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. Last Updated: 07/27/2016

Gazprom Woos Turkey, Wants Cash

APThe ship that laid most of Blue Stream at unprecedented depths under the Black Sea.
Gazprom may reduce the cost and amount of fuel it sells to Turkey to resolve a dispute that has stalled deliveries through a $3.3 billion Black Sea pipeline that opened in January.

Gazprom offered the reductions on all three of its gas contracts with Ankara, deputy CEO Yury Komarov said. In turn, Turkey must pay for 800 million cubic meters of gas it agreed to take from the new pipeline, known as Blue Stream, by the end of the year.

"A take-or-pay clause has come into force as of July 1," Komarov said. Turkey "must pay for the gas even if it in fact takes less fuel than it had agreed. The sides surely will find a solution and gas supplies through the Blue Stream pipeline will resume."

Gazprom and Italy's Eni built Blue Stream to ship as much as 16 billion cubic meters of gas to Turkey annually, more than the country consumed in 2000.

Turkey stopped taking gas from Blue Stream in April, saying the price was too expensive and the agreed deliveries exceeded its needs following a contraction of the country's economy in 2001.

The Turkish Energy Ministry said it is willing to discuss the proposal once it receives notification from Gazprom. Delivery volumes were not discussed during talks last month because no agreement could be reached on price, a spokesman said.

Gazprom exports gas under contracts that link the price to the cost of alternative fuels, such as crude oil. The prices are adjusted once or twice a year. The contracts usually specify how much gas the customer will pay for, regardless of actual use, a so-called take-or-pay clause.

"On one hand, Turkey has overestimated its rate of energy consumption growth; on the other hand, it hasn't developed a sufficient infrastructure for gas," Komarov said.

Gazprom has offered to invest in Turkey's gas distribution network, he said.

Gazprom has said Turkey would pay about $80 per 1,000 cubic meters for gas, valuing this year's scheduled supplies at about $320 million. The price Turkey actually pays for Russian gas will take into account changes in European gas prices.

In February, Gazprom said gas prices reached a high of $116 per 1,000 cubic meters in Western Europe, up from an average of $97 in the first nine months of 2002.

Turkey's government, elected last November, says the country was locked into expensive gas contracts at volumes that exceed its needs. The contracts with a variety of providers require it to buy 26 bcm of natural gas this year. Turkey estimates 24 billion of that can be used.

Gas from Russia will make up 62 percent of the gas bought by Turkey in 2003 if what was agreed in the Blue Stream contract is actually imported.

Gazprom delivered 11.8 bcm of gas to Turkey last year, and it also buys gas supplies from Iran, Algeria and Nigeria.