Seeking arbitration, BOTAS warns BTC pipeline could lose $2 bln

BOTAS International Limited (BIL), the operator of the Turkish section of the Baku-Tbilisi-Ceyhan oil pipeline, is applying for international arbitration against its natural gas provider due to a dramatic rise in the price of the gas 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," BIL Chairman Ibrahim Palaz told reporters on the sidelines of a press conference 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, adding that the pipeline's operational costs exceeded the profit defined by the 2002 agreement. Citing Turkey's four major pump stations 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 operational costs are "unsustainable this way." Once last month, the natural gas spot price jumped 13 percent. The four oil pumps consume approximately $35 million worth of natural gas a year, Palaz said. "The prices were nearly $312 per thousand cubic meters in 2009 but this has now peaked up to $450," he said. Due to these prices, the only way for BIL to avoid constant financial losses is for it to renegotiate its agreement with the Baku, Tbilisi and Ceyhan Consortium (BTC Co.) provider and "fix the natural gas prices," Palaz said.