Turkey, Russia formally inaugurate TurkStream gas pipeline

London — Turkey and Russia on Wednesday formally inaugurated the two strings of the 31.5 Bcm/year TurkStream gas pipeline from Russia across the Black Sea to Turkey.

Flows through the pipeline -- which allows Russia's Gazprom to supply Turkey with all its Russian gas needs directly without having to transit any other country -- began earlier in 2020, with a senior project official saying Wednesday that both 15.75 Bcm/year lines were operating normally.

"The flow to Turkey is normal for the time of year," Sakir Arikan, managing director of TurkStream's onshore operating company, told S&P Global Platts ahead of the inauguration ceremony.

Arikan said flows through the export string into Bulgaria were low, but declined to give a figure. "It is commercial volumes, all the testing and other work has finished," he said.

The inauguration ceremony followed a week of speculation as to when the two strings of TurkStream had actually begun operating.

Turkish news portal and TV news channel Haberturk reported on January 2 that gas had begun flowing at 8 am local time the previous day.

However Botas, which operates the Turkish string of the pipeline alone and the transit string in partnership with Gazprom, did not issue any statement confirming that flow had started in either or both strings.

But indicative allocation data from European transmission system operator body ENTSOG published January 3 showed that gas had started being transited to Bulgaria via TurkStream suggesting that 23 million cu m had been delivered on January 1 and 22.6 million cu m January 2.

PRESIDENTIAL PRESENCE

Underlining the significance of the event, the inauguration ceremony was attended by the Presidents of Turkey, Russia and Serbia and the prime minister of Bulgaria.

Russian President Vladimir Putin said Russia had been supplying Turkey with gas reliably for 30 years, adding that TurkStream was a product of the strategic partnership between Russia and Turkey, and was a positive development for the region.

"We expect in the future to complete many more energy projects in partnership with Turkey," Putin said.

Turkish President Tayyip Erdogan said TurkStream -- together with the 31 Bcm/year TANAP pipeline -- were examples of the benefits of close cooperation in the energy sector.

"Tensions between states are now at an undesired level -- we don't want to see the region turned into a stage for proxy wars," he said, referring to the ongoing tensions between the US and Iran.

Russian energy minister Alexander Novak said at the ceremony that through its long-term gas supply contracts, Russia had proved it was a reliable gas supplier, while Turkish energy minister Fatih Donmez said Turkey could become a regional gas hub.

"Currently we have a total entry capacity of 318 million cu m/d, which next year will rise to 450 million cu m/d with the commissioning of new underground storage and FSRU capacity," Donmez said.

Gazprom CEO Alexei Miller said that TurkStream and the existing Blue Stream gas link via the Black Sea combined meant "the road is now open for direct, transit-free deliveries of all Gazprom's gas which Turkey needs."

SUPPLY CONTRACTS

The TurkStream pipeline consists of two parallel strings. One string is connected to Botas' transmission grid at Luleburgas, where it is to supply gas in place of the 14 Bcm/year Trans-Balkan pipeline via Ukraine, Moldova, Romania and Bulgaria.

The second string passes across Thrace without connecting to Botas' transmission grid, continuing to the Turkey-Bulgaria border where it connects with Bulgaria's transmission grid at the Strandzha 2 entry point, where it is to deliver gas to Bulgaria in place of that delivered by the Trans-Balkan line.

It is unclear how much of the 14 Bcm/year which Gazprom currently holds contracts to supply will actually be delivered via TurkStream.

Of the 14 Bcm/year, only 4 Bcm/year is contracted by Botas, with 10 Bcm/year subject to eight separate contracts with six private Turkish companies.

For most of the past two years, the six have been failing to meet their take-or-pay obligations having been unable to sell their gas at a profit.

The most recent gas import data shows that over the first 10 months of 2019, Turkish gas imports from Russia via both the Trans-Balkan and Blue Stream pipelines totalled only 12.22 Bcm, down 36.9% on the same period in 2018.

This was due largely to a fall in imports by private importers whose imports totalled only 1.1 Bcm, down 82.2% on the first 10 months of 2018.

According to one private sector official with knowledge of the issue, the combined debts of the six to Gazprom now exceed $2 billion.

The official said the issue had been subject to negotiation between Ankara and Moscow with Gazprom insisting that the contracts held by the six should be transferred to Botas and the debts met in full, while Turkish officials have offered to pay only 50% of the debt.

Neither Turkish nor Russian officials have commented publicly on the issue.

With the pipeline now operational, the question is whether Moscow will be expecting Ankara to take action to resolve the debt problem.

However, with the various contracts for Russian gas beginning to time out from 2021, Ankara may be reluctant to agree to any immediate solution.

--David O'Byrne, newsdesk@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com