Page 18 - bne_newspaper_November_23_2018

Eastern Europe
November 23, 2018 www.intellinews.com I Page 18
Gazprom determines route of TurkStream extension to Europe
bne IntelliNews
Russian natural gas giant Gazprom has deter- mined the itinerary of the second line of the Turk- ish Stream (TurkStream) pipeline — its extension to Europe — which will span Bulgaria and Serbia starting from 2020, then through Hungary and Slovakia starting from 2021 and 2H22, respectively, according to Kommersant daily.
Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin on November 19 attended an Istanbul ceremony to mark the completion of the offshore, undersea section of the TurkStream.
With the US Congress reportedly dragging any Russian sanction toughening into 2019, Gazprom is likely to complete its major pipeline projects Turkish Stream and Nord Stream II as planned. The projects are a part of the larger goal to bypass the Ukrainian gas transit system to Europe.
Gazprom began the construction of the offshore sec- tion of the Turkish Stream gas pipeline in May 2017. The pipeline, with a length of 930 km, runs along
the bottom of the Black Sea to the coast of Turkey.
A land section is to stretch for another 180 km from the border of Turkey to neighbouring countries.
Reportedly, the gas could then be supplied to Eu- rope through gas transportation system operators in Bulgaria, Serbia, Hungary and Slovakia.
In Bulgaria, Gazprom reportedly plans to build almost 500 km of new pipelines as well as using part of the existing network. The gas will enter the country through the Nova Provadia station, while in Serbia it will enter via a new station near Zaychar. According to Kommersant, the route almost completely repeats that of South Stream, which Russia abandoned in 2014.
"The capacities of Turkish Stream pipelines are 15.8bcm/a (bn cubic metres annually) through Bulgaria, 11bcm/a through Serbia (increasing to 11bcm/a in 2021 from 4bcm/a in 2020), 9bcm/a through Hungary and 4.3bcm/a through Slovakia," VTB Capital said on November 22.
The capex for the construction of the pipeline through Bulgaria (474 km) is estimated at $1.63bn, according to Kommersant. European operators reportedly already booked 4.3bn cubic metres (cm) of gas in Slovakia and 3.8bn cm in Austria in October for the supplies in 2022-2029.
"We estimate that the 15.8bcm of gas which might be booked for Turkish Stream is in line with the previous company guidance and matches the capacity of the Turkish Stream line and could reach 8% of the company’s supplies to Europe in 2020, were these volumes to be booked in full," VTB commented.
The bank’s analysts also note that the intercon- nector between Turkey and Bulgaria was report- edly built by Bultransgaz (the Bulgarian operator) and partially financed by the EU.
"The development is generally supportive for Gazprom in the longer term as, given the negative political overtones surrounding the project
and lack of firm confirmation of demand, the construction of the second line of the Turkish Stream could be considered as risky by investors," in VTB's view.
Given the latest developments, the €7bn capex project for the offshore TurkStream part has "more certain payback prospects," the analysts believe, but doubt that this is going to drive an immediate market reaction on Gazprom's shares.