Turkish stream not to reach European market – expert (exclusive)

Oil&Gas Materials 28 August 2015 13:03 (UTC +04:00)

Baku, Azerbaijan, August 28

By Aygun Badalova - Trend:

Turkish Stream gas pipeline will not supply the European market in the foreseeable future, Vesa Ahoniemi, an independent energy analyst believes.

"The future of Turkish Stream is very uncertain, in particular, the schedule and capacity Russia announced in December 2014 are unlikely to materialize," Ahoniemi told Trend.

He mentioned that originally the project was presented by Gazprom as a way to bypass Ukraine entirely and maintain or even increase Gazprom's market share in South-East Europe.

"Remarkably, Russia's plan also envisaged Europeans themselves would pay and build pipelines to connect their gas network to that of Turkey, even as Europeans did not share Gazprom's objective of bypassing Ukraine," Ahoniemi said.

He believes that the Turkish Stream pipeline, if it ever materializes, will end up supplying merely the Turkish market.

"I say "if" because the bilateral negotiations between Gazprom and Turkish Botas have been very difficult," he said, also mentioning that Gazprom recently cancelled its contract with Italian Saipen, the contractor supposedly in charge of building the underwater portion of Turkish Stream (and South Stream before it was cancelled).

"This suggests Gazprom still sees long negotiations ahead," Ahoniemi said.

He also said that he does not consider Turkish Stream as a competitor to the Southern Gas Corridor (SGC) project, which envisages transportation of gas from the Caspian region through Georgia and Turkey to Europe.

At the initial stage, the gas to be produced as part of the second phase of development of Azerbaijani gas condensate Shah Deniz field is considered as the main source for the Southern Gas Corridor project. At a later stage, other sources may join the project.

"SGC is very much a commercial project while Turkish Stream is really not," Ahoniemi said.

"The upside to SGC is of course diversification of supply and indeed its commercial nature, which ensures that its regulatory treatment is much more favorable than Gazprom's projects," he added.

The Turkish Stream project involves the construction of a gas pipeline with a capacity of 63 billion cubic meters of gas a year from Russia to Turkey via the Black Sea. The gas pipeline is to consist of four stretches bringing up to 47 billion cubic meters of gas to Turkey's border with Greece.

Russian energy giant Gazprom estimates the cost of constructing the first branch of the Turkish Stream pipeline at €4.3 billion ($4.72 billion), while the overall price tag for all four legs of this project are estimated at €11.4 billion.

In July, a source in the Russian Energy Ministry told journalists that Russia had sent a proposal for the construction of the first branch of the gas pipeline to Turkey.

Russia and Turkey were to sign an intergovernmental agreement until mid-2015 for the construction of the 'Turkish Stream' gas pipeline, but this hasn't still happened.