Russia does about turn on pipeline projects
By Vladimir Socor
Turkish Prime Minister Recep Tayyip Erdogan's visit to Russia last week capped
a month of spectacular changes to Russian energy transit projects in the Black
Sea and beyond.
During these critical weeks, Russia abandoned the Trans-Balkan
(Burgas-Alexandropoulos) oil pipeline project, which it had planned for more
than a decade to form a transcontinental oil corridor, stretching from
Kazakhstan to the Aegean Sea. The
Kremlin also abandoned (in all but name) the South Stream gas pipeline project,
designed to have stretched from the Black Sea into eight European countries.
Moscow also had to register the stagnation of the Trans-Anatolian
(Samsun-Ceyhan) oil pipeline project, designed to connect Kazakhstan via
Russia, the Black Sea, and Turkey with the Mediterranean.
The Erdogan visit's timing was coincidental, but provided the occasion for
stock-taking on these changes, which also affect Turkey in one way or another.
Erdogan discussed the situation with Russian President Dmitry Medvedev and
Prime Minister Vladimir Putin, both of whom had personally promoted these
projects, and are interested in keeping Turkey dependent on Russian-supplied
energy.
Moscow is considering the option of replacing the South Stream gas pipeline
project with a liquefied natural gas (LNG) project. This would involve
construction of a liquefaction plant on the Russian Black Sea coast, and export
of the product by tankers. Putin and Energy Minister, Sergei Shmatko, outlined
this concept in broadest terms on March 9.
Shmatko and Deputy Prime Minister Igor Sechin started elaborating on it during
and after the Erdogan meeting. They made clear this time what Putin had implied
in his remarks, namely, that the LNG project would neither be a part of South
Stream nor an addition to it, but a substitute for it. The declared goal is to
reduce costs below those of South Stream.
This goal, along with the proposed liquefaction plant, would suggest a far
smaller volume of natural gas to be liquefied, compared with South Stream's
implausible offer of 63 billion cubic meters (bcm) per year to have been
pumped. Russia had never identified a source of gas for South Stream. The South
Tambey field on the Yamal peninsula (north-western Siberia) is now explicitly
identified as a source for this LNG project.
The Russian Novatek Company and Total of France agreed in Putin's presence on
March 2 to develop South Tambey, without indicating a time-frame. The general
idea is to transport a part of South Tambey's production through Gazprom's
pipelines to the liquefaction plant on the Black Sea. Thus, Gazprom would
function as transport operator, but not as gas supplier, or possibly as a minor
supplier.
According to Shmatko at the Russian government's meeting the same day (March
17), the liquefied product would be delivered by tankers within the Black Sea
only. As anticipated, this is the only possible choice given Turkey's refusal
to allow large-capacity LNG tankers through the Bosporus Strait.
There is no word yet at this very early stage about liquefaction technology,
volumes, costs, time-frame, a tanker fleet, re-gasification terminals on the
Black Sea's western shores, or inland transportation from there into European
Union territory. South Stream, led by Gazprom, had proposed to use or build
dedicated pipelines there, but this is now being abandoned. Moreover, South
Stream participant countries Greece and Italy are out of reach for (putative)
Black Sea LNG tankers, and thus out of the new concept.
Gazprom had enlisted Italian ENI in South Stream to build the seabed pipeline
in a 50-50 partnership as well as for marketing some gas volumes in Italy.
However, Gazprom and ENI are not being mentioned as part of this new concept.
ENI was in any case attempting to disengage from South Stream during the past
two years.
Russia had requested that Turkey allow the South Stream pipeline's seabed
portion to cross Turkey's exclusive economic zone in the Black Sea, from the
Russian coast to the Bulgarian coast. Putin and Medvedev had discussed this
issue with Erdogan repeatedly and in some detail during 2009 and 2010. Turkey
consented in principle but dragged its feet in practice. Ankara missed two
deadlines: in November 2009, to allow Gazprom to conduct exploratory work on
the seabed; and in November 2010, to allow actual construction work (again, on
paper only, as Gazprom was clearly not ready to proceed).
Erdogan's March 16-17 Moscow visit occasioned a post-mortem on that
maneuvering. Russia had sought Turkey's permission in order to bypass Ukraine's
Black Sea exclusive economic zone. This was consistent with Russia's use of the
South Stream project as a pressure tool against Ukraine. The Turkish government
lent itself to this for a price - namely, the Kremlin's promise to abandon the
Trans-Balkan oil pipeline project (Burgas-Alexandropoulos, see above) in favor
of the Trans-Anatolian (Samsun-Ceyhan) oil pipeline project (see above). The
Kremlin delivered on this - again, at least on paper.
However, Ankara tacitly pursued a further goal. As a South Stream-skeptic,
Ankara had all along hoped that Gazprom would build the Blue Stream Two
pipeline on the seabed of the Black Sea, from Russia to Turkey. This would have
added 8 bcm of gas annually, on top of the existing Blue Stream One's 8 bcm per
year. And it was Ankara's hope to transit that volume (or even more, if Gazprom
could deliver) overland via Turkey to third countries. Ultimately, none of this
materialized since Gazprom was bluffing on multiple fronts.
Vladimir Socor is a Senior Fellow of the Washington-based Jamestown
Foundation and its flagship publication, Eurasia Daily Monitor. An
internationally recognized expert on the former Soviet-ruled countries in
Eastern Europe, the South Caucasus, and Central Asia, Mr Socor is a
Romanian-born citizen of the United States based in Munich, Germany.
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