Gazprom, Turkish importers agree on discount – sources

Russia’s Gazprom and Turkey’s private importers have reached an agreement for a price discount on their 2015 natural gas imports after four months of intense bargaining, three sources close to discussions told ICIS on Monday.

The price will reinstate the oil indexation after it was suspended in last year’s import contract, but will be different in each quarter of 2015.

It will be calculated based on the oil-linked formula plus an addendum that will vary each month.

Although the addenda may be different for each private importer, they hover around:

Q2 ’15 oil-indexed formula price + $10

Q3 ’15 oil-indexed formula price + $18

Q4 ’15 oil-indexed formula price + $14

For the first quarter of the year, the price will be calculated as the oil-indexed formula price minus the sum of the three quarterly addenda and will apply retroactively from 1 January 2015.

A source close to discussions said the oil-indexed formula itself included a coefficient that aligned the gas price with that of oil prices, effectively allowing companies to take advantage of the falling crude values over the last six months.

It was not clear whether the oil indexation formula was agreed just for this year’s purchases, or for a longer period of time.

A second source explained other equally important elements were the ‘flexibilities’ granted by Gazprom to private importers, which may relate to take-or-pay conditions, the customer base of each importer and the period of time for which agreed conditions will apply. These may differ from importer to importer and are confidential.

Gazprom declined to comment on the details related to price negotiations.

Bargaining under pressure

The staggered price formula was first pitched by Gazprom in March and followed the same principle, although the addenda were different. Two importers accepted the price immediately afterwards. However, the remaining importers made a counterproposal, but Russia linked further price negotiations on talks connected to Turkish Stream which had stalled for the last month.

It was unclear on Tuesday whether all remaining five importers accepted the offer, although they had been under pressure to accept a discount fearing widespread bankruptcies across the Turkish private gas sector.

This is because Gazprom had been quoting for the last three months an invoice price that had been around $70.00/1000 standard cubic metres (kscm) higher than the Turkish-lira denominated regulated tariff they can sell at domestically. The price was mutually agreed last year, but it became unattractive this year because of the record depreciation of the Turkish lira against the US dollar which meant that private shippers were paying at a loss.

Progress on the price discount negotiations had been linked to progress on the Turkish Stream front.

However, the talks that would have related, among others, to the construction permits granted by Turkey for the pipeline that will carry gas across the Black Sea to its border with Greece had stalled for the past month.

The Turkish government reportedly declined to answer three letters addressed by Gazprom. The Russian company expects to speed up the signing of an intergovernmental agreement (IGA) with Turkey, but Ankara is likely to postpone this until after parliamentary elections in June.

The Turkish government could not comment.

Meanwhile, BOTAS itself has requested a price discount of 15% or higher, but Gazprom has offered 10.25%.

Two sources close to talks told ICIS last week that the company had not officially agreed on the price, but was reluctant to return to the negotiation table, fearing that this price may be slashed further (see ESGM 21 April 2015). aura.sabadus@icis.com