JUNE 2015
/
World Pipelines
3
G
azprom remains one of Europe’s main natural gas
providers, ensuring reliable and abundant supplies via a
network of pipelines such as Nord Stream in Western
Europe, and Blue Stream and the Trans-Balkan
pipelines supplying Turkey. While European gas consumption
stagnates, production is declining mainly because of the
depletion of the North Sea reserves. These trends make
Gazprom optimistic that its exports to Europe by 2017 will
increase by 8% compared to current
levels and will remain significant in
the coming decades.
Yet, the transit of 52% of this gas
via Ukraine remains a threat to
Gazprom’s ambition to maintain safe
and abundant gas supplies to its
European partners in the coming
years, since the country has proven
an unreliable and unstable partner on
several occasions in the past.
Gazprom has been looking for
options to eliminate this transit risk
for many years, and in particular via
the construction of the huge South
Stream pipeline, planned to run via
the Black Sea, and then through the
Balkans to Austria and Italy. However,
Brussels torpedoed the plans for the
project’s construction: first by setting
obstacles to the licensing procedure on the grounds that it did
not meet the provisions of the Third Energy Package (e.g. the
requirement to separate generation and sale operations from
transmission networks), and then by forcing Bulgaria (under the
threat of a possible bank embargo due to the liquidity problem
that Bulgarian banks were facing over the period June -
September 2014) to stop the construction of the land section of
the pipeline.
In the face of political obstacles, but also due to the
increasing construction costs of South Stream – whose
budget had exceeded US$35 billion – and the simultaneous
reduction in crude oil prices (a 60% drop in eight months),
Gazprom decided to develop an alternative pipeline project,
still running under the Black Sea, but bypassing Bulgaria and
avoiding EU territory. The new pipeline – commonly referred
to as ‘Turk Stream’ – is planned to reach Turkey a few
kilometres north of Istanbul, and will then run towards the
Greek-Turkish border, where the Greek-Turkish
interconnector has been in operation since 2007. The exit
area at the Turkish-Greek border will be around Ipsala.
Gazprom’s plan, as confirmed by its Chief Executive Officer
Alexei Miller at the end of January, is the creation of a delivery
point at the Greek-Turkish border where gas can be further
transferred to Europe. In fact, this means that Bulgaria and other
Balkan countries will need to get their gas via Greece, since the
Greek-Bulgarian interconnector is forecasted to be constructed
by 2018 latest.
It should be noted that Turkey, out of the total Turk Stream
capacity of 63 billion m
3
, will be receiving at least 16 - 17 billion m
3
of the pipeline’s capacity to cover its own needs. A large share
will help meet the growing energy needs of the Istanbul area
(with a population of 12 million).
Consequently, even if the necessary
infrastructure on the Greek side is not
ready by the end of 2016 – when the
first line of Turk Stream is expected
to come on-stream – the pipeline
would still operate and supply the
Turkish market with sufficient gas
volumes.
The project also offers economic
advantages. Firstly, some of the
investments made for the South
Stream project will be fully used for
the implementation of the pipeline to
Turkey. As regards the project’s cost,
Turk Stream’s is estimated at one
third of South Stream’s initial value,
namely about US$10 billion. The
reason behind this significantly
reduced cost is that the project’s
budget now includes just the undersea section and about 188 km
on Turkish territory. In addition, under Gazprom’s new strategy,
European companies will be responsible for building the
necessary infrastructure to bring the gas to their market, at their
own costs. As a result, the new project not only appears viable,
but also the safest and financially most competitive gateway to
European markets.
Turk Stream is a chance for Greece to play a more strategic
and geopolitical role in the region by turning it into a regional gas
hub thanks to two main pipelines – TAP and Turk Stream, the
Vertical Corridor and the various additional facilities
(interconnectors, LNG terminals, reserve spaces). Fully aware of
the advantages offered by a gas hub, Bulgaria is looking for an
opportunity to develop its own. However, here the question
remains as to where would such a hub would get the gas from
and where would it direct it to.
Greece appears best placed to make the most of the project,
not only because the location at the Greek-Turkish border offers
a competitive advantage but also because some energy
infrastructure is already under development. Let’s hope that the
country’s new government will manage to adequately leverage
these new developments for the benefit of the economy and
the geopolitical upgrade of the country.
Vice President and Executive Director of the
Institute of Energy for South-East Europe (IENE)
Costis Stambolis
Guest
C
o
mment
TURK STREAM
IS A CHANCE
FOR GREECE TO
PLAY A MORE
STRATEGIC AND
GEOPOLITICAL
ROLE IN THE
REGION
