Turkey signals to discount gas prices after Iran arbitration

Turkey is looking forward to lower gas prices from Iran following victory in an arbitration case, the energy minister Berat Albayrak said February 2.

According to semi-official Anatolian News Agency, he told journalists in Chile February 2: "We'll most probably receive a discount this year, which is very good for us. We plan to make a discount in gas prices this year.”

However, the discount rate from Iran has not been agreed yet, beyond the range it will fall between: 13.3% and 15.8%, according to the arbitration court’s ruling, although how the discount will be calculated.

And the calculation of the repayment has not been published: it could be on the basis of overpayments between 2011 and 2015, which would amount to a repayment of some $2.5bn; or it could take the form of an immediate cut in the price for deliveries in 2016; or a combination of the two. On February 2, the managing director of the National Iranian Gas Company, Hamid-Reza Araqi put a figure of $1bn on the repayment but did not go into details.

Separately, Iran’s ambassador to Turkey Riza Bikdeli said that the arbitration announcement would be a new start for Turkey-Iran gas relations. "Arbitration is natural in the natural gas business," Bikdeli said in a press conference on February 3. He did not disclose any specific time frame or the amount to be paid regarding the arbitration case.

The state-owned gas pipeline company Botas owes lire 6bn ($2bn) in taxes and it also needs to pay $4bn for its 30% stake in the trans-Anatolian pipeline (Tanap) project, which will ship Azeri gas to Turkey and westwards.

"The discount can be limited. It's all in the hands of politicians, but Botas' finances need to be strengthened," said an industry source. Iran is Turkey's largest gas supplier after Russia, providing 10bn m³/year under a 25-year deal signed in 1996. Last year, Iran exported 9.6bn m³ to Turkey.

Murat Basboga