Turkey secures gas discount from Russians

Russian Energy Minister Alexander Novak announces that Russian state-run company Gazprom and Turkish state-owned pipeline firm BOTAS have reached agreement on 10.25 percent gas discount

Photo by: AA
Photo by: AA

Updated Aug 1, 2015

Russian Energy Minister Alexander Novak has announced that Russian state-run company and Turkish state-owned pipeline firm BOTAS have reached an agreement on a 10.25 percent discount concerning natural gas prices, Novak has also indicated that the deal is not signed yet.

Turkey is Gazprom’s second biggest export market after Germany and the country is looking to secure a 15 percent gas discount from Gazprom through the project, according to Turkish government sources.  

Novak has also stated that the Russian side has not received any notifications connected to cancellation of the project from Turkey denying recent media reports.

He said, “We have been continuing to work on an intergovernmental agreement. It is my understanding that the Turkish side has been continuing to work on it too," according to Anadolu Agency.

Novak said on Wednesday that construction of the envisaged “Turkish Stream,” will not begin until Russia and Turkey sign the intergovernmental agreement.

"The beginning of the project's construction will be postdated as the date of signing is postdated," he added, Russian Interfax news agency reported.

Turkish Energy Minister Taner Yildiz previously stated that the Turkish Stream pipeline project needs more time because there have been “certain disagreements” between Russia and Turkey in terms of priorities of the project after the countries had previously announced that they will sign a formal agreement at the end of June.

Yildiz said Turkey gave Russian state-controlled natural gas company Gazprom the necessary permit to begin the exploration work for the Turkish Stream pipeline project in the country’s exclusive economic zone (EEZ).  The project was largely discussed in a private meeting on June 13 between Turkish President Recep Tayyip Erdogan and Russian President Vladimir Putin in Azerbaijan’s capital Baku during the Baku 2015 European Games.   

The energy minister said the most important disagreement between the countries is whether the project will consider Turkey a transit country or a centre of energy. Yildiz stated that, “When President Putin visited Turkey on Dec. 1, 2014, we spoke about not only passing this pipeline through Turkey but also making the region of Thracia where the pipeline will lay out a centre for distribution of energy and natural gas.”

“This was the main concept, but the Russian Federation has brought us a different proposition. We now need to work on different propositions and ensure the project to advance at a speed we wish,” he added.

Russian Energy Minister Aleksandr Novak previously revealed that Russia received Turkey’s permit which  “envisages engineering surveys for the first line of the project in the Turkish Exclusive Economic Zone and within Turkey’s territorial waters," according to the most recent Gazprom statement quoted by Anadolu Agency.   

Both countries have been meticulously planning for the project since Russia relinquished its plans for the $40 billion South Stream pipeline project in December 2014 due to objections from the European Union (EU) on competition grounds.

The new Turkish Stream project is an alternative pipeline which is planned to bring gas to Europe through Turkey, bypassing Ukraine, with an aim of pumping 63 billion cubic metres (bcm) of gas per year - 47 bcm of which will be delivered to Europe - by 2020. The rest of 16 bcm will be allocated for domestic use in Turkey.

The pipeline will have four lines and each one will have an annual capacity of 15.75 bcm and the project is planned to lay out a total of 660 kilometres of pipelines through the old South Stream route beneath the Black Sea.

Yildiz previously emphasised that Turkish discussion with Russia is focused on the first line of the pipeline, which has also been the main subject of discussions between Erdogan and Putin during their “very constructive meeting” in Baku.

Reuters also previously reported that Gazprom hopes to create a gas hub at the Turkish-Greek border for transit to Europe, but this depends on “Turkey agreeing to build on its territory and needs EU countries  - many of which want energy independence from Russia - to develop the required infrastructure.”  

Novak said Turkey may join the construction of the pipeline’s offshore segment within its EEZ, referring to 250 kilometres of pipes along the Turkish coast. Yildiz also said that Turkey is "talking about partnership and ownership.”

“We need to set up the mechanism very carefully for this. We are looking to become a partner in the costs," he added.   

The first line of the project is expected to be valued at 3.3 billion euros ($3.73 billion). Gazprom said Turkey “ensured that the project was not in any territorial conflict with the EEZ of its neighbour, Bulgaria, in the western Black Sea.”

Novak announced on June 19 that Bulgaria has renewed its desire to build a natural gas storage facility on Bulgarian soil for the Turkish Stream.

Greece and Russia also signed on the same day a preliminary agreement to build an extension to the Turkish Stream.

TRTWorld and agencies