TurkStream gas pipeline faces tough challenges ahead – analyst

The newly operative TurkStream gas pipeline will have a limited impact on the market due to tougher competition for Russia in both Turkey and Southeast Europe, economic hardship and a surge in liquefied natural gas (LNG) imports, wrote Dimitar Bechev, research fellow at the University of North Carolina.

Russian President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdoğan inaugurated the 930-km long TurkStream pipeline on Jan. 8. It began pumping gas at the start of the year with an expected annual capacity of 31 billion cubic meters. The pipeline is seen as a symbol of the burgeoning ties between Russia and Turkey.

TurkStream - a watered-down version of its predecessor, the frozen South Stream - is guaranteed to give Russia and Turkey certain advantages, including Russian gas giant Gazprom’s ability to directly access the Turkish market without having to deal with countries sitting in between, Bechev said in Sharq Forum, an independent international network.

It also gives Turkey the ability to receive and transfer Russian gas to the European Union, he said.

But the duel pipeline project has its fair share of challenges, Bechev added.

While the second phase of the project, known as the Balkan Stream, has fallen behind schedule, the increasingly competitive gas market in Turkey and its Southeast European neighbourhood is causing Gazprom’s share to contract, the article said.

There has been a decrease in imports from Russia from Iran, Azerbaijan, Greece and Southeast Europe over the last few years. 

Bechev attributed Russia’s loss of grip on local markets to shrinking demand in Turkey, the region’s largest market.

''Since March when the COVID-19 pandemic hit Turkey and its neighbours, consumption appears to be in sharp decline. Turkey’s Electricity Producers’ Association, for instance, reported a drop of 20 percent in the output of electricity at power plants running on natural gas in April,’’ he said.

Another game changer is LNG imports, which jumped from 22 percent of the total volume in 2018 to 28 percent in 2019, the article said, as Turkey continues investing in its LNG import capacity. 

The emergence of Azerbaijan as Gazprom’s rival supplier to the markets in Turkey and in Southeast Europe is another factor likely to affect the future of the pipeline, Bechev wrote.

''In the short term, TurkStream will remain underused. Turkey is not in a position to utilise the full capacity of the pipeline’s first string because of the looming recession and the cheaper alternatives,’’ Bechev wrote.