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Natural Gas
December 20, 2024
HIGHLIGHTS
Exemption to allow continued payments of Russian gas
Bulk of Turkey's gas imports come from Russia
Hungary also says Washington approved sanctions waiver
Turkey has been granted an exemption from US sanctions against Russia's Gazprombank, an official from Turkey's energy ministry told S&P Global Commodity Insights Dec 20.
The official said a formal announcement on the waiver would be made later Dec. 20.
The US on Nov. 21 announced sanctions against Gazprombank, its six foreign subsidiaries and dozens of other financial institutions and officials. After a 30-day wind-down period, the sanctions were due to come into force Dec. 20.
The exemption enables Turkey to continue paying for its imports of Russian gas through the winter peak demand period.
Russia is Turkey's main supplier of gas, accounting for 42% of Turkey's total imports of 50.5 Bcm last year.
The bulk of Turkey's gas imports from Russia are made by state-owned Botas under two contracts that both expire at the end of 2025.
The oldest is a legacy contract for 16 Bcm/year delivered via the Blue Stream pipeline across the Black Sea under an agreement signed in 1997 and which became active in 2005.
The second contract is for 5.75 Bcm/year delivered via the TurkStream pipeline under an agreement reached at the end of 2023 that is also scheduled to expire at the end of 2025.
Turkish officials have said talks to renew or replace both agreements have been underway for over a year and that Ankara has been looking for lower prices and greater flexibility.
As yet no indication has been given as to whether a new agreement is close.
In addition, six Turkish companies hold seven legacy contracts with Gazprom to import a total of 9.75 Bcm/year via the TurkStream pipeline.
Only three of the six -- Bosphorus Gaz, Akfel Gaz and Kibar Enerji -- have imported gas during 2024.
Meanwhile, Hungarian foreign minister Peter Szijjarto, speaking from New York, said Dec. 19 the US had granted a sanctions waiver for gas payments to Gazprombank.
"An exemption was given to Gazprombank for the payment of natural gas, which of course is good," Szijjarto said in a video posted to his official Facebook page.
"Hungary's energy supply is secure and will remain so under our government," he said.
Hungary and other countries that still buy Russian pipeline gas -- including Serbia, Slovakia, and Turkey -- had been looking to find alternative ways to pay after the US sanctions were announced.
Szijjarto said workaround solutions had also already been identified to be able to continue to pay for Russian gas imports.
Hungary -- which receives its Russian gas via the TurkStream pipeline and onshore infrastructure in Bulgaria and Serbia -- agreed to a 15-year deal with Gazprom in September 2021 for 4.5 Bcm/year.
It also imports gas in addition to the contracted volumes, with total Russian gas exports to Hungary this year expected to reach 6.7 Bcm, according to government officials.
In October, Gazprom signed a memorandum of understanding on the potential to supply more gas to Hungary following a meeting in St. Petersburg between Szijjarto and Gazprom CEO Alexei Miller.
Uncertainty over the future of Russian gas supplies to European buyers saw European gas prices trade at 2024 highs in November.
Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at a 2024 peak of Eur48.58/MWh on Nov. 21.
It was last assessed on Dec. 19 at Eur43.01/MWh.
Russian President Vladimir Putin, meanwhile, signed a decree Dec. 5 canceling an obligation that Russian gas payments be made via Gazprombank following the US sanctions.
The decree no. 1033 amended a previous decree from March 2022 -- decree no. 172 -- that required buyers of Russian gas from "unfriendly" countries to pay for Russian gas in rubles via a new currency conversion mechanism.
Under the initial decree dated March 31, 2022, European buyers were required to transfer funds in euros or dollars to a new Russian account at Gazprombank, from which payments would be made to Gazprom in rubles after conversion.
In the months following the initial decree, several European buyers of Russian gas opened new so-called K-accounts at Gazprombank.
The new decree Dec. 5 allows payments via "authorized" banks.