12.10.2015
EMBASSY OF THE REPUBLIC OF KOREA
ENERGY NEWSLETTER
Latest Improvements in TANAP
Turkish President Recep Tayyip Erdogan on a Turkish channel stated that Azerbaijan and Turkey will speed up the implementation of the Trans-Anatolian gas pipeline (TANAP) project construction and emphasized the importance of the project and necessity of its implementation. Turkish President previously stated that Azerbaijan is ahead of Europe in the implementation of energy projects and has begun to implement the TANAP project. He said “While Europe did nothing for the Nabucco project implementation, Azerbaijan started to successfully implement the TANAP project, in which Turkey also has its share.”
Additionally, Interim Energy Minister Mr. Alaboyun has declared that if any gas shortage is experienced by 2019 due to limitation of gas supply by Russia via West Line (via Ukraine), Ankara will compensate fort his volume through the gas delivered via TANAP.
A senior fellow at the Atlantic Council’s Eurasian Energy Futures Initiative, Micha’el Tanchum, talked about post-sanctions era of Iran, its gas pipeline and LNG export plans, China's strategy to meet its gas demand, and Turkey's need to include Iranian and Turkmen gas in TANAP and Southern Gas Corridor. According to Tanchum, China is trying hard to divert the natural gas of Iran and Turkmenistan away from Europe to its western Xinjiang province through its pipeline investments in Pakistan. Tanchum emphasized the importance of inclusion of Iran to TANAP by the following words: “That’s a political game that Turkey needs to play very wisely. Turkey has been building successful ties with Azerbaijan and Turkmenistan over the last years, and they need to be more focused on this because it is critical for Turkey’s energy needs. Post-sanctions Iran will greatly impact Turkey and Ankara has to act now. If TANAP is so central to Turkey’s geopolitical and energy ambitions, it needs to incentivize Tehran, such as offering Iran an equity share in TANAP. Iran has a stake in Shah Deniz II, but they have no stake in TANAP. Azerbaijan also has some incentives that they can provide for Iran.”
Resources:Azernews, Enerji Gunlugu
2 US Energy Minister Ernest Moniz gave an interview to Sabah Daily Newspaper during G20 Energy Ministers Meeting in Istanbul. Moniz was asked questions regarding Turkish Stream, Turkey’s stance as energy hub and oil supply from KRG. Mr. Moniz also made declarations about eastern Mediterranean natural gas fields including the possible routes for natural gas to be delivered to Europe.
Moniz stated, upon a question regarding Turkish Stream Project, that the USA is pleased to see its allies diversifying their energy supply sources. He noted that the first phase of the Turkish Stream project would not increase Turkey's dependency on Russian gas specifically. Mr. Moniz emphasized the importance of Southern Gas Corridor and stated: “We think it's really important to keep focus on the Southern Corridor for getting Caspian gas to Turkey as a hub into Europe; perhaps eastern Mediterranean gas is going to provide another opportunity. The real issue is obviously that the general principle of diversifying sources is really important, and the current situation in Ukraine and other eastern European countries means we think that diversifying sources with regard to Russia as a supplier remains quite critical.”
Moniz stated that Turkey is already a major country for gas and oil transport. He noted that having many different energy supply sources and pipelines, together with a transparent energy market are the vital pre- requisites of a fully functioning energy hub. He added that Turkey is internally well positioned and continuing to develop the market structure, infrastructure and diversification of the supply.
Mr. Moniz answered a question regarding US’ stance about KRG selling gas and oil to the world via Turkey.
Moniz emphasized that the USA is supportive as long as the process is consistent with the Iraqi constitution.
As is known, KRG is especially in the recent years an important supplier of oil to Turkey. Additionally, although currently the import process is not consistent with the Iraqi constitution, KRG is selling oil to Turkey and to the world markets via Turkey. American minister stated that there is an understanding between Iraqi Central Government and KRG and that Turkey should carry out the discussions in that way now. Mr. Moniz also emphasized the current chaotic situation of the region and underlined that Russian move in the region might cause further complications in the region.
The minister was asked whether there are any discussions between US and Turkish officials regarding LNG trade from USA to Turkey which is an alternative option for energy supply diversification and decreasing of dependency on Russian gas. The minister answered as follows: “Yes, we have had discussions in the past.
What I want to emphasize is first off all, the first LNG export cargoes will start in a few months and will be expected to build up over several years. However, whether it is Turkey or any other country, it needs to be emphasized that the U.S. government does not determine where the cargo goes, that is determined by commercial contracts, and what we would do, as the department of energy, is license companies to export to non-free trade agreement countries.”
As an answer to the question regarding the ideal scenario for selling the eastern Mediterranean natural gas to Europe, Mr. Moniz stated that commercial considerations would determine the most proper route for the gas to be delivered to Europe and noted: “my understanding is right now there is an opportunity being pursued, particularly with Egypt and using existing LNG facilities that are underutilized in Egypt, but ultimately I think there can be many routes, and obviously, Turkey geographically is well positioned to have some of this gas go through Turkey, especially as a functioning hub.”
Mr. Moniz declared that Iran might be regarded as a reliable energy partner as long as it adheres to the Nuclear Deal that was signed on 4 July 2015. He emphasized that the former sanctions were imposed to Iran not only because of their nuclear activities but also for many other activities such as supporting terrorism and added that Iran is expected to increase its oil production and export in the coming years in case they remain committed to the Nuclear Deal.
Lastly, Mr. Moniz stated that US will not take any strong position for or against opening of the chapter on energy in membership talks between Turkey and the European Union
Resources:Enerji Enstitusu, Sabah Daily Newspaper
Important Statements from US Energy Minister after G20
3
Historical Evolution and Current Situation of Turkish Stream Pipeline Project on the Light of Latest Political Developments
According to the declarations of Mr Novak after G20 Energy Ministers meeting, the Turkish Stream Project seems to be still in the agenda but with on-going debates. It is better to briefly view the important points of the process with a chronological approach:
The Project first came up with a declaration of Vladimir Putin in May 2014 about establishing the route of South Stream transiting through a non-EU country which was interpreted as Turkey being considered as an alternative route.
December 2014
Mr. Putin, on 1 December 2014, came to Turkey for Turkey-Russia High Level Cooperation Council Meeting and announced the cancellation of South Stream. On the very same day, the CEO of Gazprom, Aleksey Miller, declared a new pipeline Project to be built passing through Turkey with an annual capacity of 63bcm.
Former Energy Minister Yildiz, a few days later, spelled the Project as “Turkish Stream” and noted that it will not only be a transit Project for Turkey but the gas will be distributed to Europe from Turkey which was thought to enable Turkey to become an energy hub. Yildiz added that gas discount negotiations are conducted alongside with the project negotiations.
January 2015
Aleksandır Novak declared that the gas transit agreement with EU is expiring in 2019 and added that gas will be delivered to Europe via Turkish Stream after the regarding date. Within the same month, Minister of Foreign Affairs and Foreign Trade of Hungary, Peter Szijjarto, declred that his country is ready to receive Russian gas through Turkish Stream.
February 2015
The technical works regarding the project had been initiated in February 2015. Mr. Yildiz and Mr.
Miller (CEO of Gazprom) had a helicopter ride in order to determine the possible route for the pipeline. Former Minister Yildiz after the ride stated: “ Price negotiations, evaluation of the projects regarding Turkish Stream, structuring of the route and renewal of West Line (through which Turkey receives Russian gas via Ukraine) are all considered as a single pack for us.”
Later again in February 2015, Mr Yildiz stated that the gas flow from Russia to Turkey via Turkish Stream is planned to be initiated in December 2016 and added that Turkey and Russia had agreed on 10.25% discount in gas price.
April 2015
Mr Yildiz declared the approach of the Turkish side to the Project with the following words: “Turkey does not consider to have share fort he Black Se apart of the Project. With this Project, some million dollars of investment will be carried out in the Thrace region of Turkey. Out of the 4 planned pipelines, we are willing to complete 1 pipeline till 2017 via which Turkey is supposed to receive Russian gas. In other words, Turkey would like to be in a position by 2017 that is able to meet its Russian gas demand via Turkish Stream and no longer require to receive gas through West Line. The other 3 planned pipelines are issues to be clarified between EU and Russia”.
May 2015
On 8 May 2015, the construction work regarding the 1 pipeline through which Turkey would receive Russian gas was decided to be initiated.
4
June 2015
In the beginning of June 2015, Robert Fico, the prime minister of Slovakia, declared that his country together with Romainia, Bulgaria and Hungary provided a joint Project to Russia regarding the Turkish Stream.
Later in June 2015, Mr Taner Yildir stated that the Turkish Stream Project is not at the required level yet but that Turkish side is determined and added that they are still expecting the coordinates of the route from the Russian side.
Among other European countries, Greece had been the most interested country in Turkish Stream Project. Following negotiations Greece and Russia signed a protocol for the extension of Turkish Stream to Greece. Mr Putin declared that Russia would provide financiang to the public and private Greek companies that will participate in the Project.
Aleksandır Novak on 20th June declared that Bulgaria is willing to build a storage facility within its territory fort the gas that flows via Turkish Stream.
July 2015
Mr Taner Yildiz expressed the change in the attitude of Russia regarding the Project with the following words: “We lean towards Turkey being an energy hub rather than just a transit country in the Project.
We have agreed upon this issue previously. Turkey’s position as a distribution center within the Project had been spelled during Mr Putin’s visit in December 2014 which was the main concept.
However, the proposal received from Russia does not match with what was spoken previously.
Therefore, this issue should be renegotiated in detail.”
Russian Prime Minister Medvedev on the 24th of July declared that he is optimistic about the future of the Project and added that the Russian side is expecting the new government to be established in Turkey in order to sign the intergovernmental agreement.
During this period, the Project had been written to be cancelled in some media institutions.
Ambassador of Turkey in Russia, Mr. Yardım, upon news, declared that the negotiations between the countries did not start due to on-going legal, economical and ecological studies and added that the news regarding the cancellation do not reflect the thruth
In addition to that, Russian Energy Minister Novak stated that BOTAS and Gazprom had agreed upon 10.25% gas discount but not signed a contract yet and noted that the Project is still on the agenda and there is no cancellation. It is declared that Turkish and Russian Presidents Erdogan and Putin will meet in autumn to discuss about the Turkish Stream Project.
5
August 2015
Russian Energy Minister, Mr Novak made important statements regarding the intergovernmental agreement with Turkey. Mr Novak stated that Russia is expecting but could not receive any proposal from the Turkish side since June 2015. He added that Russia is aware that the delay stems from the inexistence of a government since the July general elections and therefore, Russia does not expect any proposal from Turkish side until the new government is established after the snap election that will take place on 1st November 2015. Two countries will continue to communicate regarding the Project during this period of time.
On the other hand, Mr Yildiz explained the reasons of deay in the intergovernmental agreement with the following words: “Russia submitted the pipeline coordinates late. We have submitted the intergovernmental drafts mutually. We are not in the sam eline regarding each item but I believe, we will reach an agreement after negotiations.”
In the meanwhile, Mr Riza Alaboyun has taken over the Office from Mr Taner Yildiz at the end of August 2015 and he stated: “We will not focus on this issue during my interim ministerial process until the November election. Russia offered a gas discount of around 10.25, but we did not accept this, as we saw this as a beginning price to start negotiations. This was not a prerequisite to start talks over a gas pipeline project for us. Besides, Russia does not keep its promises on gas discounts now. All these issues will be clarified during the term of the next minister after me after the elections.”
September 2015
In mid-September, the Turkish Stream project was announced by the Turkish officials to be frozen last week and Gazprom’s deputy chairman Alexander Medvedev stated that the implementation of the pipeline is delayed.
On 23 September 2015, Turkish President Erdogan visited Russia and met the Russian President Putin.
Two leaders discussed the current situation and the future of cooperation between Russia and Turkey.
Mr. Vladimir Putin stated: "As for our bilateral contacts, we are highly satisfied with the way our interstate relations develop. Regular contacts continue at the highest level, both in the parliamentary and governmental directions”. After the meeting, Kremlin spokesman Dmitry Peskov described the Turkish-Russian gas cooperation as “usual” and stated: “The activities are underway. This is rather complicated work. Everything is taking its usual course”. He also noted that not all matters would be solved "Before the yearend, the Russia-Turkey Supreme Council will be held, where [Russian President Vladimir] Putin and [Turkish President Recep Tayyip] Erdogan will meet again and receive one more chance to ‘compare notes’," Peskov added.
October 2015
Aleksandır Novak, during his visit to Istanbul for G20 Energy Ministers summit, met with the Turkish Energy Minister Aliriza Alaboyun and he declared that they have reached a concensus about the neccessity of Turkish Stream Project. He noted that the both parties are interested in the Project;
however the final IGA will be signed only after the establishment of the new goverment after snap election that will take place on November 1st. Mr. Novak informed that a delegation from Russia was to pay a visit to Ankara in order to discuss the technical issues regarding the Project.
After the statements of mutual agreements on the necessity of Turkish Stream Project by the two energy ministers durin G20, the tension rised between Russia and Turkey due to Russian warplanes' infringement on Turkey's airspace and Russia's latest intervention in Syria. Turkish President Erdogan warned that the natural gas deal with Turkey, as Russia’s second biggest gas client, is an issue that Russia should take into account. In addition to that According to Sputnik, Erdogan warned that the Akkuyu nuclear power plant project and its natural gas deal with Turkey are issues that Russia should take into account. He cautioned Russia to be sensitive over its $3 billion investment in the Project and said that an alternative source could be found if the Russians are no longer involved in the project.
6
Above-mentioned tension brought the question marks regarding the fate of Turkish Stream Project. On the 8th October, Kremlin spokesman declared that Mr. Putin was informed about the declarations of President Erdogan and emphasized that Russia cares about bilateral relations with Turkey, and wishes to continue with the agreed bilateral plans. Additionally, Gazprom CEO Alexey Miller stated that no political factors would negatively affect work on an intergovernmental agreement with Turkey on the Turkish Stream gas pipeline.
The next day, spokesman of Foreign Affairs Ministry of Russia declared that there is no reason for the bilateral relationships between Russia and Turkey to deteriorate.
In the meanwhile, it was confirmed by Gazprom that the capacity of Turkish Stream project is decreased to 32 bcm from previously-determined 63 bcm and that the project is limited to only two pipelines (previously it was 4 pipelines), one pipeline for the domestic demand of Turkey and one for European market.
Turkish Interim Energy Minister Mr. Alaboyun declared in an official statement that the Turkish Stream Project continues as planned, dismissing the latest news in the local and global media regarding the cancellation of nuclear power plant construction. Alaboyun also dismissed latest stories in the local and the international media that claimed Russia has denied Turkey's request to for an additional 3 billion cubic meters (bcm) of natural gas supply through the Blue Stream gas pipeline that runs under the Black Sea. The minister stated that they have agrees on 1 bcm of additional gas initially and after the necessary infrastructure is established, 2 bcm of additional gas will be discussed.
As of today (12.10.2015), it is reported in the Turkish media that no agreements had been signed yet regarding previously-agreed 10.25% gas discount. According to media, Turkish side is getting prepared to go to international arbitration court in case no official steps are to be taken by the Russian side till the year-end.
Additionally, the tension, although decreased, is still going-on between Turkey and Russia regarding Russian air strike against ISIS forces in Syria. According to experts, Russia and Turkey have mutual benefits in terms of natural gas trade that both countries should take into account. Turkey imports almost 60% of its natural gas from Russia and generates around 40% of its electricity at natural gas-fired power plants. Therefore, Turkey is dependent on Russian gas. On the other hand, Turkey is a vital gas market for Russia. According to some experts, it is not easy for Russia to find a substitute gas market if Turkey quits importing gas from Russia and Turkey is the second largest consumer of Russian gas after Germany. At the same time, it is also not easy for Turkey to find a substitute gas supplier in the short-term. As is known, Turkey buys the most expensive gas from Iran which makes Iran not the best alternative for Turkey, at least for the time being. Turkey might increase its LNG imports from Nigeria and Qatar but LNG is more expensive than pipeline gas and additionally Turkey does not have enough storage capacity and infrastructure for high volumes of LNG trade. Since, no significant additional gas can be importeed from Azerbaijan in the short-term, Russia remains as the sole alternative for pipeline gas supply to Turkey.
Resources:Enerji Enstitusu, Dunya Daily Newspaper, Tass Russian News Agency, Sputnik News, aaenergyterminal
7
The long lasting arbitration court between Iran and Turkey is expected to be finalized by the end of 2015.
Turkey requests a 25% discount on the the gas price supplied by Iran. Turkey buys the most expensive gas from Iran.
The World Bank has lowered its average oil price forecast for 2015 to $53 per barrel, earlier forecasted at $57 per barrel in its April report.
Fatih Birol, the President of IEA said that the oil prices are expected to remain around 45 $/b level for a long time. Birol stated that the companies reduced their investments by a fifth this year due to low oil prices, emphasizing such a decline in the investments was not recorded in any period previously.
