Underselling Gas to Turkey Denied

EghtesadOnline: Hamidreza Araqi, managing director of the National Iranian Gas Company (NIGC), has denied speculations that his company is underselling gas to Turkey.

News ID: ۷۷۶۴۰۱

21 May 2017

"The so-called discount in gas exports to Turkey is in fact a compensation for a court ruling that NIGC overpriced its gas supplies to Turkey between 2011 and 2015," Araqi was quoted as saying by Mehr News Agency.

"After the International Court of Arbitration sentenced Iran to pay $1 billion to Turkey in 2016, talks were held with Turkish gas officials to convince them that it would be impossible to pay the whole amount  at once," Araqi noted, adding that the two sides agreed that the compensation will be deducted from the periodic gas bills that Turkey must pay NIGC.

The official dismissed claims that Iran's natural is being supplied to the neighboring state for free and said, "There is no such thing as free supply. We have cut gas export price by 13.3%."

According to Financial Tribune, Iran signed a contract in 1996 to export up to 10 billion cubic meters of gas per year to Turkey over 25 years. But Turkey's state-owned oil and gas company Botas appealed in March 2012 to the International Court of Arbitration saying that Tehran had overcharged.

The court ruled in November that Iran supplied gas to Turkey at a higher price compared to other producers in the region and must cut its exported gas price by approximately 13%.

"Turkey had also filed a separate lawsuit accusing Iran of insufficient gas supplies, but lost that case, otherwise NIGC would have to pay them compensation equivalent to $35 billion," he said.

According to Araqi, gas business has its own complexities, which explains why it is not possible to set a fixed price for exporting the strategic commodity.

Iran, which started selling gas to Turkey in 2001, is the second largest gas supplier to the country after Russia.