Gazprom Pledges More Support To Build Competitor Pipeline To Southern Gas Corridor

Russia’s gas giant Gazprom announced it will expand cooperation with Turkey to build the TurkStream natural gas pipeline, as Russia looks to build subsea export routes that bypass Eastern Europe and keep Russian gas both relevant to and competitive in Turkish and European markets.

Gazprom has agreed to finance the construction of the onshore segment of the TurkStream pipeline in northeastern Turkey, based on an agreement reached with Turkey’s state-owned BOTAŞ Petroleum Pipeline Corporation.

"We have already agreed with them [with Gazprom] on this issue, but I cannot disclose the figures,  in what percentage will we do it," Botaş’s General Director Burhan Özcan said at the 22nd World Petroleum Congress in Istanbul on Monday. 

Known as the “Olympics of the oil and gas industry,” the World Petroleum Congress this year runs from July 9-13.

TurkStream is a 1,090 kilometer-long, transit-free pipeline designed specifically for the export of Russian gas to Turkey and Europe. Costing around $13 billion, the project was first agreed to in 2014, but delayed as Russo-Turkish relations soured following the downing of a Russian fighter jet in Syria by Turkey in November 2015. By late 2016 plans resumed, thanks in part to direct involvement by Presidents Vladimir Putin and Recep Tayyip Erdogan, and an intergovernmental agreement for TurkStream was signed in October.

South Stream Transport B.V., a subsidiary of Gazprom, will be responsible for constructing the pipeline, which will deliver a total of 31.5 billion cubic meters (bcm) of natural gas per year through two parallel lines. The first line is scheduled to be completed next year, with the second line due to come on line in 2019.

TurkStream will operate via two compressor stations near Russia’s Black Sea town of Anapa and deliver gas via a 900-kilometer route under the sea at a depth of 2,200 meters to reach the European side of Turkey. The onshore route will stretch another 190 km from northwestern Turkey to southeastern Europe. Turkey is expected to consume about 15.75 bcm per year, while the remainder is destined for the Greek–Turkish border, where it will be exported by way of connecting pipelines to Europe.

The pipeline is one of several undersea networks Moscow has pushed in recent years in an effort to bypass older pipelines that transit through Russia’s bitter rival Ukraine. After a debt repayment crisis in 2008 saw Russian gas exports to Europe via Ukraine cut due to Kiev’s failure to pay more than $5 billion in gas purchases, officials in European capitals and Moscow began searching for transit alternatives.

The introduction of new gas routes to Europe, which includes TurkStream, helps remove political risks, explained Alexander Pasechnik, the head of the Analytical Department at the National Energy Security Fund of Russia.

“Russian-Turkish co-financing of TurkStream is optimal. It will speed up the construction and allow sharing risks,” Pasechnik told Caspian News. 

TurkStream broke ground in the Black Sea near the Russian coastline on May 7, according to Gazprom, which controls 17 percent of global reserves and 72 percent of that in Russia. On June 23, Putin gave the "Go!" command to commence work on the deep water segment, as he pressed a button aboard the Pioneering Spirit, a ship laying pipe for the project, while speaking to Erdogan via telephone.

“The project is right on schedule, and by late 2019 our Turkish and European consumers will have a new, reliable source of Russian gas imports,” said Alexey Miller, Chairman of the Gazprom Management Committee.

Russia plays a critical role in Turkey’s energy security. Turkey’s demand for natural gas is estimated to reach over 50 bcm this year, according to the Ankara-based Natural Gas Distribution Companies' Association. It already receives 16 bcm via the Blue Stream pipeline, which started delivering gas in 2003 and was built to skirt the more expensive, existing gas transit routes that went through Ukraine, Moldova, Romania, and Bulgaria.

In a country where 99 percent of natural gas demand is imported, and natural gas comprises 38 percent of total power generation, pipelines like Blue Stream are and TurkStream are necessary, but not unique.

TurkStream cuts out Ukraine, while the Southern Gas Corridor (SGC), a three-segmented mega-pipeline project set to deliver gas trapped underneath the Caspian Sea to Europe starting in 2020, removes Russia from the import equation completely. 

Azerbaijan is set to deliver gas to Turkey from its Shah Deniz field underneath the Caspian Sea via the South Caucasus Pipeline, which forms the first segment in the corridor, as it extends through Azerbaijan and Georgia before reaching eastern Turkey. There the Trans-Anatolian Pipeline (TANAP), or middle segment of the SGC, runs the entire length of Turkey from east to west.

Set to go online in 2018, TANAP will bring 6 bcm per year of the 16 bcm transported via the SGC, before connecting to the Trans Adriatic Pipeline that will run through Greece and Albania and end in Italy.

“Turkey intends to strengthen its strategic ties with Russia by means of TurkStream. While at the same time, Ankara wants to reduce its dependence on natural gas imports from Russia and diversify its import base via TANAP,” said Vugar Bayramov at the Center for Economic and Social Development in Baku.

In 2015, Russia represented a 55.3 percent share in Ankara’s natural gas purchases, while Iran came in at number two (16.2 percent) and Azerbaijan at number three (12.7 percent). Over the past decade Turkey has trailed China as the world’s largest gas importer.