Pressured by fears of economic meltdown, Turkey’s President Recep Tayyip Erdogan may be willing to overstep a few legal uncertainties in order to sell two natural gas importing companies to a businessman formerly linked with Russia’s energy giant, Gazprom.
Although it is unclear whether small importers are being targeted for takeover, an investigation report published by ICIS, the world’s largest petrochemical market information provider, reveals that Turkish gas importers Akfel Gaz and Avrasya Gaz could ultimately be placed under Gazprom’s control.
“At least two Turkish natural gas importing companies, which were confiscated by the government following a failed coup, might be sold to a businessman formerly associated with Russia’s Gazprom despite multiple legal uncertainties,” an ICIS report published on December 6th said.
The move would help the Russian producer to consolidate its position in the Turkish gas market as the 31.5 billion cubic metre (bcm)/year TurkStream pipeline running from Russia to Turkey is completed.
Only two years ago, Turkey moved to nationalise Akfel Commodities Turkey Holding, the country’s leading independent gas importer, sparking concerns among stakeholders that Gazprom and the Turkish government could be planning to wind down the private sector in 2019.
Multiple sources interviewed over the last two months told ICIS that Adnan Sen, managing director of the rival importer Bosphorus Gaz, had applied to buy out Akfel Gaz and Avrasya Gaz, two of the three importing companies, which belong to the expropriated group.
Unclear shareholder structure
Akfel Gaz, Avrasya Gaz and Enerco Enerji, Akfel Gaz’s sister company, which import a total of 5.25bcm/year, were nationalised at the beginning of December 2016 amid alleged links to Erdogan’s arch nemesis and Ankara-recognised terror group, the Fethullah Gulen movement, accused of masterminding a failed coup in July 2016.
The companies are part of Akfel Holding Turkey, which is in turn owned by Akfel Commodities Pte Ltd, a Singaporean company.
Prior to the nationalisation, the Singaporean company was owned by two Turkish individuals who were ousted immediately afterwards as well as other foreign investors. It is unclear what the current shareholding structure is, the ICIS report added.
Akfel Gaz, Enerco Enerji, facing take-or-pay penalties
Despite a pressing need to reflect the rising import costs and the depreciation of the Turkish lira in regulated tariffs to end consumers, the Erdogan government failed to do so as the measure would have been unpopular with voters ahead of a long electoral cycle this year, the ICIS report said.
That said, at least two of the Akfel Turkey Holding importers lost settlement negotiations against Gazprom and are now expected to make retroactive payments in excess of $160m for the period January 2017-September 2018.
Akfel Gaz and Enerco Enerji were two of five independent gas importers involved in arbitration over a 10.25% discount granted by Gazprom between January 2017and September 2018.
Gazprom had granted the discount as stipulated by contractual add-ons but then sought to remove it, which led to the arbitration proceedings.
Even if Akfel Gaz and Enerco Enerji are now expected to make the payments, they have the right under their long-term supply contracts to transfer that responsibility to their customers based on the back-to-back terms embedded in the agreements.
Sources claim all importers would be facing take-or-pay penalties on this year’s gas off-takes, which could amount to 75% of the 2018 average import price.