Turkey eyes Bulgaria LNG sales ahead of TurkStream gas exports, sources

Author: Aura Sabadus

2019/07/30

LONDON (ICIS)--Turkish gas grid operator BOTAS and Bulgarian Bulgartransgaz are poised to sign an interconnection agreement for cross-border capacity that could allow Turkey to sell gas ahead of Russian TurkStream exports into Bulgaria, three sources close to the matter told ICIS.

The agreement would cover the existing cross-border point which is currently used by Turkey to off-take 14 billion cubic metres (bcm)/year from Russia via the Trans-Balkan pipeline.

Russia, which is in the process of completing TurkStream and intends to export gas to central Europe via Turkey and Bulgaria would have to build a new exit point to link up with the Bulgarian transmission network, the sources said.

“The Russian exit point for TurkStream 2 will be some 20km east of the current Strandja-Malkoclar cross-border point,” one of the three sources said.

It is not known whether Turkey’s interconnection agreement with Bulgaria would include third-party access and what capacity the exit point would have. It is also unclear whether BOTAS would be able to introduce physical reverse flows or just use backhaul.

The existing Strandja-Malkoclar cross-border point is the eastern end point of the Trans-Balkan pipeline which transits Russian gas to Turkey and Greece via the Republic of Moldova, Romania and Bulgaria.

The maximum daily send-out at the border can now reach up to 51.4 million cubic metres (mcm), but flows have so far happened only in the direction north-south.

However, sources say Turkey could export gas in physical reverse flows because of upgrade works in the Bulgarian system.

Last year, the Bulgarian gas grid operator Bulgartransgaz was expected to complete a 20km loop at Lozenets close to Burgas on the Black Sea to allow the annual capacity of the pipeline to rise from 14bcm to 15.7bcm.


TURKISH EXPORTS

The Turkish government is now keen to open its borders and start exporting natural gas on three accounts.

- Firstly, Turkey has now expanded its LNG import capacity, which now totals close to 40bcm or nearly 90% of its yearly demand. Capacity at the BOTAS-operated Marmara terminal, which is located closest to the Bulgarian border has been expanded from 22mcm/day in 2017 to 37mcm/day.

- Secondly, by opening up the borders and allowing the export of surplus volumes, Turkish companies, including BOTAS would be able to reduce their take-or-pay obligations. This will depend on Turkey passing relevant spot pipeline export regulations and negotiating the elimination of destination clauses in its long-term contracts with traditional suppliers such as Russia.

- Thirdly, the export of gas is part of Turkey’s wider vision to become a regional gas hub, although successive governments in the past two decades have never articulated the details of that vision.

There were reports earlier in July that Turkey would also sign an interconnection agreement with neighbouring Greece for third-party access on the existing interconnector.


RUSSIAN EXIT

Meanwhile the Russian exit point from Turkey into Bulgaria is yet to be completed. Russia is in the process of commissioning TurkStream 1 and 2, which will have an annual capacity of 15.75bcm each. Russia intends to divert volumes currently exported via the Trans-Balkan line to Turkey to TurkStream 1 after its transit contract with Ukraine expires at the end of this year.

TurkStream 2 aims to bring gas to central Europe via Bulgaria and Serbia. The pipeline is now expected to join up with the Bulgarian system via the interconnection point adjacent to the existing Strandja-Malkoclar point, according to sources.

Russia has insisted the commissioning date for TurkStream 2 would be 1 January 2020, but market sources in Turkey and Bulgaria say key parts of infrastructure in Turkey and Bulgaria are yet to be completed.

Even when finished, exports through TurkStream 2 would have to be ramped up which may take several months, sources in Turkey and Bulgaria said.

“Turkey has a window of opportunity to start exports to Bulgaria ahead of Russia, and the capacity could be quite big,” one of the three Turkish sources said.

BOTAS and Bulgartransgaz did not reply to questions by publication time.