Russian gas giant Gazprom has invested billions in extending and diversifying its pipeline infrastructure to Europe through Turk Stream and Nord Stream 2. Both projects are part of Moscow's vision to circumvent Ukraine and deprive the country of its strategic value as a transit country for its gas. Nord Stream 2 has been the focus of attention of critics while Turk Stream has gone relatively unnoticed. Both pipelines are scheduled for completion this year. In Turk Stream's case, the entry point of the pipeline into Europe has not yet been announced.
The project consists out of two pipes, each with a total capacity of 31.5 bcm. One string is marked for the domestic Turkish market, while the second string is intended for the European market. Gazprom has several options regarding the entry point into Europe: west into Greece and Italy or north into Bulgaria and towards Baumgarten Austria. Gazprom, intentionally, has created a veil of uncertainty to maximize its financial gains and achieve Moscow's political goals. Recent developments and Russia's long-term strategic goals imply an announcement in favour of South Stream Lite (the northern option).
Strategic implications
From an economic point of view, Turk Stream is not the most logical option to get Russian gas into Europe due to existing infrastructure in Ukraine. Some countries, however, will benefit from the project. Direct access to Russian gas by Turkey, for example, will reduce costs due to the absence of transit fees which instead will be paid by other countries, down the road. Related: Does Saudi Arabia Really Have As Much Oil As Analysts Think?
Gazprom, as a state-controlled company, needs to take into account the Kremlin's strategic goals. The 2014 revolution in Ukraine created an unprecedented crisis between Russia and its one-time ally. Therefore, Turk Stream's primary goal is to deprive Ukraine of its strategic value and much-needed revenue from transit fees. It is projected that the country could lose up to 3 percent of its GDP when transit through Ukraine decreases from 90 bcm/year to approximately 10-15 bcm/year due to Nord Stream 2 and Turk Stream.
The church and state
Politics will be the primary factor in Gazprom's final decision regarding Turk Stream, and the political crisis between Ukraine and Russia has blown over from the physical realm, into the spiritual one. Historically, the Orthodox Church in Ukraine has been under the authority of the Russian Orthodox Church in Moscow. The Church in Ukraine, however, has declared its independence due to the political crisis between the countries which has been formalized by Ecumenical Patriarch Bartholomew, the head of the global Orthodox Church.
The Russian Orthodox Church, in turn, cut off ties with the Fener Greek Patriarchate of which Bartholomew is the highest cleric. While Greece and Russia still maintain close political relations and Athens has offered to extend Turk Stream into its territory, the religious conflict could have serious political ramifications. Volkan Özdemir, head of the Ankara-based Institute for Energy Markets and Policies (EPPEN), said in an interview that "Russians in response to this are focusing on the Bulgarian option, and not on Greece. Therefore, in this sense, I think that the Russians will make a political preference." Related: Bank Of America: Oil 'Anchored' Until 2024
Bulgaria's green light
Due to South Stream's cancellation, Bulgaria missed out on a significant economic opportunity. Turk Stream, however, offers a window of opportunity to obtain a strategic and financial advantage vis-Ã -vis its current position. Bulgaria is not biding its time and waiting for Gazprom to make an announcement. Instead, Sofia has doubled down on its effort to construct the extension of Turk Stream and receive Russian gas for its domestic market and beyond.
Bulgartransgaz announced the successful completion of the economic test for expanding Bulgaria's gas transit network from Turkey to Serbia. This means that the capacity of the future pipeline has been booked for 20 years. Following the positive results, the national transmission company has taken the final investment decision for the €1.4 billion project.
Gazprom's apparent decision
Despite Gazprom's attempt to maintain a veil of uncertainty, all factors seem to point towards the north and Bulgaria. The Turk Stream project is meant to circumvent Ukraine. Furthermore, Gazprom has long-term delivery contracts with customers in southeast Europe. To preserve the security of supply and deprive Ukraine of its strategic value, Turk Stream needs to be extended into Bulgaria and towards Austria. Therefore, it seems highly likely that Gazprom will soon announce its decision for the preferred northern extension.
By Vanand Meliksetian for Oilprice.com
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Comments
Just yesterday Russia’s gas giant Gazprom announced that the Power of Siberia gas pipeline will be operational by the 1st of December this year with an annual delivery of 38 billion cubic metres a year (bcm/y) for China for the next thirty years. The pipeline capacity can be increased to 61bcm/y if Putin decides to cut the shipment of natural gas to Europe in favour of China.
And with the eventual completion of Nord Stream 2 and the Turk Stream gas pipelines, Russia’s dominance in the European Union’s (EU) fast-growing gas market will be unchallengeable.
Then, there is India. Plans are under consideration for building a pipeline to India as an extension to Power of Siberia.
And it does not stop there. Russia and Japan are actively discussing the construction of a natural gas supply pipeline from Sakhalin (a Russian island in the Pacific Ocean) to Japan. The 1,500 km underwater pipeline will be able to provide Japan with 20 bcm/y of natural gas per year, which is 17% of Japan’s LNG imports.
While Nord Stream 2 will carry Russian gas supplies under the Baltic Sea to Germany and onward to the EU, Turk Stream will carry Russian gas supplies under the Black Sea to Turkey and the EU. The Turk Stream project consists of two strings. One string is marked for the domestic Turkish market, while the second string is intended for the European market. However, the entry point of the Turk Stream pipeline into Europe has not yet been announced.
There are many factors which seem to favour Bulgaria. First the Turk Stream project is meant to circumvent Ukraine. Second, Gazprom has long-term delivery contracts with customers in southeast Europe. To preserve the security of supply and deprive Ukraine of its strategic value, Turk Stream needs to be extended into Bulgaria and towards Austria.
Still, the completion of the Power of Siberia will send a huge signal to the EU that Russia is not vulnerable to economic or geopolitical pressure on the gas price or supplies as it could easily switch its gas supplies from the EU to China.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
should be removed and beaten bt t nkd. this fake bdstrd
It's an error. Each string will have the throughput capacity of 15.75 billion cubic meters.
Bulgaria has canceled the pipeline project due to presume from US and the newly NATO member Macedonia will follow so the Turkish Stream has dead end. There is no access for the Russia Gas to Europe from south east.