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    TANAP and Turkey's energy ambitions

Summary

Turkish, US and EU interests align on energy diversification in Southeast Europe.

by: Dimitar Bechev

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Complimentary, Global Gas Perspectives

TANAP and Turkey's energy ambitions

The December 3-4 NATO summit in London was marked by internal bickering between member states. Yet by the end of the two-day gathering, consensus was reached on one item: that Russia poses a major problem to the alliance.

"Russia's aggressive actions constitute a threat to Euro-Atlantic security," reads the closing declaration. Even politicians known for their admiration for or cosy ties with Vladimir Putin, such as US President Donald Trump, Turkish President Tayyip Erdogan or Hungarian Prime Minister Viktor Orban, signed off on such language.

The standoff with Russia has played out not only in the military and defence sphere, but also in the energy sector. For a decade or more, the US and many of its allies in Eastern Europe have called out Moscow for using its exports of natural gas as a tool to bully post-Soviet neighbours into submission and sow discord in the West.

The EU may have largely excluded the gas and oil sales from the sanctions it imposed on Russia for its annexation of Crimea and support for separatists in eastern Ukraine, but it has been working hard to reduce its dependence on Russian energy supplies. In the past, hydrocarbons helped connect the West and the Soviet Union - and later the Russian Federation - and foster a win-win partnership. But today, energy relations between the two have become quite complicated.

Southeast Europe is one of the regions where this rivalry is intensifying. As NATO was convening for its meeting in the United Kingdom in early December, Serbian President Aleksandar Vucic met with Putin in Sochi. During the visit, Vucic boasted that the Serbian leg of the Turk Stream - or Balkan Stream - was near complete.

The natural gas pipeline which passes through the Black Sea, Turkey and Southeast Europe is part of Gazprom's long-term strategy to reduce transit through Ukraine.  Balkan Stream, also known as Turk Stream 2, connects the Turkish grid to the gas hub at Baumgarten, Austria, via Bulgaria, Serbia and Hungary. It will serve both the Balkans and Central Europe. 

It was proposed five years ago following the demise of South Stream, another undersea pipeline which was supposed to link Russia to the Balkans.

Balkan/Turk Stream, together with Nordstream 2, which has nearly four times its capacity, guarantee the uninterrupted flow of Russian gas to major consumer countries in Europe, with all the commercial and geopolitical gains resulting from that. Such projects strengthen Moscow's hand in negotiations with Kyiv, whether it is the ongoing negotiations regarding the future of gas transit or, even more importantly, the much-anticipated talks on the conflict in Eastern Ukraine on December 9, the first face-to-face encounter between Putin and President Volodymyr Zelenskyy.

Yet Russia is not the only game in town when it comes to gas in the Balkans. Local countries, even those who are eager to curry favour with the Kremlin, are taking steps towards tapping into the alternative supplies. The South Gas Corridor, first proposed in the 1990s as an alternative source of energy from the Caspian region and the Middle East, is finally becoming a reality.

On November 30, Erdogan and Azerbaijan's President Ilham Aliyev inaugurated a link between the Turkish and Greek gas grids, which marks the completion of the Trans-Anatolian Pipeline (TANAP). This is no mean feat. Surely, its supplies to Europe - some 10 billion cubic metres (bcm) annually - are a drop in the ocean compared with the volumes the EU receives from Russia (176 bcm in 2018).

But for countries like Greece and Bulgaria, both of which import about three bcm of Russian gas a year, this is a significant alternative source. The two countries have contracts for one bcm with the company behind TANAP - Shah Deniz, an international consortium of BP, Azerbaijan's SOCAR, Turkey's TPAO, Norway's Equinor and others.

This gives the two countries bargaining power vis-a-vis their main supplier, Russian state-owned energy giant, Gazprom. TANAP will furthermore connect to the Trans-Adriatic Pipeline (TAP), which runs between the Greek-Turkish border and Italy, and deliver gas to Albania and possibly other countries in the Western Balkans.

TANAP represents a strategic achievement for Turkey. For a long time, it has strived to graduate from a larger consumer to a transit country, capitalising on its position in between oil and gas-producers and major importers in Europe. The arrival of Azeri gas to the Balkans, brings that vision to fruition. 

Azerbaijan itself has been trying to diversify its export destinations. After independence from the Soviet Union, the country inherited oil and gas infrastructure which was connected to Russia's.

With the opening in 2006 of the Baku-Tbilisi-Ceyhan (BTC) pipeline, which runs to the strategic Turkish seaport of Ceyhan, Azerbaijan was able to export its oil to international markets. The Baku-Tbilisi-Erzurum (BTE) gas pipeline inaugurated the same year allowed the supply of Azeri gas to Georgia and Turkey.

Now with TANAP, Azerbaijan can also sell its natural gas in the EU and seize some market share from Gazprom.

Ankara's long-standing ambition is for TANAP to be scaled up from 16 to 31 bcm, with gas coming from other destinations such as Turkmenistan, northern Iraq and Iran. If it plays its cards right, Turkey may establish itself as a trading hub and top-notch energy power. 

Such an outcome, however, remains a distant prospect. Problems with supply in producer countries due to both production challenges or security concerns, as well as uncertainty about future demand in Europe, geopolitical risks, regulatory hurdles, and domestic instability all constrain Ankara's ambitions.

Dependence on Russia is also a factor. On January 8, Putin will be in Istanbul to attend the launch of the first leg of Turk Stream serving the Turkish market. But this time around, Erdogan has a freer hand. The 6 bcm to be delivered by TANAP equals one-quarter of Turkish imports from Russia. And cheaper prices have allowed Turkey to ramp up purchases of liquefied natural gas (LNG) from the US, Algeria, Nigeria and Qatar. In other words, today the Turks have a stronger hand in energy relations with the Russians.

Turkey's pursuit of energy autonomy makes it a welcome partner to both the EU and the US. The Trump administration has put a premium on US LNG sales in Europe, lobbying governments to commit to larger volumes. Turkey has become the second-largest customer for American gas in Europe and Central Asia after Spain.

Its neighbours are also interested in growing their imports from the US. LNG imports were, reportedly, one of the topics discussed during Bulgarian Prime Minister Boyko Borisov's visit to the White House on November 25.

The opening of the TANAP/TAP connection has helped move forward work on an interconnector linking up Greece and Bulgaria's grids. Known as IGB, the interconnector will also serve a planned floating regasification unit at the port of Alexandroupoli in northeast Greece, a project backed by the US.

Cross-border energy connectivity in Southeast Europe is in line with both US and Turkish interests. The EU, too, despite tense and often fractious relations with Erdogan, has been a staunch supporter of the Southern Gas Corridor. It falls in line with its own diversification efforts launched after Russia's temporary cuts of gas deliveries through Ukraine in 2006 and 2009.

Competition over gas shipments to and through Southeast Europe is heating up and with the inauguration TANAP, Turkey has become a key player. Chances are that in energy, as in other issues, such as the Syria conflict, it would continue to balance between the West and Russia in order to get the best deal.

Dimitar Bechev

Dimitar Bechev is a Nonresident Senior Fellow at the Atlantic Council. This article was first published as an Opinion piece by Al Jazeera.

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.