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MULTIMEDIA
May 26, 2012
 
 
 
 
 
 

Turkey may pay Iran $2 bln for unused gas as consumption plummets

2 September 2009 / İSMAIL ALTUNSOY, ANKARA
Turkey may have to pay Iran some $2 billion for unused natural gas this year, officials from the Energy Ministry have said.

Following an accumulative 75 percent increase in natural gas prices last year, gas consumption in Turkey dropped remarkably. With the negative impact of the ongoing global economic crisis, the contraction in natural gas consumption in Turkey in the past few months has reached 20 percent.

Turkey meets a considerable amount of its natural gas needs from Iran. As stated in the natural gas purchase contract between the two countries in July 2003, the state-owned Turkish Pipeline Corporation (BOTAŞ) has to buy at least 6.8 billion cubic meters of natural gas from Iran annually, meaning Turkey has to pay Iran a specified amount of money whether or not it buys the natural gas. Turkey paid Iran $704 million for natural gas it failed to buy from the country in 2008.

No hike in natural gas prices this year

To prevent a decline in natural gas sales, the Ministry of Energy and Natural Resources will not be increasing natural gas prices for the rest of this year. Despite an increase in crude oil prices, the ministry is determined not to increase natural gas prices, which are set every month by a decision of the Supreme Planning Board (YPK). Although an increase in prices was due last month, it did not go into effect. Although crude oil prices continue to increase, there will be no price increase for natural gas, a step that the ministry hopes will lead to an increase in consumption.

The amount of natural gas that Turkey failed to purchase from Iran since the beginning of this year has amounted to 2 billion cubic meters. Turkey will have to pay Iran around $2 billion for unused gas unless sales increase by the end of the year.

While the Ministry of Energy and Natural Resources is meeting with natural gas provider countries to ease a “buy or pay” condition in agreements, it is also seeking ways to increase natural gas sales. Initial plans include exempting some sectors from paying the private consumption tax (ÖTV) and not increasing natural gas prices until the end of the year even if fuel prices increase.

Natural gas prices increased by close to 73 percent for homes and 75 percent for industries last year, leading subscribers to cut back on gas consumption. As a response to these developments, the ministry announced that gas prices would drop as of January. However, despite a 40 percent reduction in natural gas prices since January, sales still continue to drop.

Searching for ways to increase sales, the Ministry of Energy and Natural Resources' first plan is to exempt some sectors from the ÖTV on natural gas. According to officials close to the Supreme Planning Board (YPK), BOTAŞ recently asked the council to lift the ÖTV on natural gas for the fertilizer sector.

Doing so, the company seeks to sell some 800 million cubic meters of natural gas to the Turkish fertilizer industry, which currently consumes no natural gas at all.

An official from the ministry asserted that the ÖTV exemption will boost activity in the fertilizer industry, which is currently facing a serious drop in production. The global economic crisis is also negatively affecting natural gas sales in Europe. European gas suppliers and buyer countries are holding talks on showing flexibility in the “buy or pay” condition.
 
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© Feza Gazetecilik A.Ş. 2007, Ahmet Taner Kışlalı Cad. No: 6, Bahçelievler - İstanbul 34194 Turkey, +90 (212) 454 1454, +90 (212) 454 1497(fax)