Gazprom reduces import price for Turkey's BOTAS, but uncertainty lingers for private gas sector

Source: Heren

2015/02/27

Russia’s Gazprom has agreed to a 10.25% import gas price reduction for the Turkish incumbent BOTAS, but negotiations for the price paid by private importers are still ongoing, shippers said.

The discount will be enforced from 1 March and is part of a price review that BOTAS is entitled to have under its import agreement with BOTAS, the sources said.

Three sources active in the private gas sector said the 10.25% reduction would apply to the oil-indexation formula embedded in the contract with Gazprom. It would also include a 6% reduction announced by the Russian president during his visit to Ankara last December.

BOTAS had asked for a 15% decrease that would have allowed it to manage losses resulting from the constraints of the subsidies system and the recent record depreciation of the Turkish lira against the US dollar.

“We don’t know whether the discount will be for a year, or for three years [until the next price review is due],” a shipper said. “We don’t know whether the discount will be uniform throughout the next quarters or whether the price will be changed on a regular basis.”

He said it was vital for the private sector to secure at least a 10% discount or more because the currently adjusted BOTAS price would be on the same level as the cost that Gazprom has been charging independents since the beginning of the year.

Because of the subsidised nature of the Turkish gas market, private companies typically compete with BOTAS by offering a cheaper price than the one charged by the incumbent. However, this is only possible when the import prices for independents are cheaper.

Last year private importers and Gazprom agreed on a fixed price for 2014 and 2015. This price was quoted in the January invoices for private importers, but at its current level the US-dollar denominated price is significantly higher than the lira-denominated regulated tariff that private companies can sell at.

This means that a price discount to the private companies is mandatory in order to allow the sector to survive in a tough climate.

Gazprom could not comment by publication time. Aura Sabadus