1. Turkish Stream: A Threat or a Challenge to the Southern Gas Corridor?
John Roberts
Energy Security Specialist, Methinks Ltd.
TUROGE 2015
Ankara
19 March, 2015

2. What Do We Know? Turkish Stream
A plan that embraces existing contracts.
SGC:
A contracted set of projects.

3. SGC Costs Initial costings: Total: $45 bn. (BP, various). SD2: $22.5bn
SCP-X $5.4bn
TANAP $10 bn, $11bn, $12.8bn, $13.9 bn, $16.bn?
TAP c. $4bn - 5bn.
Rovnag Abdullayev: $48bn total (8 Dec 2014)
Implementation under way: c. $10bn of contracts issued (early 2015).

4. SGC: Gas Sales Agreements
Gas sales to EU buyers signed in 2013:
Axpo, GDF Suez, Gas Natural, E.ON, Shell
Hera, ENEL, Bulgargaz, DEPA
Gas to Europe to start ~1 yr later than 1st gas
Gas sales volumes (bcma)
Gas sales volumes (bcma)
Shah Deniz Field
South Caucasus Pipeline Expansion (SCPX)
Trans Anatolian Pipeline (TANAP)
Trans Adriatic Pipeline (TAP)
Gas sales to BOTAS
Stage 2 sales signed in 2011 (First Gas in 2018)
Complementing current Stage 1 sales
ACQ: Annual Contract Quantity
ACQ: Annual Contract Quantity

5. South Stream: Route Options 2009-2011
Source:
Gazprom

6. South Stream: The November 2012 Choice
Russians want to end the 2002 JV
Source:
Gazprom

7. Turkish Stream & South Stream

8. South Stream – Jan 2014 - A Declaration
“The European Commission has been pretending for quite a while that it has heard nothing about South Stream. Then, at some stage, receiving from the related countries copies of these agreements, the European Commission stated that all of them failed to comply with the EU Third Energy Package norms, that is, they should be denounced or revised.
“In the end, these six countries collectively asked the European Commission to undertake negotiations with Russia, to which European Energy Commissioner Gunther Oettinger agreed.”
Vladimir Chizhov, Russian Ambassador to the EU. 22 Jan 2014.

9. Russia - November 2014: Southern Costs and Eastern Challenges
$22.5bn for Russia’s Southern Corridor.
$22.5bn for South Stream offshore and onshore (€16-17bn I 2013).
$55bn for development of the 4,000-km Power of Siberia gasline and upstream costs of the Vostok project, notably the Chayanda gasfield in Yakutia (albeit, with a $25bn upfront Chinese loan).
$18.5bn for the Altai Pipeline

10. South Stream & Russia’s Southern Corridor
The Southern Corridor:
2506 kms; 10 compressor stations
Ready by 2018.
Western Route: kims, including Kubanskaya CS and the Korenovskaya CS interconnector; compressor stations’ capacity, 574 MW.
Eastern Route: 1,625.6 kms; compressor stations’ capacity, 942 MW.
Map source: Gazprom 2011

11. South Stream: July 2014
Source:
Gazprom

12. South Stream & Turkish Stream: December 2014
Putin’s Ankara declaration (1 December 2014):
“Taking account of the fact that until now we have not received permission from Bulgaria, we believe that in the current conditions Russia cannot continue with the realisation of this project.” (Source: BBC)
Accord signed by Gazprom Chairman Alexei Miller and Botas Dep. Ch. Mehmet Konuk for:
A new 63 bcm/y system to Turkey
A 50 bcm/y distribution centre on the Turkey-Greece border.
New company called Gazprom Russkaya to build line.
QUESTIONS:
Who knew of this plan?
What destination?
How many strings?
EU negotiations?
Turkey: The residual market?

13. Turkish Stream – February 2015 Source: Gazprom

14. South Stream/ Turkish Stream: Actual Contracts
January 2014: First String physical pipe contracts €1bn
Mid-March 2014: Saipem (Italy) gets contract for
Saipem to lay first string (scheduled start: 4Q 2014) €2 bn
Late March 2014: Second String physical pipe contracts €0.8bn 
30 April: 2014: Allseas (Switzerland) gets unspecified value contract for Pieter Schelte (Pioneering Spirit) to lay 900 kms of second string and Saipem gets contract for engineering, tie-ins to landfall, storage and ancillary services (scheduled start: mid-2015). ALLSEAS CONTRACT REPORTED CANCELLED – 3 Dec Est.€ bn

15. Turkish Stream: Prospective Development
1. The Saipem 7000 and the Castoro Sei are already in the Black Sea ready for pipe laying. 
2. The July 2014 South Stream route was c. 230 kms in Russian waters and EEZ; 470 kms in Turkish EEZ; and 230 kms in Bulgarian EEZ and waters.
The planned landfall at Kiyikoy in Turkish Thrace adds c. 50 – 70 kms to an offshore pipeline compared to the South Stream landfall near Varna. But roughly three-quarters of planned South Stream route will be utilised.
Required: A new 180-km pipeline across Turkish Thrace from Kiyikoy to the proposed distribution hub at Ipsala on the Turkey-Greece border. The border between Ipsala and Kipoi in Greece is to be the junction for the SGC’s TANAP and TAP pipelines.
Question: An LNG liquefaction plant on the Saronic Gulf?
TIMETABLE: Immediate or, as per Taner Yildiz (11 Dec 2014), completion in 2019?

16. Turkish Stream: Who Will Pay For It?
September 16, 2011: OAO Gazprom, Eni S.p.A., EdF and Wintershall Holding GmbH (BASF Group) sign the shareholder agreement for South Stream Transport in Sochi, Russia.
14 November 2012, Amsterdam: “South Stream Transport is honoured to announce that a Final Investment Decision (FID) has been taken for the South Stream Offshore Pipeline in accordance with the Shareholders Agreement. The FID was made today in a Shareholders’ meeting subsequent to the meeting of the Board of Directors of South Stream Transport. The minority Shareholders maintain the right to leave the Project in case certain conditions will not be satisfied in the future.”
31 December 2014: Gazprom purchases the 50% stake in South Stream Transport held by Eni, EdF and Wintershall.

17. SGC & Turkish Stream: Comparative Capacities
Azerbaijan-Georgia (c. 450 km); (8-9 SCP and SCP-X) c. 40 bcm/y
Georgia-Turkey (c. 240 km); (SCP-X, using compression only): bcm/y
TANAP Turkish Border with Georgia to Eskisehir (c km): bcm/y
TANAP Eskisehir to Kipoi (c. 450 km): bcm/y
TAP Kipoi to Lecce (870 km): bcm/y
Turkish Stream:
String One, bcm/y: Essentially replaces existing Western route to Turkey & Greece
String Two, bcm/y: Additional supply to Turkey and European markets accessible via Turkey using existing infrastructure or infrastructure currently under development.
String Three, bcm/y: Additional supply to Turkey and European markets accessible via Turkey, BUT REQUIRES NEW INFRASTRUCTURE TO CARRY GAS BEYOND TURKEY
String Four, bcm/y: Additional supply to Turkey and European markets accessible via Turkey, BUT REQUIRES NEW INFRASTRUCTURE TO CARRY GAS BEYOND TURKEY.
Blue Stream:
Can be expanded from 16 to 19 bcm using additional compression. An additional string would be required for any subsequent expansion. Currently envisaged: a 1.0 bcm/y capacity increase.

18. SGC & Turkish Stream: The Legal & Political Overlap
Two Key Questions:
Is there anything to prevent Gazprom from booking capacity in TAP to take advantage of its second phase expansion to c bcm/y?
What are the implications of ‘Turkish Stream’ for the longer-term development of the Southern Gas Corridor?

19. Southern Corridor Source Fields
Field Country Estimated Reserves Output & Production Timing
Shah Deniz Phases I and II Azerbaijan 1.2 tcm 25 bcm/y by
Shah Deniz Phase III Azerbaijan c. 500 bcm ?
ACG Deep Level Azerbaija bcm 10 bcm/y by 2023
Umid, Babek, Nakhchivan,
Apsheron, Zefer-Meshel,
Araz-Alov-Sharq, Asiman-Shafaq Azerbaijan 2.7 tcm Post-2023
Kurdistan Iraq ? bcm/y near to medium-term
Akkas Iraq bcm (GOI) bcm/y long-term
Galkynysh Turkmenistan Up to 26.2 tcm (gas in place) bcm/y by
Dauletabad Turkmenistan 1 tcm 30 bcm/y with E-W pipeline
Offshore Block 1 Turkmenistan 180 bcm 10 bcm/y by
Source: Methinks Ltd

20. TANAP – A Line Half Full?
If there is no capacity in TAP for post-SD2 gas, then does this mean TANAP will only be half-full?
One sign of confidence: BP formally taking a 12% stake in TANAP on 13 March 2015.
THE BIG HYPOTHETICAL: If the SGC is to grow, and Russian gas from Turkish Stream secures TAP’s expanded capacity, then what alternatives are there for post-SD2 gas to access European markets?

21. Nabucco West (2012) & Eastring (2015)

22. The SEEP Concept: 2010/11 and also 2015?
In 2010, BP came up with a concept known as the South East European Pipeline (SEEP).
This was predicated on the possibility of using 10 ten bcm of the gas to be produced by the second stage of Azerbaijan’s giant Shah Deniz gas project to supply markets in the Balkans, without necessarily having to make its way all the way to Italy or Austria.
Although commonly portrayed as if it were a detailed project, it was essentially a concept.
At the time, (see subsequent slides) there was a case for saying that regional demand might well be able to use this gas. However, subsequently, it seems reasonable to revise Balkan demand estimates downwards because the region’s two biggest consumers, Greece and Romania, may now require much less gas than previously expected. This is because Greece is suffering from recession and persistent financial crisis while a major gas discovery in the Black Sea off Romania in March 2012 has the potential to end Romania’s need to import gas.
The SEEP concept envisaged a melange of existing pipelines, upgraded pipelines, new interconnectors and some wholly new mainstream pipeline coming together to constitute a coherent system for supply to prospective customers in the Balkans.
It might be worth talking a look at some of the SEEP ideas to see how relevant they are in 2015.

23. The SEEP Concept: 2010/11 - and 2020? Source: GDF Suez, Dec 2012.
TANAP (Trans Anatolian Pipeline)
TAP
Nabucco west (regular route
to Baumgarten)
Nabucco west (RWE’s route)
SCP (South Caucasian Pipeline)
SEEP SE Europe Pipeline
16bcm
10bcm
Shah Deniz II
(Absheron)
East Mediterranean Pipeline
Existing
South Stream
63bcm
8-16bcm
6bcm for
local consumption
BOTAS network upgrade

24. South East Europe and Turkey: Additional Gas Needs
2015
2020
0.9
1.8 2 5
0.5
3.4
0.9
1.5
3.3 2
2.6 12
< 2 bcm
Total: 10 bcm
2 bcm < X < 5 bcm
Total: 26 bcm
5 bcm < X < 10 bcm
2025
2030
10 bcm < X < 20 bcm
20 bcm < X
No need
1.2
1.2
10.5 8
8.3
5.9
2.6 2
5.3 34
4.8 24
Source:
GDF
Dec 2012
Total: 46 bcm
Total: 62 bcm 24

25. South East European Gas Demand: A 2010 Overview
The SEEP Rationale:
Demand
SE Europe
Turkey
Total w/Turkey
SE Europe total comprises:
Romania, Bulgaria, Greece, Hungary, Slovenia, Croatia, Serbia, Montenegro, Bosnia & Herzegovina, Macedonia, Albania.
Source: IHS CERA, c. 2010

26. Conclusions Look for a two-string Turkish Stream;
View Turkish Stream as a challenge, not a threat;
There is a need to re-assess prospects for interconnectors in the Balkans.

27. Questions? John Roberts Energy Security Specialist Methinks Ltd
New Mill House
Jedburgh TD8 6TH
Scotland UK
Tel: (home)
(mobile)