Winter will show: will the Turkish hub save Russia's gas exports?

Ukraine (, - Russia and Turkey want to create a new gas hub to supply fuel to the European continent. Moscow hopes in this way to compensate for at least part of the losses incurred due to the loss of the Nord Streams, Ankara, if successful, can claim the role of the largest regional player in the gas market. But the main word will, apparently, not be theirs, but Brussels's, experts say, whose opinions are published by the Profile magazine.

They believe that if the European Union is firm in its intention to abandon Russian gas, then the idea of ​​​​a hub can be considered stillborn. In addition, the new route will not be a full-fledged replacement for traffic through the Baltic Sea.

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Why Russia needs it

Sabotage at Nord Stream put an end to Russian gas pipeline supplies to Northern and Northwestern Europe. It is already obvious that neither Nord Stream 1 nor Nord Stream 2 will be able to be used in the foreseeable future, and therefore Moscow is looking for ways to redirect at least part of its gas exports to new markets.

“We could move the lost volume of transit through Nord Stream along the bottom of the Baltic Sea to the Black Sea region and thus make the main routes for the supply of our fuel, our natural gas to Europe (routes) through Turkey,” President Vladimir Putin said on October 12 at the Russian Energy Week forum.

Turkey itself was asked to become "the largest gas hub for Europe."

The choice of Turkey is not accidental - the fact is that the Russian Federation has a good technical reserve in the southern direction, as well as the ability to relatively quickly and inexpensively build up the gas transportation infrastructure.

Recall that in the early 2010s, Russia tried to implement the South Stream project, designed to pump 63 billion cubic meters of gas to the Bulgarian port of Varna. But in 2014, under pressure from the European Commission, Bulgaria withdrew from the project. Then, by the decision of President Putin, the South Stream was transformed into the Turkish Stream - the pipe went along the bottom of the Black Sea from the Krasnodar Territory to the European part of Turkey. The capacity of the new gas pipeline was only 31.5 billion cubic meters - exactly half of what was originally planned. However, on the territory of the Russian Federation to the Black Sea coast, pipes were laid, designed for the same 63 billion cubic meters. So now, in order to double the available capacity, it is enough to stretch along the bottom two additional pipes of 15.75 billion cubic meters each.

“Turkish Stream is already operating, and laying additional pipes in its fairway is faster and cheaper than implementing such a project from scratch,” explained Aleksey Gromov, Chief Energy Director of the Institute of Economics and Finance, adding that, according to his assessment, , this may take "on the order of two years".

The head of Gazprom, Alexei Miller, in an interview with domestic media, has already made it clear that technologically and technically his company is ready to start construction. As soon as Moscow and Ankara agree on the creation of a hub, the Russian side will be able to get to work.

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Prospects for Nord Stream

Immediately after the sabotage at Nord Stream, the German newspaper Der Tagesspiegel wrote that these pipelines had been destroyed forever. Independent experts assured that they can be repaired, although the task is not easy: the damaged area is located at a depth of 80 meters, the length of the cracks exceeds 50 meters. It is necessary to start repairs as soon as possible so that salt water does not get inside the pipeline.

The fact is that the outer side of steel pipes 3-4 cm thick has a special anti-corrosion coating and is additionally protected by a layer of concrete. There is no such protection inside, and the ingress of salt water can lead to fatal consequences.

At the time of the explosion, the pipes were filled with technical gas. Until he came out, the water did not penetrate inside. It is not clear to what extent the pipes are now filled with water, since representatives of Gazprom have not said whether there are special plugs in the design and whether they are involved.

The situation with Nord Stream is complicated by the fact that the emergency sites are located in the territorial waters and economic zones of Denmark and Sweden, and the authorities of these countries are in no hurry to allow Russian specialists to the place of explosions. As a result, the situation with gas pipelines may turn out exactly as Deputy Prime Minister Alexander Novak described it: it is easier to lay a new gas pipeline in the Black Sea than to repair the existing one in the Baltic.

Very slow stackers

True, there is a rather serious problem: Russia has a too weak specialized fleet. The Turkish Stream was laid by the vessels of the Italian company Saipem S.p.A. Alas, the current geopolitical situation excludes the participation of European partners, so we will have to use domestic pipelayers. And there are only two of them: the Fortuna pipe-laying barge and the Akademik Chersky crane and installation vessel - both were used during the completion of Nord Stream 2. According to their technical and economic characteristics, these vessels lose to their foreign analogues. Their pipe laying speed is several times lower than that of competitors, plus there are restrictions on the depth of work. The last factor may turn out to be critical: if the average depth of the Baltic Sea, through which the Nord Streams passed, is only 51 m, then at the Black Sea it is 1240 m - a difference of 24 times!

“The fundamental question is whether Russian pipe-laying vessels are ready to work at much greater depths than in the Baltic,” says Sergey Khestanov, lecturer at the RANEPA.

He believes that the project is feasible, but the inability to use foreign ships will greatly lengthen the construction time. Two years, during which the Turkish Stream was built in the past, with the current technical equipment, is most likely not enough.

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Is it profitable for the Turks to sell Russian gas

Next question: how do Moscow and Ankara see the organization of trade on the new site?

“It is unlikely that we are talking about creating some kind of transit hub, that is, turning Turkey into a transshipment point for“ problematic ”Russian gas,” says Alexey Gromov.

This role of Turkish partners will definitely not be of interest. There is another option: simply “hand over” the entire volume of Russian gas to Turkey. The fuel changes its "registration", and then the Turks dispose of it as they see fit - they resell it to the Europeans, etc. Thus, Moscow gets rid of the problems associated with the sale of gas to former European partners. This option, according to the expert, is the simplest, but at the same time the least profitable for Gazprom, since in this case the company will have to give gas at a very large discount.

However, Ankara's ambitions, most likely, extend further - it is interested in creating a hub that would accumulate fuel from suppliers from all over the world for its further resale to European countries. Valentina Milashevskaya, a specialist in commodity markets of the Finmir marketplace, recalls that the Trans-Anatolian gas pipeline already passes through Turkey, through which natural gas is supplied to Europe from Azerbaijan. Ankara has also entered into a scramble with Greece and Israel for the right to mine newly discovered fields in the Mediterranean Sea, not far from Cyprus.

In the future, Iranian gas could be traded in the Turkish hub, possibly attracting liquefied natural gas (LNG) going to Europe from Nigeria, Algeria and the United States. If successful, Turkey will be able to claim the role of a regional player that controls supplies both through pipelines and through LNG terminals.

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How Ukrainian and Belarusian transits work

After the loss of Nord Stream, Russia still has the possibility of transit supplies to Europe through Belarus and Ukraine. The Yamal-Europe gas pipeline with a capacity of 32 billion cubic meters per year passes through the territory of the former. However, pumping through it was stopped by the Russian side on March 30, 2022, after Warsaw arrested and de facto nationalized Gazprom's stake (48% of shares) in EuRoPol Gaz, which controls the Polish section of the pipeline 683 km long.

A total of 100 billion cubic meters per year can be transported through the territory of Ukraine. Now the existing pipelines are underloaded: 42 million cubic meters per day are pumped through the Sudzha gas measuring station (GIS), at the beginning of the year more than 70 million cubic meters were supplied, technically it is possible to supply more than 80 million cubic meters per day. The second (southern) Ukrainian branch through the GIS "Sohranivka" is operational, but blocked by Kyiv.

Russia and Ukraine have signed a contract for gas transit to Europe until 2024, but experts estimate the likelihood of its extension and preservation of Ukrainian transit in the current geopolitical situation as "extremely low."

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Does Europe need a Turkish hub with Russian gas

True, there is nowhere to sell gas from a hypothetical hub except to Europe. Thus, the main question still sounds like this: will there be demand in the Old World for additional volumes of Russian gas? Especially given the current geopolitical situation and the absence of any constructive interaction between Moscow and Brussels on the issue of gas supplies.

Even before the outbreak of hostilities in Ukraine, the European Commission set a goal to completely abandon our gas by 2030. And after the start of the military operation, the blocking of supplies through the Yamal-Europe pipeline and the reduction of Ukrainian transit, this process went by leaps and bounds.Initially, the EU planned to reduce imports from Russia by 50 billion cubic meters in 2022, that is, by about a third. Now this plan has been almost doubled.

“We expected that the replacement of Russian gas would take several years. Today it is a fact that it took us only eight months to replace two-thirds [of supplies from the Russian Federation]. In other words, we have significantly accelerated the transition to other foreign suppliers,” European Commission President Ursula von der Leyen said in October.

If everything goes as the European officials planned, then Europe, or rather, individual European countries, will need Russian gas for another two or three, maximum four years, Alexey Gromov gives such a forecast. Brussels hopes that by 2026 additional volumes of LNG will appear on the market, and then the need for Gazprom's services will disappear altogether. And who will need a Turkish hub then?

However, there is no need to rush to conclusions either, because Europe is just entering the autumn-winter heating period, and it will become the “moment of truth”, which will show the real dependence of the continent on Russian fuel. Moreover, in preparation for the next season, European partners will no longer have those billions of cubic meters of cheap pipeline gas from the Russian Federation that they pumped into their underground storage facilities in the first half of 2022.

“I would say the situation is fifty-fifty. If we believe the rhetoric of the EU, then there is no need to deal with the Turkish hub project, because Europe says directly: we do not need your gas. If we assess the situation more realistically, then we are waiting for the next heating seasons to pass. It may very well be that Europe will have to reconsider its gas policy,” summarizes Alexey Gromov.

Risk number two is the lack of a gas transportation infrastructure in Europe to transport additional volumes of Russian gas from Southern Europe to Northwestern Europe. The Turkish Stream was built only up to the territory of Turkey, while the Balkan Stream departing from it (through Bulgaria to Serbia and Hungary) was sold by the operators of these countries. But will the EU states create new "gas bridges", especially considering that decisions on laying new pipelines must be coordinated by the European Commission? But it's still entertainment.

Finally, there is the constant threat of sanctions against the new site. Sanctions can instantly nullify all investments in the project, as happened with Nord Stream 2: the money was spent, the work was carried out, but the gas pipeline was not launched.

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The fate of Germany

Germany can be considered the main loser if a Turkish hub is created. Berlin, most likely, will not be able to use this gas, since due to the colossal length of the route, the transfer of fuel from Turkey will be unprofitable.

At the same time, after the destruction of Nord Stream, Germany lost its potential status as the largest distributor of Russian gas across the European continent. According to Alexei Gromov, the country has come to terms with this loss and is ready, in the company of other EU states, to become a client of American LNG sellers. Berlin has already planned the construction of several floating LNG terminals in the coming years - this will replace expensive liquefied gas from the United States with cheap pipeline gas from Russia. After all, even at the height of the gas crisis, when spot prices exceeded $1.5 thousand per cubic meter, Gazprom supplied fuel at $500 per cubic meter under long-term contracts.

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Is the eastern alternative real

Even if the Turkish project succeeds, it will not become a full-fledged replacement for the destroyed Nord Streams. Because we are talking about different markets and different volumes of deliveries. Through Nord Stream 1, Russia "driven" and sold 55 billion cubic meters of gas per year. And the capacity of the promising Black Sea pipeline is only 31 billion cubic meters.

Nord Stream was oriented to the northwest of Europe. With the help of the expanded Turkish Stream, the most we can do is increase gas sales to the states of Southern Europe – the Balkan countries, possibly the northern regions of Italy, Greece. Perhaps you can dream about Austria.

“But the volumes there are still less than we sold in Germany, France and other countries of the region,” emphasizes Alexey Gromov.

In general, compensating for the loss of the European market is an impossible mission. Prior to the outbreak of hostilities in Ukraine, Gazprom supplied 145 billion cubic meters of pipeline gas per year to the Old World. Now this figure, according to various estimates, ranges from about 50 billion cubic meters to 32-33 billion cubic meters. That is, you need to "attach" somewhere from about 100 billion to 112 billion cubic meters.The Turkish hub (if it is created) will “swallow” 31 billion cubic meters. So? For example, China, where the Russian leadership expects to send 50 billion cubic meters per year through the Power of Siberia-2. In September, Deputy Prime Minister Alexander Novak said that this pipeline would replace Nord Stream 2, and that a final agreement with China could be reached "in the near future." That is, in fact, the project has not even been officially agreed upon, and its construction, at best, can begin in 2024 - such a date was called by the Prime Minister of Mongolia, Luvsannamsrain Oyuun-Erdene (a pipe will pass through the territory of this country). Plus, the Power of Siberia 2 cannot be built as quickly as the two new lines of the Turkish Stream. According to various estimates, construction may take four to five years.

And, strictly speaking, the Power of Siberia-2 gas pipeline cannot be considered a replacement for Nord Stream, since gas from the Chayandinskoye field will be pumped through it, while Potok supplied fuel from the Yamalo-Nenets Autonomous Okrug. The largest Russian fields are located in Western Siberia, and the existing gas transmission systems are “sharpened” for deliveries to Europe. You can turn them to Asia if you wish, but it is difficult and expensive. We will have to overcome thousands of kilometers, force the rivers.

Beijing itself, of course, is not against Russian gas, but prefers not to put its eggs in one basket. Many players are involved in the gasification of the Middle Kingdom. China has already built four lines of the pipeline from Turkmenistan (“Central Asia – China”), their total capacity should be 65 billion cubic meters per year. According to Sergey Khestanov, it is possible to connect gas suppliers from Uzbekistan and Kazakhstan to these pipes. The length of this pipeline is less than the future Power of Siberia 2, which means that the cost of supplies is lower. It won't be easy to compete.

China has also extended a pipeline from Myanmar to supply oil and has 13 LNG receiving points.

“China, as a consumer, has diversified supplies very well and has a strong negotiating position,” Khestanov notes. “In order to sell him significant volumes of gas, you will have to give a very large discount, otherwise he simply will not buy.”

An energy union with Asia is, of course, possible, but it certainly won't be easy.

Winter will show: will the Turkish hub save Russia's gas exports?