Renunciation Of The South Stream: Challenges And Prospects For The Ukrainian Gas-Transportation System

Renunciation Of The South Stream: Challenges And Prospects For The Ukrainian Gas-Transportation System

By Anna Yaschenko

The goal of Russia is to gain control over the Ukrainian pipe… EU has attracted Turkey into the game against Russia… Our position in the negotiations with RF is getting stronger… Opinions of the experts…


Russia might renounce the South Stream project. Supposedly Turkey hasn’t given a permission to lay the pipeline in its exclusive economic zone. Therefore now Russians are going to transport their gas to Europe not by pipeline but as liquefied natural gas (LNG). We’ve asked the experts what South Stream might turn into and how it would be reflected in the Ukrainian gas-transportation system (GTS). 


Sergey Diachenko, energy programmes leading expert at Razumkov Center:




In general I’m skeptical about the South Stream project. Firstly, it’s too expensive even for the underwater pipelines. If Nord Stream lies at a depth somewhere up to 200 m, some parts of South Stream will have to be laid at a depth of 2000 m.


Secondly, its priority for EU is also a rather doubtful issue. I guess European Union will stake on Nabucco. They are more interested in the diversification of supply sources rather than of transportation routes. For EU it’s much more interesting to attract the resources of Central Asian and Caspian regions, than to diversify gas supply from Russia.


Thirdly, if to create bypass routes in such volumes, emerges the issue of filling the Ukrainian GTS with gas. From the security point of view it is not right to stake fully on the underwater routes. If something happens, it will be a big problem to repair them; in many cases they are not repairable at all. Therefore it won’t do without Ukrainian GTS. Especially as each pipeline has profitability point related to the filling volumes. 


Fourthly, according to the Third package, supplier party has no right to owe transport assets, that’s why Gazprom will have big problems with legal implementation of these projects. Of course, they find bypass routes for this via daughter or affiliated structures – but it is not easy. 


If to talk about the LNG terminal at the shore of Black Sea, it won’t cover the transportation volumes wanted by Russia. This is only 10 billion cubic meters. In addition it’s stretched in time; it can’t be done within one year. Also one shouldn’t forget about the problem of Bosporus and Dardanelles which are already now overloaded. LNG transportation can compete with pipeline transport at long distances, over 2 thousand kilometers. 


Fifthly, Ukrainian GTS is not only transportation volumes but also security issues. It is very safe. It is diversified. Plus we have many high-capacity storages. The competitive advantages of our GTS are so strong that Kremlin’s talks about refusing it are only politics. The goal of Russia is to gain control over the Ukrainian GTS. If Russia achieves that, it will renounce South Stream at once, I’m sure about that. But even if it doesn’t happen, the South Stream project won’t be the way it’s been planned, that is clear already. 


In order to comment on the Turkey’s position it is necessary to remind that it is formed under the influence of many political and economic factors, including the relations of this country with USA, NATO, EU, etc. Probably Turkey is bargaining for better conditions of participation in South Stream for itself. But let’s not forget that this country is an active participant in Nabucco and apparently this project looks more prospective for it. 


For us, as transit party, the current situation around South Stream is a very positive moment. Our position in the negotiations with Russia is getting stronger. The policy of Ukraine must consist in defending its own interests. What must be at issue are the increase of transportation volumes, and modernization, and the increase of income. 


Anton Antonenko, energetics issues expert:




Will South Stream be implemented? It’s very hard to say. In my view, it is an advertising-exhibition-political project. Its final realization will immensely depend on the political situation. For today there is nothing about this matter except some calculations and comments. South Stream exists only on paper. It seems that the impressive figures of South Stream cost have started influencing even its initiators. And they have started looking for the ways of implementation or keeping up appearances of this overpass implementation in a cheaper way. 


Russia hasn’t managed to agree with Turkey. Behind that stands an attempt of Turkey to get a discount for Russian gas. Also Nabucco will have to agree with Turkey about the passage of this gas pipeline.


What concerns the liquefied gas terminal. Many experts are saying that Gazprom might bury very big money and lose plenty of time there. 


If South Stream is used as a factor of political influence and pressure, first of all there will be interest in implementing it for as long as possible, in order to make it “a long-play record” with the help of which it’s possible to bargain. 


While South Stream is being “built”, Ukrainian GTS is working. And this is our profit. We are transporting the gas which supposedly could have gone over another gas pipeline.


The Ukrainian thesis about the modernization of GTS which could have cost much less than beyond the clouds plans of building South Stream is being confirmed. 


Aleksander Gudyma, People's Deputy, Minister of Fuel and Energy of the opposition government:




The influence of streams – either Nord or South, and others – on Ukraine should not be exaggerated. Ukraine has one main problem - instead of decreasing the gas consumption, we are growing it, thereby increasing our dependence on Russia. If we annually shortened the import of Russian gas, we would have reviewed the transit of Russian gas through our territory only as a way of making money. Today this is energetics security. 


Russia very often makes political projects in order to increase the dependence of Europe on it. Today Kremlin, when seeing the weakness of Ukrainian authority, believes that it is able to break the resistance of the few and get the Ukrainian GTS. If, God forbid, this happens, then there is absolutely no sense for them to build South Stream when having two channels to EU – Nord and Ukrainian, not mentioning a small Belarusian one. Russians might satisfy their gas ambitions. 


Russians don’t force and won’t force the implementation of South Stream. If they really wanted, they would have done it. And now they have two variants – with or without Ukraine. And they are waiting. They cannot afford that. 


Turkey doesn’t depend on Russia in gas issue. Today Turkey substantially depends on the position the leading countries of European Union which will either approve or disapprove its joining EU. And South Stream (in view of the fact that Europe and USA cannot run Nabucco) is a stroke at the energy security of EU. European Union has involved Turkey into the game against Russia on South Stream. Especially as Turkey already has contacts with Russia through the so called Blue Stream, going from the North of Black Sea to Turkey which hasn’t proved its value because it’s absolutely unloaded. Therefore Turkey doesn’t want to get involved in the game which won’t bring it any dividends. 


The basin of Black Sea is so small, and the offer of the Ukrainian authority to build the terminals for storing liquefied gas – it’s a risky venture. They say that one terminal will cost 2 million. They are deceiving! That will be only the cost of LNG receiving centers, and it’s also necessary to build the plants. In addition Bosporus and Dardanelles are so loaded that Turkey doesn’t provide permission for tankers to pass. 


Russia has started echoing us due to its own interests saying that it also will be building on its territory terminals for changing the pipeline method of gas delivery for tankers. These are not world scales. Here is Black Sea. Why build such terminals if there is a way through Ukraine? This is a method of political influence, but not concrete projects which can be implemented within the nearest 10 years. 


Aleksander Todiychuk, president of Kiev international energy club:




South Stream was a purely political and geopolitical project. GTS of Ukraine and other countries at the South of Europe possess bigger strength margin, bandwidth, work rather safe and anything else will be much more expensive. 


Black Sea has a range of its own problems. Russia has built Blue Stream through Turkey and it can’t manage to start working at full capacity. It worked only during “the second gas war” in 2009. And with it EU supports Nabucco rather actively.


Turkey has declared that it won’t support South Stream, that it doesn’t see its interests there. Turkey strives to EU and tries to be at most loyal to the European projects. It supports Nabucco. 


Quite curious information is that Russians will be building a terminal for liquefied gas at the shore of Black Sea, which will allow transporting gas through Bosporus by tankers. This is an alternative for South gas stream. Meanwhile I guess Ukraine will save its prospects for loading GTS. 


We can lose some part of the gas volumes. But liquefied gas is the least evil for Ukraine in comparison with South Stream. 


Bogdan Sokolovskiy, energy issues expert, counselor of ex-president Victor Yuschenko: 




South Stream is absolutely unnecessary for anybody from the point of view of economy. Russia just wants to influence EU and the countries, through which this stream is planned to be laid, directly. On the other hand EU hopes that it will influence the behavior of Russia via this pipe. Here goes on a big game where there is no place for Ukraine. 


Until this bargaining goes on – to build or not to build – Ukraine will be demanded from the point of view of transit. But Ukraine doesn’t have to panic even if South stream exists. For today Ukraine has 1,3-1,5 billion dollars of pure gain. But if nothing happens – it’s not a tragedy, at the same time we’ll get rid of the problems which Russia creates from scratch. 


It seems to me that Turkey is trying to bargain for better conditions for itself, even in other spheres. By bargaining about various gas streams Turkey at the same time has bargained for itself rather comfortable, in their opinion (in my opinion – not), conditions for the creation of nuclear energy complex on the basis of Russian technologies. 


If Russia enters the liquefied gas market, it will have the same conditions with the others. Because through the pipe South Stream the conditions for all the rest will be worse from the point of view of Russia’s prevailing. But today it’s too far to look into. 


We know that EU has agreed with the countries of the Caspian region about creating the so-called South corridor, presupposing the transportation of liquefied gas. All these processes in Ukraine should be reacted to actively enough. At the first place Ukraine should work on creating a terminal for liquefied gas. For itself and for transit – it’s always profitable. Then we’ll become the participants of the game.






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