Politics has reared its head in the energy industry again as Russia, in the form of Gazprom, has cancelled the $40bn South Stream gas pipeline project across the Black Sea which would have supplied gas to southern Europe while avoiding the Ukraine.
EU sanctions against Russia over the conflict in the Ukraine were the main driver for the cancellation of the project which would have seen the pipeline landed in Bulgaria.
#Gazprom has had difficulty raising funds for the project from Western banks, although Russian President Vladimir Putin called the blocking of the pipeline against the economic interest of the EU and bad for Bulgaria.
In order to keep the gas flowing, Gazprom has signed a memorandum of understanding with Botas Pipeline Petroleum to land the pipeline and the gas in Turkey.
There are upsides and downsides of this new deal. The 63bcm/a capacity of the pipeline is four times Turkey’s gas consumption. Even with a proposed discount, increasing the Turkish uptake would still leave in excess of 40bcm to be sold. This gas will be in competition with gas from the Caspian Sea and TAP pipeline system through Albania, Greece and eventually Italy.
While Russia is Turkey’s main gas supplier, Turkish President Tayyip Erdogan has spoken out on Russia’s overt support for the Syrian government of Bashir al-Assad in the current civil war, although he was not about let politics stand in the way of a good deal.
What is also of note is that Saipem which was due to lay the pipeline across the Black Sea had not, as of Tuesday, received any notification of cancellation of the project. Same pipeline just different route.
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