Putin’s ‘Turkish Stream’: Who Knows What? John Roberts Energy Security Specialist, Methinks Ltd 2030 EU Energy Security The Role of the Eastern Mediterranean Region, Brussels 10 December 2014

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

The Southern Gas Corridor: SCP-X,TANAP & TAP Source: BP Shah Deniz 2 project. A newer version of this can be found at:

SGC Costs Initial costings: Total: $45 bn. (BP, various). SD2: $22.5bn SCP-X $5.4bn TANAP $11bn, $12.8bn or $20bn…….? TAP c. $4bn - 5bn. Rovnag Abdullayev: $48bn total (8 Dec 2014) Implementation under way: $9bn of contracts issued.

SGC: Gas Sales Agreements Shah Deniz Field South Caucasus Pipeline Expansion (SCPX ) Trans Anatolian Pipeline (TANAP) Trans Adriatic Pipeline (TAP) Gas sales volumes (bcma) ACQ: Annual Contract Quantity Gas sales volumes (bcma) Gas sales to BOTAS Stage 2 sales signed in 2011 (First Gas in 2018) Complementing current Stage 1 sales 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 1 st gas ACQ: Annual Contract Quantity

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) A new 63 bcm/y system to Turkey A 50 bcm/y distribution centre on the Turkey-Greece border. QUESTIONS: Who knew of this plan? What destination? How many strings? EU negotiations? Turkey: The residual market?

South Stream: Route Options Source: Gazprom

South Stream: The November 2012 Choice Source: Gazprom

South Stream – 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.

South Stream: July 2014 Source: Gazprom

Ukraine’s EEZ and South Stream Black Sea Routes Source: East European Gas Analysis

South Stream: Actual Contracts January 2014: First String physical pipe contracts€1bn Mid-March 2014: Saipem (Italy) gets contract for Saipem VII to lay first string (scheduled start: 4Q 2014)€2 bn Late March: Second String physical pipe contracts€0.8bn 30 April: 2014: Allseas (Switzerland) gets unspecified value contract for Pieter Schelte to lay second string (scheduled start: mid-2015) Est.€ bn

‘Turkish Stream’: Hypothetical Development 1. Saipem VII is 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. A landfall in Turkish Thrace would add c. 70 – 100 kms to an offshore pipeline compared to the South Stream landfall near Varna. But roughly three-quarters of planned South Stream route could be utilised. Required: A new pipeline across Turkish Thrace to proposed distribution hub on Turkey-Greece border. Question: Would this hub be located near Kipoi?

The Turkish String: Who Will Pay For It? “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.” South Stream Transport,14 November 2012, Amsterdam 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.

The Bottom Line (Technical): Comparative Capacities SGC: 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): 24 bcm/y TANAP Turkish Border with Georgia to Eskisehir (c km): 33 bcm/y TANAP Eskisehir to Kipoi (c. 300 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 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.

The Bottom Line: Legal & Political Two Key Questions: 1.Is there anything to prevent Gazprom from booking capacity in TAP to take advantage of its second phase expansion to c bcm/y? 2. What are the implications of ‘Turkish Stream’ for the longer-term development of the Southern Gas Corridor?

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