September 15, 2016 / 2:36 PM / in a year

Russia's Gazprom expects agreement on Turkish Stream pipeline in October

MOSCOW (Reuters) - Russia’s Gazprom expects Russia and Turkey to sign an agreement next month that will allow construction of the offshore section of the Turkish Stream gas pipeline to start in late 2017, Deputy CEO Alexander Medvedev said.

Gazprom Deputy CEO Alexander Medvedev speaks during an interview at the Reuters Russia Investment Summit in Moscow, Russia, September 15, 2016. REUTERS/Grigory Dukor

“We expect that, not later than the World Energy Forum in Istanbul at the start of October, these documents will be ready and ... Russia and Turkey can sign the intergovernmental agreement on Turkish Stream,” Medvedev told the Reuters Russia Investment Summit.

“If the intergovernmental agreement is signed in October it would allow us to start construction at the end of 2017, with an aim to complete it by 2019 - as scheduled.”

Talks on the project were halted last year after Turkey shot down a Russian air force jet and Russia retaliated with trade sanctions. But since then, Moscow and Ankara have made significant progress towards restoring relations.

Gazprom said this week it had been informed via diplomatic channels that Turkey had given approval for the building of the offshore part of the pipeline - a move that, according to Medvedev, shows that “Turkey is committed to the project”.

The project envisages two links, with the first line, with a capacity of 15.75 billion cubic meters, designed for supplying the Turkish market, and the second line intended to pump gas onwards to Europe.

Earlier this week Gazprom head Alexei Miller met EDF’s Electricite CEO Jean-Bernard Levy for talks about Turkish Stream.

Medvedev said Gazprom is now discussing with a range of European Union energy firms ways of delivering gas from the Turkish-EU border to European countries.

“Miller’s meeting aimed at defining the approach of our French and Italian friends to this project”, Medvedev said, adding that Gazprom is not intending “at this point” for European firms to take part in building Turkish Stream.

Italy is considered as one of the main potential purchasers of gas delivered to Europe via Turkish Stream.

He said there was no direct link between a gas price discount for Turkey’s gas importer Botas and the pipeline project.

Gazprom Deputy CEO Alexander Medvedev looks on during an interview at the Reuters Russia Investment Summit in Moscow, Russia, September 15, 2016. REUTERS/Grigory Dukor

“In theory, joint implementation of projects can have a bearing on how the partners consider how they deal with export and import operations. But there could be no quid pro quo.”

Gazprom previously discussed a package deal with the Turkish side, including a discounted price for Botas that was coupled to the Turkish stream project, but “time has passed, we are in a different (market) situation”, the executive said.

EUROPE

Medvedev also said Gazprom and its Western partners in the Nord Stream 2 Baltic subsea pipeline project are still examining alternative ways to fund it after Poland’s competition authority objected to the creation of the consortium which was to finance, build and operate the new pipeline..

Slideshow (5 Images)

“We will find ways to both finance the project and to attract partners who are interested in it, with no violations of EU rules”, he said.

Medvedev said no delay to the project is expected despite the Polish decision, which blocked Gazprom’s planned joint venture with Uniper, Wintershall, Shell, OMV and Engie on the grounds that the concentration of partners could lead to a restriction of competition in the Polish gas market.

“All the tenders are on track. The construction is due to start late 2017”.

AUCTIONS

On gas sales, Medvedev said the aim now was for the company to be selling as much as 10 percent of its export volumes through auctions, “within five years rather than in three years”, having previously said it aimed to reach the 10 percent level in three to five years.

Gazprom sold about 2 billion cubic meters of gas for delivery to Europe at its third auction earlier this month and Medvedev said the firm had achieved a price higher than hub-indexed prices or “our portfolio’s average price”.

The next gas auction is set to be held as early as spring of 2017. The firm plans for 2017 export volumes to total as much as 165 billion cubic meters, he said.

Medvedev also said that hub-indexed and hybrid contracts, which combine both spot and oil-linked prices, account for 40 percent of Gazprom’s export supplies portfolio.

reporting by Katya Golubkova, Olesya Astakhova, Oksana Kobzeva, Anastasia Lyrchikova, Denis Pinchuk and Christian Lowe; writing by Denis Pinchuk; Editing by Greg Mahlich

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