Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Russia Readies New Gas Link to Europe in Defiance of U.S.

Published 01/08/2020, 06:09 PM
Updated 01/08/2020, 08:38 PM
Russia Readies New Gas Link to Europe in Defiance of U.S.
NG
-
GAZP
-

(Bloomberg) -- Russia is poised to officially open its TurkStream natural gas pipeline on Wednesday, further diversifying export routes to Europe amid a backlash from the U.S.

President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdogan are meeting in Istanbul to inaugurate the pipeline in a ceremony celebrating the nations’ energy and political ties. TurkStream is set to carry Russian gas under the Black Sea to Turkey and supply several countries in southeast Europe once fully operational, just as U.S. sanctions stall another Gazprom (MCX:GAZP) PJSC export line.

TurkStream consists of two pipelines running together underwater, each with an annual capacity of 15.75 billion cubic meters. Gas via the link has been flowing to Turkey and Bulgaria since Jan. 1, according to utility Bulgargaz. A combination of existing and new pipelines will subsequently take supplies to Serbia and later on to Hungary.

The project allows Russian producer Gazprom (MCX:GAZP) to achieve two strategic aims. First, it may help the company increase its market share in Turkey, currently among the top three buyers of its gas. Second, Gazprom can reduce its dependence on Ukraine as a transit route, a key objective following years of strained political relations between the two neighbors.

See also: Last-Gasp Gas Accord With Ukraine Averts Winter Supply Crisis

Construction of another major Russian pipeline project -- the Nord Stream 2 link under the Baltic Sea -- was halted last month because of American sanctions on the contractors building the line to Germany. The U.S., itself an emerging gas exporter to Europe, has claimed that Gazprom’s pipeline projects hurt the region’s security of supply.

Nevertheless, Putin has hailed the TurkStream link as “an important factor in ensuring pan-European energy security,” while Erdogan has said at least half of the gas supplied via the pipeline will be shipped to Europe.

For Russia, the inauguration marks a further success in adding export routes, despite Nord Stream 2’s setback. Gazprom (MCX:GAZP) last month opened the giant Power of Siberia gas pipeline, which runs from Russia’s enormous reserves in eastern Siberia to northern China.

Ukraine Reliance

Until now, Russian gas flows to Turkey have been split almost evenly between supplies via Ukraine and direct shipments via the Blue Stream link, completed 16 years ago.

With the start of the new pipeline, as much as 13 billion cubic meters of Russian gas can be immediately diverted from the Ukrainian transit route into the first line of TurkStream for Turkish consumption, the Oxford Institute for Energy Studies said in October.

Neighboring Bulgaria has prepared its gas grid to accommodate about 2.9 billion cubic meters of the fuel from TurkStream, while Serbia expects to receive an initial supply of more than 3 billion cubic meters a year, according to state-owned gas company Srbijagas. Serbia will also be able to transit as much as 6 billion cubic meters a year to Hungary via an interconnector that’s projected to come online in 2021.

Besides inaugurating TurkStream, Putin and Erdogan plan to discuss prospects for further cooperation and international issues, including the situation in Syria and Libya, according to a Kremlin statement.

(Updates with Kremlin statement in final paragraph. An earlier version of the story was corrected to amend the start date of the Serbia-Hungary interconnector.)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.