Comeback of South Stream?

August 29, 2015

grafik In my article Turkish, Greek And Tesla Streams Re-routing Energy Supply In Eastern Europe how new Turk(ish) Stream pipeline is re-routing the energy supply in whole Eastern Europe with Greek and Tesla [Balkan] Stream gas pipelines. South Stream, was cancelled last December (2014) after Bulgaria (influenced by the EU acting on behalf of the US) made it impossible to construct the pipeline through its territory. South Stream project was replaced with ‘Turkish Stream’, the Russian pipeline to Turkey’s Eastern Thrace region and from there with ‘Greek’, ‘Tesla’ (or ‘Balkan’) Streams intended to South Stream’s Serbian, Hungarian, and Austrian partners, but detouring through Greece and Macedonia to compensate for the exclusion of Bulgaria.

At the same time, several observers say that South Stream has a good chance of being revived. Since there’s been no official cancellation of the South Stream cooperation from Moscow, Bulgaria assumes that the project can still be saved. Speculation about a revival appears to have come from a source in Moscow. Russia needs the pipelines as a tool to assert political pressure. And Bulgaria could play a role in these plans. (Source: DW ).

European nations could buy gas from a terminal at the Greco-Turkish border, in what was interpreted as a vague hint that such purchases could either be LNG or possibly even the start of a brand new pipeline. Anyway with these plans Turk(ish) Stream and its follow-ups are according EU regulations. The obstacle of South Stream was the EU’s Third Energy Package (TEP). Under these rules, a single company cannot own the pipeline through which it also supplies gas.

Comeback of South Stream

Now though, according Deutsche Welle there’s a different tone between Moscow and Sofia. Earlier this week, Putin acknowledged that Bulgaria’s NATO membership is a done deal. “We have to respect the choice of the Bulgarian people and continue to work with Bulgaria, independently of all the difficult questions in connection with different projects, including South Stream,” he said. Putin added that Russia and Bulgaria have historically enjoyed close ties. In Bulgaria, his words have been taken as a “clear signal of reconciliation” and “a completely new tone in bilateral relations.”

According Natural Gas Europe Bulgarian Energy Minister Temenuzhka Petkova has announced new efforts to push forward with South Stream, recently telling local media the project still remains a major goal for the country. She also said that the country’s has never walked out of the South Stream project. Kiril Domuschiev, head of the Confederation of Employers and Industrialists in Bulgaria, noted that pipework for South Stream could also be used for Turkish Stream or any other project involving both Bulgaria and Gazprom. He added that no one would stop Bulgaria from doing business with Russia.

No other country lying on the proposed route of the pipeline from Russia to central Europe is better prepared than Bulgaria in technical and organizational terms to start the construction works immediately, said Bulgaria’s former Energy Minister Dragomir Stoynev who is deputy chairman of opposition Bulgarian Socialist Party (BSP).  Another big advantage for Bulgaria is the availability of an agreed funding mechanism for the project which doesn’t involve budget spending and only needs to be activated, Stoynev said in comments after Putin’s earlier statement that Moscow will work closely with Bulgaria on the implementation of joint projects including those in the energy sector such as the South Stream gas pipeline. (Source: Novinite.com )

Energy expert Professor Atanas Tasev said in an interview for FOCUS News Agency , that “Both countries [Bulgaria, Russia] seem to have the intention. It remains Brussels to come out with a stance on the matter. Perhaps we will witness favourable processes in resolving the conflict in Ukraine,” “Many steps should follow from now on,” he added and stressed that the first official reaction from the Bulgaria came from Energy Minister Temenuzhka Petkova, who said that our country is ready.

“A problem can be solved only in the environment where it was created. Since it was the Russian President who created the problem, it is he who can solve it,” Prof Tasev, who has worked as a financial analyst for a number of deals in the Bulgarian energy sector, believes. He maintains that the route previously designated for South Stream is not “a result of some sentiments for the Bulgarian-Soviet fellowship” but is the most economically and technically viable solution. At the same time the professor notes that it is highly unlikely that South Stream is “reborn” with all of the four lines. He foresees that one of the pipes, with a capacity of 15.75 billion cubic meters of gas, might reach Europe via Turkey, while the others could be “redirected” to Bulgaria. (Source and more at Novinite.com )

Nine months after Russia loudly announced that it repeals the South Stream project, the Bulgarian government continues to carry out activities on construction of the pipeline. In addition the joint Bulgarian-Russian company South Stream Bulgaria, which had to build the pipeline on Bulgarian territory, continues to exist and accumulate costs. (Source: Radio Bulgaria )
turkish-stream-south-stream-karte

Nonetheless Greece, FYROM, Serbia, and Hungary are on the verge of signing a joint memorandum of cooperation on Turkish Stream and its Balkan route. Serbian media have already named part of the route as the “Tesla Pipeline” in an obvious attempt to “nationalize” the section that will pass through Serbia. Insiders suggest the Greek, Serbian, and Hungarian foreign ministers will meet in Belgrade in September to announce an agreement that will see the exact route formalized. It should be noted the foreign ministers, not energy ministers, have taken the lead on this file. (Source: Natural Gas Europe ) Latest developments with Tesla Stream wouldn’t have been possible had Macedonia not beaten back the Color Revolution attempt that aimed to sabotage the entire thing. (More in Terrorism in Macedonia Wasn’t An Isolated Act! ).

Eastring?

For Eastern Europe there is also a project called Eastring will bring gas from Azerbaijan, Turkmenistan, Iraq, Cyprus and Russia and will provide reverse deliveries from the gas hubs in Western Europe. This is actually a step towards the creation of a vertical gas corridor which is particularly valuable to Bulgaria.

Eastring would connect infrastructure in Slovakia to Romania and Bulgaria. Slovakia has taken the lead on the project and even suggested connecting to Turk Stream. Bratislava wants to be part of Gazprom’s plans to diversify transit options away from Ukraine because Slovakia is the critical link between pipelines in Ukraine and central Europe. The Slovakian company Eustream’s gas pipeline, expected to deliver gas to countries in the Balkans, and Gazprom’s Turkish Stream will be complementary projects, Eustream’s international development and public affairs head told RIA Novosti [on Feb. 2015]. Eustream’s Eastring pipeline will run from Bulgaria to Romania and then, via Hungary or Ukraine, to Slovakia. Its planned capacity will be from 20 billion to 40 billion cubic meters per year and project partners are Eustream, Transgaz and Bulgartransgaz.

Wider picture

Aside from production, the transportation of crude oil, natural gas and petroleum products is of paramount concern for oil-producing nations. For energy consumers, transit routes are necessary lifelines. A huge amount of the world’s energy is transited through pipelines, across the Eurasian landmass in particular. Natural gas has limited and expensive transport options. As a result, natural gas pipelines are constantly used as tool of the political pressure and bargaining. One of the most notable battlefields is the European continent, where Russia has exerted its influence through an intricate network of pipelines.

There is a strategic cooperation in the energy sector between EU and Russia as Russia is still the primary supplier of the EU’s hydrocarbon resources, providing 42% of its imported gas and 33% of its imported oil (2013). In addition due global warming the EU want to increase the share of renewable resources and natural gas in their consumption patterns. Russia’s bad relations with the West and Ukraine have created the need to Russia to rearrange its energy policy. From the Russia’s point of view Turkey, as a regional power with its independent policies, e.g. when deciding not to partake in the Western sanctions against Russia due to the Ukraine Crisis, is a more reliable partner than other alternatives. Cooperation between these two regional powers on issues related to Caucasia and Central Asia would generate mutual benefits so indeed the Ukraine Crisis may have paved the way for a new form of cooperation in Russian-Turkish relations.

The Continent has also taken steps to build a regulatory environment conducive to the new energy market it envisions. The Third Energy Package has played a key role in coordinating the European energy market and eroding monopolistic tendencies plaguing the natural gas networks. Among other things, the package’s regulations prevent pipeline operators from supplying natural gas and prevent suppliers from operating the pipelines. These rules have blocked Gazprom from owning or heavily investing in any European pipelines, with a few notable exceptions, such as the Ostsee-Pipeline-Anbindungsleitung pipeline. Europe has applied equal scrutiny to deals involving non-Russian companies, including Azerbaijani national oil company SOCAR’s proposed purchase of Greek pipeline operator DESFA.

Interactive: Veins of Influence

Screen%20Shot%202015-08-13%20at%2010.03.21%20AM

Interactive: Veins of Influence is republished with permission of Stratfor.”

 

Turk Stream update

The Gapzrom-led Turk(ish) Stream pipeline project has stalled as negotiations between Russia and Turkey on gas pricing have broken down. On July 2015 the Russian Energy Ministry sent to Ankara two versions of an intergovernmental agreement on the Turkish Stream gas pipeline, proposing to construct either one or all four planned strings.

The technical director of South Stream Transport B.V. Andrey Fick has been appointed as general director of the company in charge of construction of the Russia-owned Turkish Stream gas pipeline, Russian energy giant Gazprom announced in its statement, April 2015.

Related to The Environmental Impact Assessment (EIA), the Project benefits from the data available from the extensive surveying and approved EIA, and Environmental and Social Impact Assessment (ESIA) in accordance with international financing standards, conducted for the South Stream Offshore Pipeline project. The EIA and permitting process for the Turkish portion of the offshore pipeline is divided into two parts. South Stream Transport is conducting an EIA for the portion of the pipeline from the border of the Turkish and Bulgarian Exclusive Economic Zone (EEZ) to the Turkish coastline, with a length of approximately 275 km. For the remainder of the offshore route, the EIA was already approved in 2014 in the context of the South Stream Offshore Project.

map_route_turkey

Bottom line

Gazprom has asserted several times that it will cut off gas transits through Ukraine by the end of the decade. The current alternative routes (Nord Stream + Belarus), however, only present a capacity of 86.5 bcm per year. To maintain the current level of Russia’s exports (119 bcm in 2014) at least 35 bcm of additional pipeline capacity would be needed.

Turk Stream as well South Stream, would enhance the Continent’s energy security because it would enable natural gas flows to Europe to continue uninterrupted in the event of a fallout between Ukraine and Russia. The pipeline project would also incentivize European Union-based companies to invest in infrastructure in Southeastern Europe, integrating countries such as Romania and Bulgaria, into the more mature natural gas markets in Central Europe. New infrastructure for Turk Stream could also eventually carry Iranian or Central Asian natural gas to Europe. Due political reasons USA and EU probably are not very pleased nor active with Turk Stream, they maybe are tolerating the project so long as Russia adheres to the Third Energy Package and finalized Energy Union Package rules restricting Russian control over the Turk Stream project.

turkishstream (2)

 


Turkish, Greek And Tesla Streams Re-routing Energy Supply In Eastern Europe

June 2, 2015

Russia cancelled its South Stream gas pipeline project in December 2014 replacing it with new Turkish Stream pipeline. The follow-up of this Russian-Turkish project is re-routing the energy supply in whole Eastern Europe with Greek and Tesla [Balkan] Stream gas pipelines.

image001The head of Russian gas producer Gazprom stated on 7th May 2015 that the firm had decided to start building the Turkish Stream pipeline and that preparations to build the undersea stretch of the pipeline were under way. During a meeting between Gazprom’s Alexei Miller and Turkish Minister of Energy Taner Yildiz, the parties sent a resounding message to gas markets: the Turkish Stream will be brought on stream in 19 months. Natural Gas Europe reports: “We had very efficient and crucial talks today. It was agreed to bring onstream Turkish Stream and to start gas supplies in December 2016. Gazprom, while implementing its portion of work under the Turkish Stream project, will follow the agreements reached today,” Miller said in a note released on 7th May 2015

“Gazprom has moved to the construction stage of the sea part of the Turkish Stream pipeline,” Gazprom chief executive Alexei Miller said in an interview with a Russian television. The Russian firm may be reviving the infrastructure that it built for the South Stream. South Stream gas pipeline construction in shallow waters will begin in first 10 days of June 2015. The pipes originally bought for South Stream will be used for the Turkish Stream. For laying the pipes in the bottom of Black Sea, Russia rented two pipe-laying vessels from Italian Saipem company in last fall. Following the cancellation of the South Stream pipeline project in late 2014, Gazprom has paid €25 million monthly to Saipem without any usage of the vessels – Castoro Sei and Saipem 7000.

Recently there has been some tensions between Russia and Turkey. Russia’s President Putin participated to the ceremony in Yerevan to commemorate the Armenian victims of the 1915 events, and Turkish leaders have made some critical comments over situation of tatars in Crimea. However now it seems that the Turkish and Russian delegations have renewed their commitment to increase energy ties. (More e.g in NaturalGasEurope ) .

While South Stream Pipeline project was replaced with Turkish Stream and planning is going on to continue project with Greece and Tesla Streams some serious threats still remain that could endanger the projects. These mostly have to deal a reoccurrence of instability in Macedonia [look my article Terrorism in Macedonia Wasn’t An Isolated Act! ]

eu-gas-russia

Gas to Europe

There are three main sources of supply of pipeline gas to Europe. They are Russia, Norway and North Africa. Norway probably will keep or even reduce the volumes. Besides, North Africa provides gas only to Italy and Spain and its volumes have significantly reduced in recent years.

During last years LNG (liquid natural gas) has came more to European gas markets. There is now more LNG gas terminals in Europe and some new terminals will came in 2015 e.g in Poland and Lithuania so in principle it is possible to import LNG from US. However Europe has decreased its LNG imports due its high price; and as Asian LNG import prices as well demand are much more higher than those in Europe it seems that LNG is not real alternative to Russian gas. LNG suppliers have redirected the volumes of liquefied natural gas to other premium markets and Europe can only be guided by those surpluses when they are not in demand in Asia.

The construction of the Trans Anatolian Pipeline, which will connect the South Caucasus Pipeline to the Turkish-Greek border is already initiated and the construction of the Trans Adriatic Pipeline, bringing gas to the Italian market, will follow. These investments will secure some 10 billion cubic metres of gas a year from Azerbaijan by 2019 to the European market.

The Russian gas to Europe has now three main energy high ways: 1st The Nord Stream via Baltic Sea, 2nd Jamal, four pipelines through Belarus and 3rd Transgas or pipelines through Ukraine. More than 86 billion cubic meters (bcm) of the gas exported to Europe by Gazprom passed through Ukraine’s pipeline network in 2013 – about half of the total. There is also some economic reason to re-route Russian gas via Turkish Stream instead of Ukraine as modernising Ukraine’s gas transport system is estimated to cost 19.5 billion dollars.

After building the first Turkish Stream line, the existing Bulgaria Turkey line will be empty, however it can be used for reverse flow to Bulgaria. (Source: NewEurope )

TurkishStream

Re-routing energy supply in Eastern Europe

Turkish Stream will redesign completely the energy supply route in Turkey and Eastern Europe. Gas that is currently transported via the Trans-Balkan Pipeline through Ukraine to Romania, Bulgaria and Turkey will be re-routed so that Turkey will become the first and not the last recipient of gas in the supply chain. One new aspect are gas interconnectors between Central and East European countries. These interconnectors allow a much better crisis supply of gas, together with new reverse-flow capacities.

Gazprom has already told Europe that it plans to cease using its current export route through Ukraine in 2019 and shift those natural gas supplies to the Turkish Stream pipeline. As Russia now begins construction on the first of Turkish Stream’s four parallel pipelines, each with a capacity of about 16 billion cubic meters. Gazprom can use this first pipeline to supply Turkish natural gas market. Three other pipelines can be implemented when EU and especially Central and East European countries decide to build infrastructure to deliver gas from Turkey to European markets currently transported by the Trans-Balkan pipeline (TBP) to Turkey via Ukraine, Moldova, Romania and Bulgaria. The expiration of a transit agreement on Russian gas supply through Ukraine in 2019 along with the completion of Turkish Stream mean that TBP will likely be suspended. This in itself would be beneficial to Turkey as its security of supply would no longer be vulnerable to Russia’s political stand-offs with Ukraine or other eastern European countries along the route.

On 7th April 2015 representatives of five countries – Hungary, Serbia, Macedonia, Greece and Turkey – met in Budapest, announcing the formation of a working group to facilitate natural gas deliveries – specifically infrastructure development – to their markets from gas emanating from Turkey including possible participation in the Turkish Stream pipeline. The group has pledged to meet again in July and hopes to involve Albania and Bosnia & Herzegovina.

As for whether Gazprom can finance its three major pipeline projects the company has a strong balance sheet, relatively low level of net debt and robust cash flow. Considering it has spent $20 billion on transport over the last few years, the spending required on Turk Stream, Power of Siberia and Altai averages about $10 billion/year.

Greece

One of the main factors in Moscow’s shift from South Stream to Turkish Stream was the EU’s Third Energy Package (TEP). Under these rules, a single company cannot own the pipeline through which it also supplies gas. Neither Russia nor Turkey is an EU member, and so neither are bound by the TEP, which makes the construction of Turkish Stream much easier. However, the construction of Turkish Stream is not the only issue at stake. The pipeline will have to stop at the Turkey- Greece border because of the TEP rules, given that Greece is an EU member state.

In order to transport its gas to Greece and onwards, Gazprom needs to use existing interconnectors – either TAP or Interconnector-Turkey-Greece-Italy, including the DESFA-operated Greek National Gas Transmission System (NGTS). Turkish Stream will traverse the Greek territory as ‘Greek Stream’ and then it will spread itself into two routes. Turkish Stream will traverse the Greek territory as ‘Greek Stream’ and then it will spread itself into two routes. A main line towards the North via FYROM and Serbia and one towards Italy, merging itself with the Italy-Greece Interconnector (ITGI) which originally was to transfer Azeri sourced gas from Western Greece to Southern Italy via the Adriatic Sea. It is of interest to note that ITGI is already eligible under the EU’s Projects of Common Interest (PCI) and it is already owned by 50% by the Italian Company Edison which is a subsidiary of the French EDF.

That detail is of great importance regarding the EU Commission’s clauses of the Third Energy Package that will prohibit an involvement of Gazprom in that sector. Thus Greek Stream is envisaged as a 50-50 project between the Greek DEPA (and DESFA) and Gazprom and the remainder would be a DEPA and Edison partnership. It is supposed that the Italian market would also be used as a stage point for the introduction of some quantities of Russian gas into France as well. (Source and more in Natural Gas Europe )

Trans Adriatic Pipeline and the Turkish Stream pipeline will not be competitive, as each of them will have an own role to play. TAP cannot satisfy the huge demands in natural gas of the European states and peoples and that the project would not be an alternative to the Turkish Stream.

The Greek extension of a pipeline to pump Russian natural gas through Turkey to consumers in southern Europe could cost about 2 billion euros and its construction will create about 20 000 working places. An agreement on the construction of the Greek extension of a proposed pipeline to pump Russian natural gas through Turkey to consumers in southern Europe could be signed at the St. Petersburg Economic Forum on 18-20 June 2015.

 shah%20deniz%20southern%20corridor%20bp_f960x260

Tesla Stream

Turkish Stream is replacing the previous South Stream project which Moscow ditched due to EU (and Bulgarian) resistance to unblock construction. The “Tesla Stream” is an offshoot of “Turkish Stream”. The concept is to connect ‘Turkish Stream’, the Russian pipeline to Turkey’s Eastern Thrace region, to a new hub on the Turkish-Greek border. Tesla pipeline would move gas further across the territory of Greece to the former Yugoslavian Republic of Macedonia (FYROM), Serbia, Hungary, reaching the Baumgarten gas hub in Vienna, Austria. So compared to South Stream Turkish and Tesla Streams are detouring through Greece and Macedonia to compensate for the exclusion of Bulgaria.

The foreign ministers of Greece, Macedonia, Serbia and Hungary met 7th Apr. 2015 in Budapest to explore their potential participation in Russian plans for the new Turkish Stream pipeline. In the joint declaration on strengthening cooperation in the energy sphere which was signed at the end of the meeting, the parties “expressed their support for the idea of creating commercially viable routes and sources by supplying natural gas from Turkey to countries in Central and South-Eastern Europe via the territory of the member countries”. It was also emphasised that the pipeline would be fully covered by EU regulations. After this positive response Russia’s President Putin and Greek Prime Minister Alexis Tsipras have discussed the construction of the so-called Greek Stream pipeline across Greek territory. ‘Russia confirmed its readiness to consider the issue of funding the public and private Greek companies that would be involved in the project’ reads a note published on the Kremlin’s website, referring to the gas transportation system on the Greek territory. 

eng-propozycje-nowych-szlakow-dostaw-gazu-do-europy-srodkowej-i-poludniowo-wschodniej (2)

Geopolitical aspect

Russia, Turkey and the West all share one rival in the Balkans: political instability. Located at the confluence of three historic empires, the strip of land between the Mediterranean and the Black Sea has long been the focus of competition among global powers. Now it is just one arena in the standoff between Russia and the West. The United States and the European Union have been involved in the internal politics of the Balkans since NATO committed troops in the aftermath of the Bosnian war and the conflict in Kosovo in the 1990s.

Recently with the help of the local revolutionaries and ethnic terrorists, the West was trying to destabilize Macedonia (FYROM) in order to overthrow the democratically elected government and to withdraw the country from the Tesla Stream. (More background in my article Terrorism in Macedonia Wasn’t An Isolated Act! and  Oil Geopolitics: The South Stream Pipeline Has Been Replaced by “The Balkan Stream”  by Andrew Korybko). Also US has already contacted Greece and expressed the negative stance of Washington regarding the Turkish Stream in general.

The bottom line from my perspective is that Turkish Stream will deliver 14 billion cubic metres per year to the Turkish market and there is a good change that another 49 billion cubic metres Russian gas per year will flow to Europe – partly for fulfilling the contracts already signed – via a new hub on the Turkish-Greek border and through Greece and Tesla Streams.

Ο Αγωγός Balkan StreamIn my opinion it is also noteworthy that Turkish Stream and the creation of a gas hub on the Greek Turkish border, coupled with the planned TAP and TANAP pipelines, give Greece and Turkey more reason to enhance cooperation on energy matters as all these lines are generating remarkable transfer fees for both countries. Similarly also from its side Tesla Stream will create significant transfer fees for Macedonia (FYROM), Serbia, Hungary and Austria in addition to their energy security.

Related article: Is South Stream Pipeline Transforming Itself To “Turk Stream”?


%d bloggers like this: