12 Nisan 2011 Salı

Turkish pipeline operator laments debts due to gas price hike

Gokhan Kurtaran    Hurriyet Daily News

Turkey's BOTAŞ International Limited, which operates the Turkish section of the BTC pipeline, has applied for international arbitration against the consortium that provides natural gas for the route due to operational costs. BİL chairman İbrahim Palaz tells the Daily News that the operational cost of the oil pipeline is higher than the profit defined by the agreement signed between the parties in 2002
The operator of the Baku-Tbilisi-Ceyhan oil pipeline’s Turkish section is applying for international arbitration against its natural gas provider due to a dramatic rise in the price of gas, which the company needs to run its oil pumps.

“The agreement that was signed between the parties nearly nine years ago is causing a great loss of money,” BOTAŞ International Limited, or BIL, Chairman İbrahim Palaz told the Hürriyet Daily News & Economic Review on the sidelines of a press meeting in Adana on Sunday.

Palaz said BIL had posted nearly $31 million in losses and $91 million in debt at the end of last year and added that the operational cost of the oil pipeline was higher than the profit defined by the agreement signed in 2002.

Noting that Turkey has four major pump stations located in the eastern provinces of Ardahan, Erzurum, Erzincan and Erzincan, Palaz said, “These pumps operate with natural gas and the hike in natural gas prices has caused a great loss for the company.”

In the last five years, natural gas prices have risen 45 percent, he said, adding that the operational cost was “unsustainable this way.” In a period in the middle of March, the natural gas spot price jumped 13 percent.
The 1,768-kilometer-long crude oil pipeline starts in the Azeri-Çıraq-Güneşli oil field in Azerbaijan’s Caspian and connects Baku, Tbilisi and Ceyhan on Turkey’s southern coast. Since 2006, around 1.2 billion barrels of oil have been transferred through the pipelines.

The four oil pumps consume approximately $35 million worth of natural gas per year, Palaz said. “The prices were nearly $312 per thousand cubic meters in 2009 but this has now peaked up to $450.”

Because of the prices, the only way for BIL to avoid constant financial loss is for it to renegotiate the current agreement with provider Baku, Tbilisi and Ceyhan Consortium, or BTC Co. and “fix the natural gas prices,” Palaz said.

The operational income of the company will be nearly 27 cents per barrel of oil until 2021, but will be updated in 2021 and increased to 43 cents per barrel, according to the agreement.

“Natural gas prices are increasing day by day, leaving us no option but to take a loss. Since we cannot increase the actual income per barrel of oil before 2021, we will continue to lose money,” Palaz said.
“Fixing the prices of natural gas per thousand cubic meters at $110 or below might give a breath to the debt-stricken company,” he said.

If the situation is not rectified, the company could go default on its debt, which might mean that one of the most important export routes for Caspian oil could be threatened, he said.

In order to continue the operation, the company has outsourced financial support from Turkish lender Vakıfbank over the past five years at a cost of roughly $195 million.

Palaz also said the operational income of BIL was lower than Azerbaijan and Georgian operations, noting that while Azerbaijan and Georgia charged 78 cents per barrel of oil, Turkey charged 35 cents at the moment.
The BTC Consortium could make some changes in the agreement as a result of international arbitration in the next six months, said Palaz.

Palaz said he was assigned to his current position in the company with the encouragement and invitation of Turkish Energy Minister Taner Yıldız nearly 13 month ago. “Yıldız knows the current situation of the company and supports me fully in this challenge of changing the fate of the company.”

‘Company is losing money’
“The claims of loss brought forward by BIL do not mean Turkey has a financial loss, it is the company itself that loses the money,” Murat LeCompte, the director of communications and external affairs for Turkey at BP, which leads the 11-members consortium that controls BTC Co., told the Daily News on Monday.

LeCompte said Turkish authorities could apply a transit pass tax that would amount to 20 cents per barrel.
“There could be no loss in that sense,” he said, adding that the tax was similar to corporate taxation.
The BP official also said Turkey collected a “good amount of tax” out of the oil running through its 1,076-kilometer share of the BTC pipeline.

*The Turkish Petroleum Corporation, or TPAO, has close to a 6.53 percent share in BTC Co., LeCompte said, adding that the Turkish corporation received 6.3 million barrels of oil per year in return for the share. “If you calculated this amount with current prices, this would make a serious profit.” 

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