could be a turning point
The start of Turkmen gas flows to Türkiye on March 1st is a welcome development, but it is crucial to clarify critical aspects such as volume, price, and transit risks. Whether for industry, power plants, or households, there is a desire for cheaper gas.
If Turkmen gas can reach Türkiye at competitive prices, reliably, sustainably, and stably, this could mark a significant turning point for Türkiye’s energy security and supply diversification.
By balancing resources from Russia, Iran, Azerbaijan, and LNG, Türkiye could make significant progress in diversifying its energy supply and ensuring geopolitical, price, and supply security.
Moreover, over time, volumes could be increased and even sent to European Union markets, which are currently facing significant supply and price issues, through the TANAP pipeline.
