Gas discount not canceled for Turkish firms, negotiations in process with Gazprom

Negotiations between representatives of the Russian energy giant Gazprom and Turkish firms over whether a previously applied price discount on imported Russian gas will continue to apply in 2016 are still in progress, Anadolu Agency (AA) reported on Friday, which accords with information received from Gazprom sources.

Earlier in the day AA reported that six private Turkish companies had said they would no longer be able to utilize the 10.25 percent discount, according to notifications they received from Gazprom. The 10.25 percent price discount applied to the companies had been in effect since Jan. 1, 2015.

Yaşar Arslan, president of the Natural Gas Distribution Companies Association of Turkey (GAZBİR), reportedly said that the Turkish companies involved had raised objections to the cancelation of the discount, asserting that recent developments between Gazprom and the Turkish private gas sector would not affect an upcoming potential decrease in gas prices in Turkey.

In the first quarter of 2015, Gazprom agreed to reduce the price of natural gas sold to Turkish companies from $374 to $300 per 1,000 cubic meter while the price fell in the second quarter to $260.

The six Turkish companies involved – Enerco Enerji, Bosphorus Gaz, Avrasya Gaz, Shell, Batı Hattı, and Kibar Enerji – import 10 billion cubic meters of gas from Russia annually in line with an agreement signed in 2012 between the parties.

Apart from these private companies, the state-run Turkish BOTAŞ Patroleum Pipeline Corporation also buys gas from Russia that is imported through pipelines. Another purchaser is Ege Gaz, which imports gas in the form of liquefied natural gas (LNG). In 2014, Turkey bought around 27.3 billion cubic meters of Russian gas.

The natural gas trade between Turkey and Russia became an issue after Turkey downed a Russian Su-24 jet on Nov. 24 for violating Turkish airspace along the Syrian border, and political tensions were followed by economic sanctions. The Russian government banned Turkish produce and industrial goods from entering Russia and began refusing work permits to Turkish workers in Russia. While Moscow has damaged its reputation as a reliable trade partner in Ankara's eyes, state-run Gazprom announced that they will continue to supply the gas promised under the agreement.

Yet natural gas prices were not an issue that emerged between the two countries after the jet downing crisis. During his visit to Turkey in December 2014, Russian President Vladimir Putin announced that Moscow scraped the South Stream pipeline project, which was planned to carry Russian natural gas to Europe via Bulgaria, and replaced it with the planned Turkish Stream pipeline instead.

The Turkish Stream pipeline project was designed to carry natural gas to Europe over the Turkish-Greek border, but negotiations over a possible natural gas deal between Turkey and Russia have encountered constant delays due to both parties push for the other to sign the deal first. Russia promised to provide a 10.25 percent discount to BOTAŞ, but Gazprom did not apply it. It insisted that Turkey must first approve the proposed pipeline project. Six private Turkish gas companies have yet to get a discount as per the agreement, which ends this month.