Nord Stream-2 and Turkish Stream unlikely to co-exist

Oil&Gas Materials 5 August 2016 17:57 (UTC +04:00)

Baku, Azerbaijan, Aug.5

By Aygun Badalova - Trend:

The first string of Turkish Stream gas pipeline, which is meant to take the Russian gas to Turkey across the Black Sea, might go ahead if political rapprochement between Turkey and Russia continues and improves, and if the project does not add any financial burden for Ankara, Sohbet Karbuz, Director of Hydrocarbons, France, Mediterranean Energy Observatory (OME) believes.

“Afterall, it corresponds to more or less the existing amount of gas delivered to Turkey through Ukraine,” Karbuz told Trend August 5.

Initially, Russian "Gazprom" planned to build four lines of the Turkish Stream with total capacity of 63 billion cubic meters of gas per year. The capacity of each line was expected to reach 15.75 billion cubic meters per year. Later, it was decided to build fewer lines.

In late 2015 the Turkish Stream project was frozen due to sharp deterioration of relations between Moscow and Ankara when Turkey shot down a Russian Su-24 bomber with two pilots on board. On June 27, Turkey’s President Recep Tayyip Erdogan sent a letter of condolences to Putin over the death of Russian Su-24 pilot and expressed regret over the incident. After that, the two countries’ relations began to improve.

Last week Russia and Turkey announced the resumption of negotiations on the Turkish Stream this week and the intention to create a working group on this project.

The implementation of Turkish Stream’s second string would be very tricky, Karbuz believes.

“Will it end up in Turkey and then onward to Turkey, or will it land in Bulgaria then go to Greece and onward to Italy? The EU politics will pay a major role in the second string, as we are witnessing in the debate on Nord Stream-2, but the first string, if goes ahead, is not the EU’s business,” he said.

“The EU should first put its own house in order vis-à-vis the Nord Stream-2 before telling Turkey how it should do,” the expert added.

Karbuz also noted that Russia wants to bypass Ukraine as strongly as the EU wants to cut dependency on Russian gas.

“But at the end the whole issue is a foreign policy matter. Nord Stream-2 and Turkish Stream (Greek Stream or South European gas pipeline) both would reduce gas transit through Ukraine. And that transit through Ukraine is a strategic commitment of the EU,” Karbuz said.

The problem is that how long the EU will subsidize Ukraine, he believes.

The expert mentioned that the capacity Nord Stream-2 at 55 billion cubic meters per year plus two string Turkish Stream with a total capacity of 31 billion cubic meters per year would in total make 86 billion cubic meters per year.

“So whichever pipeline with whatever capacity is constructed, it will have a direct impact on the gas transit volumes through Ukraine”, Karbuz said, noted that that Russian gas transit through Ukraine in 2015 was 67 billion cubic meters.

Nord Stream-2 and Turkish Stream are unlikely to co-exist in the current political and commercial environment, Karbuz believes.

“For the Turkish Stream, on the one hand much will depend on how the issue of Gazprom’s existing contracts with Ukraine (which expires at the end of 2019) will be handled, and on the other hand how the delivery point clauses in the Gazprom contracts with buyers beyond Ukraine will be renegotiated,” the expert said.

The Nord Stream 2 project includes construction of two lines of the offshore gas pipeline with a total capacity of 55 billion cubic meters of gas a year from Russia to Germany under the Baltic Sea, in addition to the existing two lines.

The project is to be implemented by the engineering company New European Pipeline AG. The stakes of partners in Nord Stream 2 AG will be distributed as follows: Gazprom will hold 50 percent, while BASF, E.ON, Engie, OMV and Shell will own 10 percent each.

Earlier Polish regulator issued a formal statement of objections to the deal regarding the construction of the Nord-Steram-2 gas pipeline.