Turkey says no gas deal with Russia, gas cuts and talks continue

Istanbul (Platts)--2 Dec 2014 853 am EST/1353 GMT


Turkey has not reached any new gas deal with Russia beyond an agreement to discuss the possibility of routing Russia's planned southern gas export line (South Stream) via Turkey, Turkish energy minister Taner Yildiz told a press conference Tuesday.

An agreement to discuss and no agreement for anything else related to the projected line has been signed he said, adding that Turkey is not involved in the disputes between Russia and Ukraine or Russia and the European Union.

Yildiz said no agreement has yet been reached with Moscow over its unilateral cutting of gas exports to Turkey via Turkey's western Transbalkan import line which carries gas arriving via Ukraine.

Nor has there been any resolution to Turkey's request for a discount on the gas it buys from Russia, despite a joint press conference late Monday by Turkish President Tayyip Erdogan and Russian president Vladimir Putin in which it was suggested that the two countries had reached a number of agreements on Russia's gas exports To Turkey.

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Neither Putin nor Erdogan referred to the ongoing gas cuts during their press conference.

Yildiz explained that as of Monday night the flow of gas arriving in Turkey through the western Transbalkan line was continuing at around half the normal rate of 42 million cubic meters a day and that the suggestion by Putin that Gazprom would give Turkey a 6% discount on the price it pays for the gas it imports is simply an offer.

"The discount is not what we wanted. We have the right to a better price. We made a counter offer and we are still discussing the issue," he said expressing hope that a final deal could be struck by the end of the year.

Yildiz did not say if the talks covered the 4 billion cubic meters a year of Russian gas being imported by Turkey's state gas importer Botas via the western Transbalkan line, or if it also included the 10 Bcm/year of gas being imported through the same line by seven private companies and the 16 Bcm/year being imported by Botas through the Blue Stream line across the Black Sea.

But he stressed that any discount negotiated with Moscow will not be passed on to consumers because Botas is currently selling gas it imports at below the price it pays, suggesting that the talks may only cover gas being imported by Botas.

"Botas has an (existing) debt of Turkish Lire 2 billion ($900 million) which has to be covered," he said.

Yildiz also made no reference to Gazprom's Turkish subsidiary Bosphorus Gaz, one of the seven private companies importing gas from Russia through the Transbalkan line and holds two contracts and two licenses to import a total of 2.5 Bcm/year despite complaints confirmed by Turkish officials that Gazprom is continuing to supply Bosphorus in preference to other importers despite it having already exceeded its annual licensed import volumes.

Putin and Erdogan said Monday that Russia had decided to abandon its plans for South Stream following opposition from the European commission and Bulgaria through which the line had been planned to pass.

Moscow would instead open talks with Ankara on the possibility of running the line across the Black Sea to Turkey and then overland to Greece.

In a statement later Monday Gazprom CEO Alexei Miller said his company plans to transit 50 Bcm/year of gas via Turkey to Europe via the new line in addition to which around 14 Bcm/year will be supplied to Turkey in place of the same volume currently being supplied via the western Transbalkan line.

No mention of made as to where the gas would be supplied or how it could be transited through Botas' existing gas transit network.

The 14 Bcm/year Turkey currently imports via the Transbalkan line arrives via Botas' transit grid in Turkey's European province of Thrace which is home to several large gas fired power plant and Turkey's biggest regional gas market, Istanbul from where it is transited to other north western provinces which together with Istanbul account for the bulk of Turkish gas demand.

--David O'Byrne, newsdesk@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com

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