Blue Stream pipeline boost won't shield Turkey from gas shortages

By ISIS ALMEIDA
Bloomberg

A capacity increase in the Blue Stream natural gas pipeline from Russia won’t prevent Turkey from facing natural gas shortages, according to energy company Akfel Holding.

Western Turkey gets most of its gas through pipelines crossing Ukraine, and the ability to send Russian supplies from Blue Stream in the east is limited, Fatih Baltaci, president of Akfel, the Istanbul-based private gas importer, said in an interview at the ICIS European Gas Conference in Amsterdam.

Turkey and Russia’s OAO Gazprom agreed this month to boost Blue Stream’s capacity by 19%.

Turkey got 57% of its gas from Russia last year, 49% of which was imported through Ukraine and the rest via Blue Stream, Bloomberg Intelligence said in an Aug. 18 report.

Russia cut gas supplies to Ukraine on June 16 over a debt and price dispute, fueling speculation flows to Europe will be disrupted in a re-run of similar disputes in 2006 and 2009.

“Even with the boost in the capacity of Blue Stream, it’s not enough to replace the missing quantities to the western part of Turkey,” Baltaci said. “I think we are pretty covered, but if, let’s say, you are talking about a curtailment of several months, let’s say three months or more, definitely we will be affected.”

Gazprom and Turkey agreed to boost Blue Stream’s capacity to 19 billion cubic meters (671 billion cubic feet) from 16 billion cubic meters a year, the Moscow-based company said Oct. 1.

Turkey would face “severe shortages” of gas due to disruptions via Ukraine, with the Istanbul area most affected, Alexey Grivach of Russia’s National Energy Security Fund said in a report e-mailed Aug. 13.

Talks Fail

Russia and Ukraine failed to reach a final agreement to resume gas flows at a recent meeting. The European Union, which has been trying to broker a deal between the two nations since May, said it hopes for a decision during talks set for Oct. 29, according to Energy Commissioner Guenther Oettinger.

Turkey will cope with Russian gas disruptions through Ukraine by switching off gas-fired power plants and using fuel oil instead, according to Baltaci, whose company has a 30-year oil-indexed contract to buy gas from Gazprom. The country will also boost hydropower supplies and import more liquefied natural gas, he said.

Turkey signed a one-year agreement to buy 1.2 billion cubic meters of LNG from Qatar, the world’s biggest producer, Turkish Energy Minister Taner Yildiz said in Doha last month.

“We will not face the same tense situation as some of the other countries depending on Russian gas coming from Ukraine,” Baltaci said. The nation’s gas storage sites are almost 90% full, he said.

Rising Consumption

Turkish gas consumption will rise to 46 billion to 47 billion cubic meters this year from 44 billion cubic meters in 2013, Baltaci estimated. Use may reach 50 billion cubic meters in 2015 due to rising demand for power generation, he said.

Turkey will struggle to diversify its energy sources in the short- to medium-term, with Russia and Azerbaijan being the only “realistic” suppliers, Baltaci said.

Ukraine’s plans to build an LNG terminal are probably not viable as Turkey is unlikely to allow the ships through the Bosporus due to security reasons, he said. Traffic through the Turkish waterway to the Black Sea is already heavy and oil cargoes sometimes have to wait to pass. LNG ships would just add to that, he said.

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