Russia’s Plans for Natural Gas Hub in Turkey Facing Obstacles

SEATTLE (Oil Monster): Russia is turning to Turkey as a potential natural gas hub partner with a new sense of urgency to find new export outlets for volumes left stranded by damages to the Nord Stream pipelines in September. 

But any hub would likely face political, financial and supply issues that are compounded by the Kremlin’s war in Ukraine, said Maximilian Hess, a Central Asia fellow at the Foreign Policy Institute.

Russian President Vladimir Putin and Gazprom PJSC head Alexei Miller met President Recep Tayyip Erdogan in Kazakhstan in October to revive gas hub plans. Erdogan and Miller met again last month in Istanbul. Russia could divert gas planned for the Nord Stream pipeline to the Black Sea, Putin told Erdogan.

“Turkey will be a hub for natural gas,” Erdogan said in Ankara last month. “In our last meeting, we agreed with Putin on this issue. We will create a hub here with Turkish gas coming from Russia.” 

Turkey has not joined western sanctions against Russia, and has continued to trade with the country. However, Turkey faces its own problems with the Kremlin, including a dispute over the prices it pays for Russian natural gas imports, which “could stall regional hub talks,” Hess said.

Turkey is reportedly asking for a 25% discount from Russia, and to delay gas payments until 2024 to avoid domestic economic hardships from higher gas prices.

Although Russia is attracted to Turkey as a gas exporting hub, Turkey consumes most of the gas Russia delivers to Turkey, “leaving limited room for becoming  a regional gas hub without additional pipeline capacity, which could take at least five to 10 years to complete,” Hess told NGI. 

Since 2003, Russia has delivered gas to Turkey via the 16 billion cubic meter (Bcm)/year Blue Stream pipeline. Turkstream’s two subsea pipelines also started deliveries in 2020 with up to 31.5  Bcm of Russian gas that bypasses Ukraine through the Black Sea to Turkey.  One pipeline delivers gas to Turkey, and the other line delivers Russian gas via Turkey to several European countries.

Putin’s answer to increasing capacity for a regional hub is to build new pipelines across the Black Sea, along Turkstream’s existing pipeline route. Russia is in search of new customers for its gas since it has dramatically reduced deliveries to Europe. The Nord Stream pipelines, which moved volumes from Russia to Germany, were damaged in an explosion.

It would be difficult to replace Nord Stream’s potential 110 Bcm of capacity, Hess said.

Courtesy: www.naturalgasintel.com