| MOSCOW/ANKARA, June 3
MOSCOW/ANKARA, June 3 Russia's Gazprom plans to
start building a pipeline to Turkey this month to get gas to
Europe without going through Ukraine, company sources said,
although it has no firm agreement with Ankara and faces
opposition from the European Union.
With the EU determined to reduce its energy dependence on
Russia and Turkey seeking big discounts for its gas for
participating in the new pipeline, Russia may pay dearly for its
ambition or even see it thwarted.
Moscow has stepped up efforts to find alternative gas supply
routes to Europe, its biggest market, that avoid Ukraine, since
Ukrainian protesters ousted a pro-Russian president last year.
Russia annexed Crimea from Ukraine soon afterwards and
pro-Russian rebels began a conflict in eastern Ukraine which has
sent Moscow's relations with the West to post-Cold War lows.
In December, Russia scrapped its South Stream pipeline
project which would have supplied gas to southern Europe without
crossing Ukraine because of objections from the European Union
on competition grounds.
It instead announced the planned construction of an
alternative pipeline, dubbed the Turkish stream, with the aim of
delivering 63 billion cubic metres (bcm) of gas per year, 47
bcm of it to Europe, by 2020.
Gazprom had already begun to upgrade its domestic pipeline
system so it could link up to the more modern South Stream
project and spent 271 billion roubles ($5 billion) in 2013-2014.
It says it will build on this work and spend another 278
billion roubles this year, part of a total 715 billion on
modernising Russia's gas system to fit now with the Turkish
Stream, Gazprom documents on its website show.
Two sources at Gazprom said the state-controlled company
planned to start laying pipes beneath the Black Sea by the end
of June. Gazprom declined to comment.
Its plans may have to stop there.
The pipeline will consist of four lines, which each have an
annual capacity of 15.75 bcm, with the first line reaching
Gazprom hopes to create a gas hub at the Turkish-Greek
border for transit to Europe, but depends on Turkey agreeing to
build on its territory and needs EU countries - many of which
want energy independence from Russia - to develop required
Turkey, Gazprom's second biggest export market after
Germany, is driving a hard bargain for its participation in the
Gazprom supplied Turkey with a total of 27.4 bcm of gas last
year split between two routes: the offshore Blue Stream pipeline
and the Transbalkan pipeline, known as the Western line in
Ankara secured a 10.25 percent gas discount in late February
for the Russian gas but is pressing for more now. Gazprom is
forecasting an average gas price for Europe, including Turkey,
of $242 per 1,000 cubic metres this year.
Turkey also wants a new price for the gas it will get via
its portion of the Turkish Stream, sources in Turkey say.
"The last word for Turkey has not been said yet," a senior
Turkish official said. "There are two important points for
Turkey here: the insufficiency of the 10.25 percent reduction
Gazprom is giving to us. This should be close to 15 percent."
A Turkish energy sector insider with knowledge of the
project confirmed that this was Turkey's stance.
The first source also said that Turkey wanted a new price
for when the new pipeline was brought on stream.
"There is intense traffic of meetings but the final point
has not been reached," a Turkish energy insider with the
knowledge of the Turkish Stream said.
Leonid Chugunov, head of Gazprom's project management
department, was quoted as saying by Interfax news agency that
despite starting work this month, the company needed permission
from Turkey to lay 280 km of pipes along the Turkish coast.
FIRST LINE ONLY
The plans could also be torpedoed by the European Union,
which is at loggerheads with Russia over the Ukraine crisis.
It is supporting rival projects in the Caspian region: The
Trans Anatolian and Trans Adriatic Pipelines (TANAP-TAP) should
bring 6 bcm of gas from Azerbaijan to Turkey and another 10 bcm
to Europe in 2020.
"The arrival of Azeri gas is sharply reducing Gazprom's
chances of extending its own contracts," said Mikhail Korchemkin
of East European Gas Analysis. "It is much less expensive to
ship gas to Turkey from (Azeri) Shah-Deniz than from (Russian
gas fields in) Yamal."
Last week, Chief Executive Alexei Miller met the energy
minister of EU member Greece to discuss Gazprom's possible
involvement in gas infrastructure construction in the country.
This was seen as a possible reversal of Russia's previous
position that EU countries had to do their own construction if
they wanted to get Russian gas after the transit contract with
Ukraine expires in 2019.
Anna-Kaisa Itkonen, a European Commision spokeswoman, also
warned that "any pipeline... needs to comply to the EU rules",
telling a briefing on Monday that the bloc had not yet received
any specific plans from Russia.
EU rules mean a single company, irrespective of the country,
cannot control the full supply chain, from production to
distribution, and should give access to a third party - rules
that ruined the South Stream project.
"It is clear that the first line will be built," said
Alexander Kornilov, an analyst with Alfa Bank. "I doubt Gazprom
will be building the second one until firm agreements (with
Europe) are reached."
($1 = 53.2100 roubles)
(Reporting by Katya Golubkova, Denis Pinchuk in Moscow, Orhan
Coskun in Ankara; additional reporting by Vladimir Soldatkin,
Svetlana Burmistrova and Olesya Astakhova in Moscow, Nailya
Bagirova in Baku and Barbara Lewis in Brussels; editing by
Elizabeth Piper and Philippa Fletcher)