TurkStream Explained #Energy
There was a ceremony held on November 19 to note the successful completion of the offshore phase of TurkStream pipeline project which will carry Russian natural gas from under the Black Sea and over to Kiyikoy province in Turkey.
Russians spoke about how TurkStream was not a populist project, but rather a project that will contribute to Turkish economy as well as Europe’ energy security. The Turkish side mentioned Turkey’s unique position as the only country that has 8 international pipelines passing through its borders, and how TurkStream would serve to make Turkey major hub for oil and natural gas. They also spoke about a second large project to kick off as soon as TurkStream becomes fully operational by the end of 2019.
TurkStream in Numbers
Russian Gazprom was responsible for building the pipeline’s terrestrial portion in Russia as well as the portion that passes under the Black Sea and one of the connecting two landlines in Turkey. According to their website: “TurkStream will connect Russia’s huge natural gas reserves to Turkey’s distribution network, creating a safe energy source for Turkey as well as Southern and Southeastern Europe.”
The open sea portion of the pipeline was built by South Stream Transport B.V. That segment is comprised of two parallel pipelines of 900 km each. The pipelines go underwater near Anapa province in Russia and comes out in Kiyikoy locates 100 km from Istanbul.
Each of the two pipelines have an annual capacity of 15.75 billion cubic meters (31.5 billion cubic meters in total). One of the pipelines will surface near Kiyikoy and will be used for domestic purposes after it is connected to Turkey’s national pipeline network near Luleburgaz. The second pipeline was built to cater Europe’s energy demand -though there are some disagreements on this. Bulgaria and Greece are fighting over which country the pipeline will pass through. EU, on the other hand, has its doubts about whether the conditions for the supply of gas are in line with their 3rd Energy Package which was ironically introduced to break the monopoly of Gazprom in Europe.
What TurkStream Means for Turkey
30.5% of Turkey’s energy demand is supplied by natural gas -almost all of which is imported. Russia happens to be the country that we are most dependent on at 52%. The rest of our natural gas supple comes from Iran (17%), Azerbaijan (12%), Algeria (8.3%) and Nigeria (1.3%). 9% of our imports are conducted through cash market as liquified natural gas (LNG).
We already buy natural gas from Russia via two separate pipelines. BlueStream, which just like TurkStream, flows from beneath the Black Sea supplies 16 billion cubic meters and the TransBalkan that flows from Russia over to the Ukraine, Moldova, Romania and Bulgaria to enter Turkish Thrace which supplies a further 14 billion cubic meters annually.
Prior to 2014, Russia was working to realize SouthStream project which was designed to transport natural gas through our exclusive economic zone (EEZ) in the Black Sea region, and on to Bulgaria before being distributed to Europe. That project which was scheduled to have 4 parallel lines with a capacity of 15.75 billion cubic meters (62 billion cubic meters in total) came across many hurdles along the way, the primary one being the EU’s 3rd Energy Package that was mentioned earlier. SouthStream was also a casualty in the EU’s political embargos against Russia for their policies towards the Ukraine and Crimea. Putin, in retaliation, had arrived in Turkey in 2014 to announce the alternative TurkStream project. The move was more political than economic in nature. Russia successfully managed to kill multiple birds with one stone: they pressure Bulgaria’s weak coalition government; they made it clear to the EU that they had other alternatives; and they managed to appease Turkey in the process.
Now, let us go over this project objectively and with a cool head.
Turkey is already dependent on Russia for its natural gas supply at 52% through 2 pipelines that are carrying over 30 billion cubic meters of gas annually. TurkStream, when it becomes fully operational at the end of 2019 (or early 2020), will gradually provide another 15.75 billion cubic meters. When that happens, there will not be any use for the Western Pipeline that passes through the Ukraine. Russia will end up leaving the Ukraine out of the picture, therefore punishing them. Russia provided Europe with 194 billion cubic meters in 2017. A significant portion of that flow passes through the pipelines in the Ukraine. Russia is in a constant state of conflict with the Ukraine over natural gas policies as well as political differences. As a result, Russia is pumping natural gas over to Europe through two other pipelines called Nordstream1 and NordStream2 at a rate of 55 billion cubic meters each. Considering that these two pipelines do not go through the Ukraine either, Russia is making a rather big strategic move here. Russia is clearly the winner in this energy politics game.
When we look at the situation in Turkey, there is the fact that with the introduction of TurkStream at 15.75 billion cubic meters, and the omission of the Western Pipeline at 14 billion cubic meters, our net natural gas purchase from Russia will increase by 1.75 billion cubic meters. Which means it is not going down as some pundits like to say. We are hearing a lot of talk about how TurkStream will diversify our purchases and lower our dependency to Russia. This, simply is not true.
And then, there is the hypothesis that with the second pipeline going over to Europe, Turkey will become a major international energy hub. Well, unfortunately, none of our exclusive agreements, including the one for TurkStream, gives us the option to re-export the natural gas received. The prices will be set by the buyer and the seller, with Turkey not having a say in it. That doesn’t make Turkey an international energy hub; it just makes it a corridor. There are various other reasons why Turkey is not in a position to be a major hub with lack of sufficient storage capacity being one of them.
All the talk about “another mega project to be revealed before 2019 is over” sounds like a bait for our domestic politics. TurkStream’s undersea segment is fully constructed by Gazprom. We are only present in a small portion that lies between Kiyikoy and Luleburgaz. And I think we can all agree that building land pipes cannot be considered a “mega project.” It reeks of taking credit for others’ accomplishments.
You may be asking “But, will we be able to purchase natural gas cheaper thanks to TurkStream?” Well, to the best of our knowledge, there are no such concessions present in the agreement.
But, again, doesn’t TurkStream provide any benefits to us at all? Of course, it does! For one thing, when we face an interruption in the supply, we won’t be able to put the blame on the Ukraine anymore, since the pipeline doesn’t touch Ukrainian soil at all. When the gas is cut off, it will either be due either to a technical glitch, or a “technical irritation” by Russia. We may also expect Russia to show more love towards Turkey, since it was thanks to us that Russia outmaneuvered the Ukraine and the EU with this strategic move. That being said, Turkey and Russia have very opposing views on foreign policy. Also, Russia is still agitated by “Islamic militants” and as long as this is the case, the rapprochement between the two countries should be seen more short-term and tactical rather than long-term and strategical.
What we must be doing is applying policies that favor switching from imported energy sources such as oil, natural gas and coal over to our renewable sources lying idle. We must be targeting steps to increase our energy efficiency and the use of domestic equipment in energy production.
The only viable way to increase our oil and natural gas production will be through a vertically-integrated restructuring and self-governing TPAO. TPAO, in its current state is far from achieving that. It is imperative that TPAO is merged with BOTAS and its refining, distribution and marketing abilities reinstated. This is what our domestic oil and natural gas industry needs. Almost every successful international energy company (Exxon Mobil, Royal Dutch Shell, BP, Rosneft, PdVSA, Petrobras, CNOOC, etc.) is vertically integrated. What we are doing by taking both companies under our national sovereignty fund and drafting them for privatization is the exact opposite of what we should be doing. Under current conditions, the potential for our domestic oil and natural gas exploration, drilling and production is discouragingly dim.