Deutsche Bank to extend $1.1B LNG loan to Turkey’s BOTAŞ: Report

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Turkey and Deutsche Bank AG are said to be nearing completion in their talks for a 1 billion-euro ($1.1 billion) loan to finance liquefied natural gas (LNG) purchases, a report claimed on Wednesday.

The loan will be used by Turkey’s state energy importer, Petroleum Pipeline Corporation (BOTAŞ), to purchase LNG from United States producers and from traders in Europe, Bloomberg News said, citing people with direct knowledge of the matter.

The loan deal for LNG purchases marks the first for BOTAŞ, and is said it could pave the way for similar agreements that will allow it to diversify supplies currently dominated by Russia and Iran.

The deal is expected to be signed within weeks, the report said, and comes as pressure is piling up on BOTAŞ to further hike prices amid soaring global energy costs.

The government has been subsidizing a significant amount of utility bills in an effort to soften the burden of soaring consumer prices on households, but new price hikes seem inevitable due to higher energy prices.

Turkey has opted to keep prices for households steady and hike prices for gas sold to industrial facilities and power plants.

BOTAŞ needed a TL 100 billion ($6.8 billion) payment from the Treasury last year to cover its shortfall and losses have accelerated since Russia’s invasion of Ukraine drove energy prices higher, officials said.

That poses several challenges to authorities in Turkey, which imports nearly all its energy needs. BOTAŞ has bought billions of dollars from the central bank to cover its purchases.

So far BOTAŞ has kept its gas prices to consumers and industry well below the $830 per thousand cubic meters that it is paying in April. It said its latest price increases on April 1 still left households with an effective 70% subsidy.

Since the end of 2020, BOTAŞ has hiked the price of natural gas for the industry by 568% in Turkish lira terms, according to Reuters calculations. That reflects a 49% fall in lira against the dollar in that period on top of rising world energy prices.

The cost of Turkey’s energy imports doubled in January and February compared to last year, to reach $16.6 billion, driving the country’s trade deficit up 135%.

In February alone, BOTAŞ and other state entities bought a record $5.37 billion in foreign currency from the Central Bank of the Republic of Turkey (CBRT).

The loan guaranteed by Turkey’s Treasury and Finance Ministry is expected to have a maturity of as long as five years and can be doubled in size, the Bloomberg report said, citing people who asked not to be identified because the talks are confidential.

The funding could bring in about 1 billion cubic meters of gas at current LNG prices, a fraction of Turkey’s consumption of more than 61 billion cubic meters last year.

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