Behind Turkish LNG deal with Exxon: Washington, Ankara, and Doha ties

Turkish Energy Minister Alparslan Bayraktar told the Financial Times on April 28 that negotiations were continuing with the US energy giant Exxon Mobil for 2.5 million tons of liquefied natural gas (LNG) worth 1.1 billion dollars.
The Minister was talking about Türkiye’s need to diversify its resources to avoid being dependent on “a single supplier”; What he meant of course was Russia.
Vedant Patel, one of the spokespersons of the US State Department, responded to a question on April 30 by saying that, all countries in the region should diversify their energy resources and reduce their energy dependency on Russia. Patel linked the issue to Russia’s war in Ukraine and said that Türkiye, “as the host of the Southern Gas Corridor”, played a crucial role in diversifying Europe’s energy supply and becoming independent from Russia.
These two statements, made just in the days when President Tayyip Erdoğan postponed the meeting expected to be held with US President Joe Biden at the White House on May 9 to an unknown date due to “schedule change”, require us to look at Türkiye’s energy supply security from the foreign policy dimensions.

Energy supply security

Türkiye’s energy supply security is increasingly a matter of national security. It is our jugular vein in almost every field with its dimensions of climate change, tax, trade balance, competition, foreign policy, technology, and finance. It can also be used as a “give and take” trump card in political negotiations. We frequently experience striking examples of this phenomenon in Russia, Iran, Azerbaijan, Iraq (particularly from the Kurdish region), and the Eastern Mediterranean.
Türkiye imports some 98 percent of the natural gas it consumes; around 54 billion cubic meters per year. 33 percent of its electricity production comes from natural gas-fired power plants. 40 percent of its imports are from Russia.
A very high dependency rate. It is necessary to reduce this to a manageable level, ie cannot be used as an energy weapon in times of crisis. Europe has almost zeroed its dependence on Russia, except for LNG. Due to the Ukraine war, it is trying to carry out a massive energy transformation, even though it has high costs that fuel inflation.

Russia and the US

Natural gas comes from Russia, as well as from Iran and Azerbaijan, via pipelines. There is a possibility that they will come from Iraq’s Kurdish region and the Eastern Mediterranean in the future.
Moreover, a total of 710 billion cubic meters of natural gas reserves, which are said to have been discovered in the Sakarya gas field off the coast of Zonguldak, Western Sea, which was brought to light during the elections but was not talked about with the same intensity afterward, can also be mobilized. It can reach a size that will meet 10 percent of our domestic gas needs if the investment can continue uninterrupted.
Currently, LNG provides approximately 30 percent of our total natural gas needs. This rate was half 10 years ago. In addition to countries such as Qatar, Algeria, Oman, and spot markets for seasonal needs, we also purchase LNG from the US to an increasing extent. The LNG imports of Türkiye in 2023 were 5 million tons; both to diversify the supply and sweeten the relations with Washington through energy trade. Also to balance and alleviate the American pressure on us regarding dependence on Russia.

Four possible reasons

We constantly say, “We will buy any gas that has a competitive price” but we need to look at which one (LNG or pipeline import) is more advantageous to our end users in terms of price, security, and sustainability.
The 10-year (approximately $12 billion) LNG purchase agreement with Exxon Mobil, which has not yet been signed but is understood to be in negotiations, should be evaluated within the framework of this big picture.
I think there are four main reasons for the deal:
1- The US continues to pressure Türkiye to choose relations with Russia, and it has enough leverage against Ankara. To curb the increase in one-way dependence on energy with Russia, including nuclear. Increasing commerce with the US may be part of the bargaining. Another view: This commercial agreement can be used by Ankara to reschedule the President’s White House appointment with Biden, which was announced to be held in May but was later postponed.

Exxon Mobil and the White House

2- Exxon Mobil, the world’s largest energy company, can use its influence in the White House, Pentagon, and State Department whenever it wants. Both for our benefit, if it can extract enough concessions, and for its commercial interests. This time, the US company wants to increase LNG sales to 40 million tons per year by 2030. It has a 30 percent stake in the Golden Pass LNG terminal, which is under construction in partnership with Qatar Energy and is expected to start producing 18 million tons per year in 2025. And for this large LNG investment, a long-term purchase agreement is needed for assurance with financiers. It will be able to sell 2.5 million tons a year to Türkiye for 10 years, starting next year, if a commercial agreement is reached.
This corresponds to 7 percent of Türkiye’s natural gas consumption last year.

Qatar and Beştepe

3- When Qatar Energy is involved as Exxon Mobil’s business/investment partner in this project, of course, it may be difficult for Beştepe, the Turkish Presidential Palace, and the Ministry of Energy and Natural Resources to decline the request of Erdoğan’s close friend, the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani.
4- While creating the “new supply portfolio”, we should also consider that the long-term agreements with Russia and Iran will expire in 2025 and 2026 respectively, and that Ankara wants to strengthen its hand and leverage in negotiations with Moscow and Tehran by increasing the LNG volume and number of suppliers in this process. It should also be noted that the LNG agreement with Algeria was extended for another three years and a new deal was signed with Oman.

LNG and the Green Deal

Türkiye caught up with Germany and left Poland behind as the country that used the most coal in Europe last year. The pressure on us to phase out coal (which provides one-third of electricity production) in climate change efforts may increase in the coming period.
The EU skillfully uses the trump card of limiting our access to the world’s largest market, and EU financial markets in the framework of the “Green Deal“.
In a global environment where even natural gas is declared a “dirty” fuel and cannot find financing for investment, it is imperative that we re-establish the balance of coal, natural gas, oil, renewable, and nuclear in the light of national and global realities and dynamics.
But in the short and medium term, natural gas will continue to be indispensable in electricity generation, industry, agriculture (fertilizer production), and housing through pipelines and LNG imports.
Therefore, Türkiye has to follow a natural gas supply strategy to maximize the political/economic benefits at the best prices, the safest, and for the country’s sustainable economy, without neglecting the close engagement with other suppliers besides Exxon Mobil.