Turkey Strives for European Energy Clout
The termination of South Stream has entered a new stage with regards to the energy relationship between the EU and Russia with a twist of strong Turkish interference as the future major intermediate stop. Already, Gazprom announced that the so-called 'Turk Stream' is the new corridor, thereby eliminating Ukraine's transit role. Gazprom's press office recently noted that the gas compressor station in Russkaya on the shores of the Black Sea will be the entry point for a subwater pipeline on the Turkish mainland. Independent analysts estimate it will cost less than 50% of the originally envisaged South Stream and would commence likewise from the same region and upwards until it reaches Austria and Italy.
Moreover, Turkish gas company BOTAS and Gazprom have already begun drafting plans for the optimum gas route of the new pipeline, whilst Turkish Energy Minister Taner Yildiz explained that negotiations underway also take care of the future establishment of the regional hub where the gas flow will terminate before venturing further into Balkan and EU markets. The Minister added that Turk Stream is planned to have a capacity of 63 bcm per year, but at the same time it cannot be seen as a competitor of the Trans-Anatolian Pipeline (TANAP), which is a centrepiece of Turkey's aims to open up the Southern Corridor from Azerbaijan.
Meanwhile, it has to be noted that the latest governmental figures show annual gas consumption in Turkey to be around 48 bcm, which is a 6% in 2014 increase and a noticeable in terms of growth compared to stagnant EU markets. Natural population growth and steady increase in local electricity production by gas source as pointed out as the main cause of expansion. Thus if all things remain equal, Turkey will become the largest gas market in Europe after 2025, whereby both Turk Stream and TANAP would barely be able to accommodate consumption and perhaps even require further additional sources, leaving little room for transiting exports to other countries.
Other potential sources lie in the East Mediterranean's offshore reserves though there is crisis looming in the region due to Ankara's attempts at research and exploration process in Cyprus' EEZ. On the other hand, the US State Department, through its Special Envoy on International Energy Affairs, Amos Hochstein, recently expressed views at an Atlantic Council event that neighbouring East Med countries should overcome their differences and in answering a question, expressed his view that eventually Israel can export gas to Turkey and other states such as Egypt. The important aspect is that Turkey is being sought concurrently by Washington and Moscow regarding its future energy role and that further increases the geo-economic clout of the country, bringing about all the aforementioned energy projects closer to fruition.
Also interesting is that US-based Noble Energy, which first discovered the offshore reserve in block 12 offshore Cyprus along with a substantial number of Israeli shareholders, is said to also be searching for gas in the Black Sea's Turkish coast on behalf of TPAO. According to the newspaper Kıbrıs Postası Gazetesi, the vessel Noble Globetrotter ΙΙ will conduct research drills, signalling thus a convergence between US corporate interests and Turkey, with a rather tacit approval of Israeli influential energy circles.
Last but not least, Turkey plays a significant role in the Iranian negotiations between Teheran and the international community, being a steadfast energy partner of this country and in effect its main commercial axis to the West. Thus it is safe to assume, that an amelioration of the relations between Iran and the West will provide a further boost for the gas trade between Ankara and Teheran and may even constitute a new gas route onwards to the EU via Turkey. In that sense, Turk Stream may be a bit more than just a Russo-Turkish pipeline, but a major energy corridor linking together major producers and major European consumers via Turkish soil. It remains to be seen the exact conclusion of these political and corporate movements, but it is safe to say that all eyes on the European gas markets will be set on Turkey along with how investment decisions unfold.