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European gas puzzle: the TurkStream project – interview with Deputy CEO of construction, Erich Jurdik

Dr Erich Jurdik will be one of the speakers at the Budapest Energy Summit to be held online on 1 December.

2020 was a tough year for the gas industry as well. The competition has been exacerbated by the shrinking gas demand, driven by mild winter weather, the imposition of lockdown measures to prevent the COVID-19 and high level of gas in storage. The sector faces many uncertainties which impact ongoing pipeline infrastructure developments as well.

Dr Erich Jurdik, Deputy CEO of construction of TurkStream spoke to CEENERGYNEWS about the ramifications of the pandemic for the development of the European gas market, the state of the TurkStream project and its impact on the region’s energy security as well as the future role of gas in Europe’s ongoing energy transition.

The official launch ceremony of the TurkStream Pipeline – built to carry Russian gas flows to Turkey across the Black Sea and further into the Balkans – has been held in Istanbul in January. The pipeline has the capacity to transit 31.5 billion cubic metres (bcm) of natural gas annually. Its first line serves the demands of the Turkish market but Gazprom plans to supply gas to the Balkans and Central Europe through the second string.

“TurkStream is fully operational and ready to increase gas shipments to Turkey and countries in South-Eastern Europe,” starts Dr Erich Jurdik.

Each of the countries who would like to be involved in the project is responsible for their own extension of the pipeline. This is already underway with domestic pipeline operators realising their infrastructure such as Bulgartransgaz in Bulgaria, GasTrans in Serbia and FGSZ in Hungary.

“These parties have their own responsibility to develop their infrastructure, like pieces of a larger gas infrastructure puzzle,” says Mr Jurdik.

Bulgaria has already begun importing Russian gas via TurkStream at the beginning of the year. The next step is to deliver gas flow to Serbia by enabling physical reverse flow operations. It was announced that the construction of the Bulgarian section of Balkan Stream has been completed, according to Mr Jurdik, in combination with the Balkan Stream, TurkStream is all about energy security.

Bulgarian Prime Minister Boyko Borisov said in November that gas supplies to Serbia would start by May 2020. Hungary announced earlier in the summer that the first flows of Russian gas through TurkStream could start from late 2021 or early 2022, potentially bringing an annual 10 bcm gas across the Serbian border.

According to Mr Jurdik, the infrastructure development will increase the availability of Russian gas in Hungary for decades to come with the potential of gas being delivered even further into Europe via the Baumgarten gas hub.

The interconnectivity between nations in combination with spot corresponds to the policy goals of the European Commission. These goals are achieved by facilitating cooperation between national gas transmission operators. Ultimately, end consumers profit from these policies via an abundance of gas and lower gas prices.

In the past years building new infrastructure for alternative gas supplies to Turkey and the Balkans has accelerated: TAP, the European leg of the Southern Gas Corridor, a gateway project that will transport 10 bcm of new gas supplies from Azerbaijan to multiple markets in Europe has recently begun commercial operations while plans for new LNG regasification facilities in the region are advancing.

Mr Jurdik points out that they have always advocated the realisation of various gas import routes because oversupply in combination with new import routes is positive for the end consumer.

He underlined another important reason why there are still investments in gas import routes to Europe: rapidly declining domestic production. EU indigenous gas production decreased by more than 40 per cent over the last decade, driven by natural depletion of gas reserves and regulatory restrictions.

On top of that, many countries are phasing out coal. According to Mr Jurdik the increase in electricity generation by renewables cannot cope with the decline of coal-fired power generation.

Being a cleaner option, which still provides stability in the energy mix, natural gas can fill this gap for the short and medium-term.

Speaking of clean energy transition Mr Jurdik mentions the results of a recent study conducted by Sphera, an American research agency, showing that carbon emissions over its lifecycle of LNG are between 61 per cent and 176 per cent higher than gas delivered via TurkStream. According to the report, these higher emissions are a result of energy-intensive liquefaction (including purification) and long-distance LNG carrier transport.

“Therefore, purely from a carbon reduction perspective pipeline gas has a favourable position over LNG,” says Mr Jurdik. “Considering the fact that natural gas is the cleanest option of fossil fuels, we do see an important role for natural gas, pipeline gas in particular.”

In contrast, Mr Jurdich warns of the high level of investments in coal-fired power generation in Turkey and the Western Balkan countries which can influence Turkstream and other imports project as well. Turkey has not ratified the Paris Agreement and domestic carbon emissions have more than doubled since 1990.

“Seventy-nine per cent of all new coal-fired power capacity in Europe is planned in Turkey alone, another 13 per cent in the Western Balkan region,” highlights Mr Jurdik.

Although the TurkStream project is primarily developed to carry natural gas, Mr Jurdik points out that with an abundance of gas available, it will be also possible for Turkey to produce blue hydrogen – using carbon capture and storage (CCS) technology scooping up the resulting CO2 – which would enable the country to reduce carbon emissions significantly.

The gas industry has been facing increasing demands to clarify the implications of the energy transition for their operations and business models and to explain the contributions that they can make to reducing greenhouse gas emissions. However, this year the industry faced an imminent shock as the aftermaths of the global virus situation disrupted supply chains and triggered the largest recorded demand shock in the history of global natural gas markets.

“The pandemic has influenced the entire energy sector, including the gas industry,” says Dr Erich Jurdik adding that due to the economic downturn, gas demand has decreased significantly, also in Turkey where the pandemic brought about an oversupply of LNG with purchases of LNG increasing and imports of pipeline gas shrinking.

According to him, the pandemic will be a source of uncertainty for some time, but there are already some encouraging signs of recovery as they see gas shipments via TurkStream increasing again after the summer.

“We are also confident the gas supplies via TurkStream will increase significantly when new gas transit routes become operational in Bulgaria, Serbia and Hungary,” he concludes.

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