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End of year, time to finish the pipelines

Tanap and "Power of Siberia" inaugurated and Turkish Stream almost completed, with just the final part of Nord Stream 2 to go.

by Evgeny Utkin
04 December 2019
6 min read
by Evgeny Utkin
04 December 2019
6 min read

“Today is an extraordinary day, a truly historic event not only for the global energy market, but above all for us, Russia and China,” said Vladimir Putin in his speech at the inauguration of the 'Power of Siberia' gas pipeline on December 2. Russian president, Vladimir Putin, and Chinese president, Xi Jinping, kicked off Russian gas deliveries to the People's Republic via the so-called “eastern route” by video conference. “This year we are celebrating 70 years since the diplomatic ties between Russia and China were established and we are starting to supply China. This move takes the Russian-Chinese strategic partnership in the energy sector to a whole new level and brings us closer to the goal of increasing trade to $ 200 billion by 2024,” Putin added.

Completed so far is the 2,200 km section running from the Chayandinskoye field in Yakutia to Blagoveshchensk (on the border with China). The second phase, around 800 km long, will join up to another mega field in Kovykta. The total length of the pipeline will therefore be 3000 km. The pipeline has taken more than five years to construct and required a total investment of 1.1 trillion rubles (more than 15 billion euros). Gazprom and the Chinese CNPC signed a thirty-year agreement in May 2014 for the annual supply of 38 billion cubic meters of gas in May 2014. The total value of the contract is around 400 billion dollars. By 2020, Gazprom might be able to supply up to five billion cubic meters of gas to China, up to ten by 2021 and up to 15 by 2022. A design capacity of 38 billion cubic meters is expected to be reached by 2025.

From Siberia to TANAP

Saturday, November 30, also saw the inauguration of the Trans-Anatolian gas pipeline (TANAP) through which Azeri gas will also be supplied to Italian consumers. The ceremony was held in the Turkish province of Edirne, close to the border with Greece, in the presence of the Turkish and Azeri presidents, Recep Tayyip Erdogan and Ilham Aliyev. The event was also attended by the Italian Undersecretary for Foreign Affairs, Ivan Scalfarotto. The initial capacity of the TANAP pipeline will be 16 billion cubic meters per year, 6 billion of which will remain in Turkey, with 10 billion going to Europe.

TANAP is part of the Southern Gas Corridor (SGC), which extends 3500 kilometers from Baku to the Apulian coasts through the territory of Georgia, Turkey, Greece and Albania. Commercial deliveries of Azeri gas to Europe via SGC are expected to start in 2020.

The Russia - Turkey route

On November 30, Turkish President Erdogan also announced the launch date for the Turkish Stream. “We will open another gas pipeline, Turkish Stream, on January 8 in Istanbul,” he told the NTV television channel. Putin himself confirmed his attendance at the opening of the pipeline. Also at the end of November, the start-up work and final tests entered the completion phase. Everything is likely to be ready by the end of the year, but it was not easy for the two Presidents to find time in their diaries so the date has been set for just after the Orthodox Christmas. The Turkish Stream project has two lines carrying a total of 31 billion cubic meters per year. The first line was designed to supply Russian gas to Turkish consumers, while the second will bring gas to the countries of south-eastern Europe: Bulgaria, Serbia and Hungary.

The Russia - Germany route

There is also news regarding Nord Stream 2. First of all, in November, Denmark also agreed to have the pipes laid in its territorial waters. This permission was mainly symbolic as other countries had already given their consent and that otherwise the route would have had to be lengthened by a few kilometers, increasing time and costs (the project is worth 9.5 billion euros). The greatest risk for Nord Stream 2 (which was scheduled to be completed by the end of 2019) is the pressure from America and some European countries that oppose it, as the project would increase Europe's dependence on a single supplier, Russia. In addition to politics, there are also economic interests behind the opposition from the US. The US would like to sell its LNG to Europe, sidelining its biggest competitor, Russia: but at the moment American gas costs more than Russian gas.

The United States is threatening to introduce sanctions against the companies participating in the project, probably before Christmas. This would be a hindrance to the Nord Stream 2 pipeline, but, given that it is on its way to completion, work would not be interrupted.

The Russia-Europe route through Ukraine

The historic route for Russian gas to reach Europe through Ukraine obviously still remains. With the completion of Turkish Stream and Nord Stream 2 (capacity 55 billion cubic meters) this route becomes secondary, considering the continuous conflicts and the higher cost of transit. No contract has yet been signed between the Russian Gazprom and the Ukrainian Naftogaz companies, but the details are expected to be discussed at the meeting between Vladimir Putin and his Ukrainian counterpart, Vladimir Zelensky, on December 9. Putin announced some time ago that he was willing to enter into an agreement with Ukraine in accordance with European regulations.

In any case, the successes achieved in the construction of the various pipelines to Europe diminish the concerns regarding possible interruptions on the Ukrainian route. More pipelines, more choice; more pipelines, more security of supply.

The author: Evgeny Utkin

Evgeny Utkin is a journalist and expert on the Russian economy and on energy issues. He works in the Milan editorial office of Quotidiano Energia and contributes to several Italian newspapers (the Russia Oggi supplement of the newspapers la Repubblica and la Stampa) as well as to foreign newspapers (Expert). Before being appointed as an executive of inter-governmental and international companies like Eutelsat and Ericsson, he also worked as Teaching Fellow at the Moscow State University.