Is the Turkish Stream project worth it?

Oil&Gas Materials 18 June 2015 18:23 (UTC +04:00)
Before the construction of the Turkish Stream pipeline Russia should consider whether it really needs this project requiring huge investments
Is the Turkish Stream project worth it?

Baku, Azerbaijan, June 18
By Elena Kosolapova - Trend:
Before the construction of the Turkish Stream pipeline Russia should consider whether it really needs this project requiring huge investments, researcher at FRIDE (Foundation for the Foreign relations and external dialogue) from Brussels told Trend.

"The real question is: Is it really worth it for Russia to invest approximately $20 billion for a project just to bypass Ukraine while at the same time the capacity of the proposed pipeline exceeds demand from Turkey, south-eastern Europe and other possible customers," Andreas Marazis said.

He noted that according to the International Energy Agency forecast, the European Union would remain dependent on Russian pipeline gas imports for the foreseeable future either through existing pipeline passing through Ukraine or via the Turkish Stream.
"We need to keep in mind first of all that despite the reduction in consumption of natural gas from the EU, Russia is still Europe's major natural gas supplier," Marazis said.
He noted that Russia has supplied around 155 billion cubic meters of gas into Europe last year (30 percent of overall demand) and more than half of that (82 billion cubic meters) passed through Ukraine.

The expert stressed that in spite of the Energy Union's Strategy aim to diversify gas-supply routes in order to reduce the dependence on Russia of some of its member states, particularly those in the Baltic and Central and Eastern Europe, Russian gas will still be necessary, and the Turkish Stream project does not contradict this strategy.
"Projects such as the Southern Gas Corridor, which once completed, will have initial capacity about 16 billion cubic meters of natural gas per year (6 billion cubic meters will be for Turkish domestic consumption) will just reduce partly EU's dependence on Russian gas, not replace it," he said.

However, Marazis noted that new pipeline projects, and higher LNG import and gas storage capacity bolster the resilience of the EU gas market to short-term disruption.
"Moreover, the construction of interconnectors that enable reverse flows of gas, allows European companies to sell Russian gas back to, for example, Ukraine," he said.

Marazis also noted that the Southern Gas Corridor is already taking place on the ground while in the case of the Turkish Stream there is not any formal agreement except from a memorandum of understanding between Turkish Botas and Russian Gazprom. Moreover the Turkish Energy Minister Taner Yildiz made clear that the first priority is the implementation of the Trans-Anatolian Pipeline (TANAP, which is part of the Southern Gas Corridor) and that the Turkish Pipeline project was not a rival to the TANAP one, the expert said.

He also stressed that another important factor to keep in mind is the fact that the Southern Gas Corridor is expected to deliver 10 billion cubic meters to the European markets by 2020 with later estimates suggesting that there will be gradual increase reaching eventually 50 billion cubic meters of gas delivery annually.

"Obviously this will take some time. Meanwhile, Russian gas will still need to flow into European markets," Marazis said.
The expert stressed that both Turkey and Greece want to make use of their geostrategic advantage and become energy hubs.

"If Russia strikes an agreement with both countries and has the ability to finance the entire project then the Turkish Stream could be realized and the EU will have to act accordingly in order to meet its demands," he said.

Marazis believes that the extension of the Turkish Stream gas pipeline to Greece can help the economy of this country, bogged down in debts. This project could be a way to generate 2,000 jobs at the construction stage and attract much-needed investment in the Greek economy. Moreover Greece would benefit from the transit fees, although current EU legislation strictly prohibits transit fees, the expert said.

Moreover the Turkish Stream pipeline will give the Greek government the chance to negotiate a discount of around 10 percent on Russian gas supplies, he added.
Meanwhile the expert noted that so far, the only guarantees concerning Russian financial support for the construction of the pipeline are vague rumors that Greece will receive a prepayment based on future profits it could earn from shipping Russian gas to Europe, and Gazprom CEO's statement that a Russian-European consortium will be able to raise the required funds to construct the gas pipeline in Greece, which is estimated to cost €2 billion.

Edited by CN

Follow the author on Twitter:@E_Kosolapova