Turkmenistan's aspirations to establish a gas swap arrangement for the initial small volumes of its gas to Turkey, and potentially onward to Europe, have encountered a setback as Turkey has finalized its third long-term LNG purchase agreement within a five-month period.

On September 18, Turkey's state gas importer Botas reached an agreement with France's TotalEnergies to import 1.6 billion cubic meters (bcm) of LNG annually from the United States, commencing in 2027. This agreement follows a similar contract with Shell, also signed by Botas earlier in September, which covers 4 bcm per year starting in the same year. Additionally, a third agreement was made with ExxonMobil last May, although specific details of that deal remain undisclosed.

Neither Ankara nor Ashgabat has provided insights on whether Turkey's new LNG supply contracts will affect the longstanding plans for gas imports from Turkmenistan. However, fundamental market dynamics suggest that as Turkey increases its gas imports from alternative sources, its reliance on Turkmen gas to satisfy domestic needs and export obligations may diminish.

Nonetheless, Ankara may still be open to importing Turkmen gas. Such imports could be facilitated through a gas trading hub that Turkish officials are aiming to establish in northwestern Turkey. In a television interview on September 20, Turkish Energy Minister Alparslan Bayraktar stated that Turkey has the capacity to receive up to 80 million bcm of gas annually, while its domestic demand is approximately 50 bcm per year.

He indicated that if an export opportunity arises and an agreement can be established with European customers, LNG can be imported from a variety of sources. He specifically mentioned potential suppliers such as the United States, Qatar, Oman, and Trinidad and Tobago, but did not reference Turkmenistan.

Just a few months prior, the situation appeared quite different. In March, Turkmen President Serdar Berdymukhamedov and Turkish President Tayyip Erdogan signed a preliminary agreement for a "swap deal" involving Turkmenistan, Turkey, and Iran. However, the initial optimism for a finalized agreement did not materialize. Unverified reports suggest that negotiations faltered due to difficulties in agreeing on a purchase price with Turkmen officials.

While Turkmenistan's setback may benefit Azerbaijan, the reasons behind the unsuccessful gas swap deal between Turkey and Turkmenistan could favor Ankara's new long-term LNG supply agreements. Baku's gas production has risen to a level where it no longer relies on Turkmenistan to satisfy its immediate domestic requirements and export obligations.

Nonetheless, uncertainty remains regarding Azerbaijan's ability to meet its commitment made in July 2022 to the European Union to double exports to Europe to 20 bcm annually by 2027. With Ankara now looking to LNG to satisfy a growing share of its gas demand, there is a chance that Botas may not require as much gas from Azerbaijan, potentially allowing Baku to redirect more gas to EU countries. Last year, Turkey imported 10.3 bcm of gas from Azerbaijan, accounting for 20 percent of Turkey's total imports, an increase from 8.7 bcm in 2022.