Russia can encounter problems with gas supply via Turkish Stream

Oil&Gas Materials 22 May 2015 17:04 (UTC +04:00)
Russia can encounter problems with gas supply via the Turkish Stream.
Russia can encounter problems with gas supply via Turkish Stream

Baku, Azerbaijan, May 22

By Elena Kosolapova - Trend:

Russia can encounter problems with gas supply via the Turkish Stream, Sergey Pravosudov, director of the Russian National Energy Institute, told Trend.

He recalled that Russia and the European countries have long-term contracts on gas supply, most of which are active until 2019, the year when the term of the contract for the transit of Russian gas through Ukraine expires.

"The gas delivery points are indicated in these contracts," the expert said. "They are not on the border between the EU and Turkey."

Earlier, Russian Energy Minister Alexander Novak and Gazprom head Alexey Miller said that Russia will stop gas transit to Europe through Ukraine from 2019. Afterwards, the gas will be supplied via the Turkish Stream to the border of Turkey with the EU.

"If Russia refuses to continue supplying gas to Europe via a route through Ukraine after 2019, it will be violation of the contracts that expire later than those signed with several countries," he said.

He said that it is possible to solve this problem only through a dialogue between the supplier and the buyer and the renegotiation of terms of existing contracts.

At the same time, he said that this would be difficult to do, because these European countries will suffer from political pressure.

"The United States put pressure on the European Commission, the European Commission puts pressure on the countries that are members of the EU," said Pravosudov. "Therefore, the external pressure will hinder the implementation of this project."

He went on to remind that Russia decided to refuse to supply gas through Ukraine because it doesn't consider this route reliable in the long term. He said that Russia's position is in the fact that there is a civil war in Ukraine and the country is a step away from bankruptcy.

Pravosudov said that Ukrainian Naftogaz is also on the verge of bankruptcy, because it shows the multibillion-dollar losses each year. He said that only in the first quarter of 2015, the loss of Naftogaz accounted for $1 billion.

"Since Naftogaz is state-owned, it is subsidized by the budget, but the budget lives only at the expense of loans," said the expert. "Accordingly, if Ukraine is declared bankrupt, it means that Naftogaz is also automatically declared bankrupt."

Moreover, Pravosudov said that also, investments should be made in the pipeline that runs through Ukraine, adding that Ukraine has no funds and it is unknown who will undertake these expenditures.

For all these reasons Gazprom proposes a bypass route through Turkey, said the expert. He added that however, in this case, such a question arises: how to deliver gas from EU borders to consumers?

Pravosudov said that in order to deliver gas to small countries such as Greece, Bulgaria, Romania, the existing infrastructure can be used by putting it into operation in a reverse mode.

But the main gas purchasers are the other countries such as Hungary, Austria, Italy and new infrastructure is needed to deliver gas from Turkish borders to the consumers in these countries, the expert added.

This infrastructure faces the same problems as the South Stream project before, Pravosudov said.

"The key problem due to which Gazprom refused from the launch of the South Stream gas pipeline is that the European Commission didn't offer an exception from the rules of the Third Energy Package for this project and demanded its implementation in accordance with these norms," said the expert. "This would mean that Gazprom was to arrange the construction of this pipeline, and then to give 50 percent to someone, to some of its rivals."

Pravosudov said that naturally, such a thing didn't suit Gazprom, especially since the competing project TAP got such permission.

"Now, Gazprom doesn't want to build gas pipelines in Europe, as it understands that it won't be granted exceptions to the rules of the Third Energy Package," said the expert.

He also said Gazprom suggests that the companies from those countries should solve the issue with regard to the infrastructure by themselves.

"It is not yet clear whether they will agree to build, or not," Pravosudov added.

At the same time, he said, the current EU sanctions against Russia won't affect the implementation of the Turkish Stream project, since the sanctions don't apply to Gazprom, and don't interfere with its work.

"As for example, recently Gazprom attracted a loan from Italy, despite of the anti-Russian sanctions," Pravosudov reminded.

Regarding a possible construction of pipelines from the borders of Turkey and EU, the expert said the sanctions won't affect them either, since it is assumed that they will be built by European companies in the EU.

Edited by SI


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