According to information received from sources in the state-owned Turkish Pipeline Corporation (BOTAŞ), Turkey’s struggle to revamp natural gas agreements with Iran, which force the purchaser to pay for natural gas even if it isn’t consumed, may end up in court as a stubborn Iran is refusing to let go of the “take or pay” conditions inherent in the procurement contracts. Turkey sued Iran over the price of natural gas in 2004 in the International Court of Arbitration (ICC), and also requested compensation for the unstable flow of natural gas in to Turkey and the below par quality of the gas. Turkey won the case, but the court stated that the insufficient quality and the instability in the flow should be left for another case. Turkey is now thinking of suing Iran again in the ICC for the “take or pay” conditions.Turkey requests that Iran is more flexible in its conditions, asking it to be less strict about when the natural gas is delivered. Energy and Natural Resources Minister Taner Yıldız is currently in talks with the Iranian government to ease these restrictions, but BOTAŞ may take Iran to court if the issue is not resolved. BOTAŞ needs to purchase a minimum of 8 billion cubic meters (bcm) of natural gas from Iran this year although it has been unable to purchase over five bcm these past two years.
Increases in consumer natural gas prices reaching as much as 75 percent decreased consumption significantly, and Turkey was forced to pay Iran $704 million for undelivered natural gas. An additional $700 million is expected to be paid this year for not meeting the minimum procurement requirements. Although the payments can be used in lieu of natural gas acquired in the future, there is a five year limit after which the amount paid cannot be used to obtain natural gas. Since a spike in natural gas consumption has not occurred yet, BOTAŞ is wondering whether it will be able to consume the natural gas for which it has paid $704 million.
