Turkey’s additional gas transit potential back in the spotlight

Russia’s recent move to slash gas exports to Europe has brought about a revival of interest in Turkey as a transit route for gas from a number of new sources.

Turkey is already part of the Southern Gas Corridor (SGC) moving gas from Azerbaijan to Europe, and its location would also allow gas to flow from the rest of the Caspian, parts of the Middle East and the East Mediterranean.
Ankara has repeatedly said it is open to becoming a major gas corridor to Europe, and both Turkey’s section of the SGC — the TANAP pipeline — and state-owned Botas’ own infrastructure have spare capacity to carry more gas.

But any major increase in flows to compete with the 155 Bcm of Russian gas the EU consumed last year would require tens of billions of dollars of investment to develop new upstream resources and new interconnecting pipelines.

An agreement between the EU and Azerbaijan signed on July 18 already envisages increasing gas flow to Europe via the SGC to 12 Bcm this year and to at least 20 Bcm/year by 2027.

The three SGC pipeline consortiums are expected to confirm investment for the necessary compressors, but BP, which operates Azerbaijan’s Shah Deniz gas field supplying the corridor, has warned that the field cannot supply all of the necessary gas for an expanded route.

With no other Azeri gas yet available, Ankara last month announced interest in delivering gas from Turkmenistan to Turkey for onward transit either by “ship”, “swap agreement” or “pipeline”.

Although no details were given, the ship option is believed to involve transiting compressed natural gas across the Caspian by ship.

The swap option would likely involve the expansion of an existing deal that sees Turkmenistan deliver up to 2 Bcm/year of gas to Iran, which then delivers the same volume to Azerbaijan.

Lastly, the pipeline option is thought to refer to a project by US-based Trans Caspian Resources (TCR) for a 10-12 Bcm/year pipeline to transit gas currently flared at an oil field offshore Turkmenistan across the Caspian to Azerbaijan’s ACG field, which has infrastructure to transit gas onshore.

Further expansion
Should it be realized, TCR’s project could mean there might be more gas available than could be carried by even a doubling of the current 10 Bcm/year capacity TAP pipeline to Italy.

But if the first stage of the SGC, the South Caucasus Pipeline, was expanded beyond its 25 Bcm/year capacity, the extra volume could potentially be transited into Europe via unused capacity in TANAP and in Botas’ own transit grid.

Botas has interconnections with Bulgaria at Malkoclar/Strandzha and Greece at Ipsala/Kipi, both of which have been used for export but have limited capacity.

The capacity at Malkoclar has not been published and is believed to be available only in summer due to its proximity to pipelines supplying Turkey’s main gas demand region, Istanbul.

Used since 2007 to export up to 1 Bcm/year to Greece, the Ipsala interconnection can currently transit just 1.7 Bcm/year and would require substantial investment on the Greek side to reach its full design capacity of 11 Bcm/year.

The same existing infrastructure could also be used to transit small volumes of gas from Iran to Europe.

Turkey currently imports 9.6 Bcm/year from Iran via a 14 Bcm/year capacity pipeline.

Beyond incremental increase in flows and expansion of existing infrastructure, any meaningful increase in gas flows through Turkey to Europe would require investment in upstream production and new major pipelines.

There are, though, significant gas reserves in countries that could use Turkey as a transit route to Europe.

Iran boasts the world’s second-largest gas reserves at more than 32 Tcm, while Turkmenistan holds at least 13 Tcm, Iraq 3.5 Tcm, Israel upwards of 600 Bcm and Cyprus an estimated 550 Bcm.

All have been subject to proposals for transit of major volumes to Europe via Turkey in the past, but all face major challenges if any development is to be realized.

Obstacles
Turkmenistan currently appears the most likely to progress in the short term, with Ankara having confirmed that it is actively pursuing limited transit.

But one of the main challenges to further development will be convincing the Turkmen government to make the legal changes necessary to encourage international investment in its upstream.

In addition, any pipeline across the Caspian would likely be opposed by Russia and Iran, although since the 2018 treaty on the Caspian’s legal status, the scope for legal objections has been reduced.

Iraq has substantial gas reserves in the northern Kurdistan region and in Baghdad-controlled areas, all of which could be transited to Turkey via simple overland pipelines.

Politically, though, Iraq is problematic. In February, Iraq’s Federal Supreme Court ruled that Kurdistan’s hydrocarbon law was unconstitutional in an escalation of the long-standing dispute over Erbil’s independent energy sales.

For Iran, the potential lifting of international sanctions could make its vast offshore gas reserves available, but sanctions have impacted Tehran’s ability to develop its reserves and infrastructure.

Substantial international investment would be necessary, which would likely require guarantees that sanctions would not be re-imposed.

Israel and Cyprus have also long been mentioned as joint sources of gas for a potential pipeline to Turkey for onward transit to Europe.

Turkey and Israel on Aug. 17 agreed to re-establish formal diplomatic relations having been suspended four years ago, a move that is expected to open the door to new gas discussions.

But while Israel appears willing to consider transiting gas to Turkey, Cyprus does not and Ankara may be unwilling to transit Cypriot gas without a political agreement to solve the Cyprus problem.

Opinions differ on whether it would be legally possible to run a pipeline carrying Israeli gas through the Exclusive Economic Zone (EEZ) claimed by Cyprus, but even if legally possible investment in what could be a risky project may be difficult to secure.

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