Russia’s two southern gas pipelines back in play

Russia’s two southern gas pipelines back in play
Turkish Stream and South Stream gas pipeline projects are both back in play
By bne IntelliNews August 9, 2016

Two big Russian gas pipeline projects designed to bypass Ukraine are back from the dead and being set into competition with each other to get their host countries to play ball.

Turkish president Recep Tayyip Erdogan is in Moscow on August 9 and amongst the many trade issues he is expected to discuss with Russian president Vladimir Putin is relaunching the mooted Turkish Stream pipeline that would run under the Black Sea, across Turkey and end on the border of Greece and so into the EU.

The Turkish side is ready to "immediately take steps towards the implementation of the "Turkish Stream pipeline," discuss it and make a decision," Erdogan said on the eve of his visit to Russia. The project was shut down after relations between Ankara and Moscow collapse when Turkey shot down a Russian bomber last November.

The Turkish Stream pipeline is in direct competition with South Stream that also runs under the Black Sea, but then runs across Bulgaria, Serbia, with branches through several countries in the Balkans and then entering the EU through several southern countries. However, this project was also suspended last year under EU pressure.

Both pipeline routes are popular with their hosts as they mean transit royalties as well as cheap gas prices, however, there is only enough gas available to fill one of these two pipelines.

The ground has shifted again fast under the ground of both pipelines in the last two years. Both projects seemed dead in the water, but only in the last few months both have come back to life.

Turkey is particularly keen to get its pipeline as it has almost no storage facilities and entirely depends on Russia to regulate the gas flow and deliver just enough to run its power stations. "By the end of July 2016, the volume of natural gas imported from Russia amounted to 12.5 billion cubic meters. This shows how important Turkey is as an economic partner in this area, “ said Erdogan on the day before he flew to St Petersburg. If Turkish Stream goes ahead it the plan is to transport 63bcm of gas a year, which is mostly using the Ukrainian pipeline now. At the same time the country is running a large current account deficit of which energy imports make up a large share. The Russian pipeline would cut a big slice off its energy bill.

The Bulgarian pipeline is starting to move again too. Bulgarian Prime Minister Boyko Borisov hopes for rapid results of the working groups, which Russia and Bulgaria decided to set up on energy cooperation that includes restarting construction on South Stream, Borisov said on August 6 in a telephone conversation with Putin.

However, European Commission (EC) permission remains a potential stumbling block and Borisov says he would need to pre-notify the commission should Bulgaria restart construction of the pipeline.

European Commission President Jean-Claude Juncker has blown hot and cold on the South Stream project. He recently said that the European Commission continues to work on the development of the gas hub "Balkan", which may well include the supply of Russian gas, but only if it “fully complies with EU competition rules.”