Turkey Snubs Russia By Pushing Ahead With Iraq Gas Import Pipeline

David O’Byrne
BNE

Putin and Erdogan in 2005 at the opening of the Blue Stream pipeline. Blue Stream currently has a capacity of 16 bcm per year, and on Monday, the two countries agreed to increase it to 19 bcm. (RIA Novosti/Sergey Zhukov)

Turkey has signaled that it will press on with plans to construct a 20bn cubic metre a year (cm/y) pipeline to import Iraqi gas, just a week after agreeing to discuss the shock proposal from President Vladimir Putin to re-route Russia’s giant planned South Stream gas pipeline through Turkish territory.

Turkey’s state news agency Anatolia reported on December 8 that Turkey’s state gas importer and transit pipeline operator Botas will next year start construction of a 40-inch pipeline capable of carrying in excess of 20bn cm/y of gas, running from Turkey’s border with the Iraqi province of Kurdistan to Turkey’s south eastern province of Mardin, where it will connect to Botas’ existing gas transit grid. Anatolia reported that a tender for the project would be opened early in 2015, with construction starting in the second half of the year, which is expected to be completed within 24 months.

The new gas line from Iraq has been in Botas’ development program for several years, however the decision to push ahead with construction next year appears to be less linked to Ankara’s long-term hopes of importing gas from the region and more to the nature of the Russian offer to host the 63bn cm/y South Stream.

That offer was made on a visit to Ankara on December 1 by Putin, three weeks prior to which Russian gas exporter Gazprom had unilaterally cut the volume of gas it was supplying to Turkey’s northwestern economic heartlands by as much as 50%.

As threats go it was hardly subtle – one commentator has said Putin likes to open talks by putting a knife on the table first – and would have been unlikely to influence Turkey’s decision to open talks with Gazprom on the possible hosting of South Stream, as Ankara has made that same offer itself on several occasions in the past.

However, by signaling its commitment to push ahead with importing and transiting Iraqi gas, Ankara has sent an equally robust response, that it won’t be fazed by the Russians’ hardball actions, and will not be steamrollered into agreeing to host South Stream irrespective of other considerations.

Those other considerations include Turkey’s ongoing efforts for EU accession, which could be harmed if it agrees to support a Russian project aimed at undermining the EU’s long-hoped for southern gas corridor to carry Caspian and Middle Eastern gas to Europe; not to mention Ankara’s hopes of transiting gas from the eastern Mediterranean reserves of Israel and Cyprus; and its close relations with Iraq’s de-facto independent Kurdistan Region (KRG), with which it has developed a strong rapport and through which it hopes to facilitate an end to the festering conflict with Turkey’s own fractious Kurdish minority.

Pushing ahead now with the planned 20bn cm/y gas pipeline will at worst offer Turkey a valuable back-up supply of gas should Moscow resort again to heavy-handed tactics. At best it could ensure sufficient competition for a share of the European market from new supplies entering via Turkey, to mean that Russia will no longer be able to use the threat of cutting supply as a means of maintaining high gas prices.

Whose gas is it?

As to whose gas the new Iraq line will source, that may take some time to clarify.

Asked by BNE IntelliNews at a press conference on December 8 where the gas that the new Botas line will carry will come from, which company or companies will supply it, and when that supply is expected to begin, Turkish Energy Minister Taner Yildiz said only that Turkey is prepared to take whatever gas Iraq can supply.

Such reticence is perhaps not surprising. Having discussed possible gas imports from Iraq with Baghdad for several years, Ankara has for the past few years been forging close relations with the increasingly autonomous government of the KRG, much to Baghdad’s annoyance.

However, the successful brokering in early December of a preliminary oil deal between Baghdad and the KRG has raised hopes that a final deal covering all the region’s hydrocarbon reserves could be concluded next year, making it equally conceivable that gas from the region could be ready to flow to Turkey by 2017, when Botas’ new line is expected to be completed.

Certainly, there’s no shortage of possible suppliers. In mid-2013, then Turkish Prime Minister Tayyip Erdogan announced that Turkey had signed an agreement with ExxonMobil for the development of gas fields in the KRG region, which was followed by the signing of a similar deal between Turkey and the KRG later in the year. In addition, Anglo-Turkish developer Genel Energy has stated on several occasions that it could start exporting as much as 4bn cm/y from the Kurdistan region by 2017, rising to 20bn cm/y by 2020.

Few details of any of the options have been made public – least of all concerning the construction of a pipeline to carry the gas to the Iraq-Turkey border. However given the reportedly “easy” geology of the region, the question over supplies appears increasingly to be how much will be available and when, as opposed to whether it will be available.

Another question, therefore, is what Russia’s reaction will be to the probable competition for its gas.

Courtesy of BNE

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