Turkey decides to stop TurkStream pipeline

Turkey continues to reduce purchases of Russian gas, and in August for the first time since the early 2000s Gazprom may not supply Turkish customers with a single cubic meter of fuel.

On July 27, for the second time in two months, gas flow through the Turkish Stream pipeline will be stopped, Interfax reports, citing the state-owned Turkish company Botas, which is the buyer of gas delivered through the pipeline launched in January.

The $7 billion pipeline will be down for two weeks - until August 10. The official reason is the repair work carried out by Botas.

A month ago, Turkish Stream was already stopped for planned service, which lasted from June 23 to 29. Then, the gas flow was suspended at Gazprom’s request, and this time it will be done at the initiative of the Turkish side.

As a result, Gazprom may be left without working pipelines to Turkey. In May, the company stopped pumping gas through the Blue Stream, built in the early 2000s. The reason was also called repair work, which was planned to be completed within two weeks.

More than two months have passed since then, but the 16 billion cubic meter per year pipe is still empty, sources in the Russian and Turkish gas industries told Reuters.

The problem is the lack of demand. According to the results of the first quarter, Turkey reduced purchases of Russian gas by 70% compared to 2019 and almost 14 times compared to the numbers of 2 years ago.

As a result, Russia dropped from the first place among the largest suppliers of pipeline gas to the country. Of the 1.87 billion cubic meters of gas supplied to Turkey, Azerbaijan (924 million cubic meters) delivered half, Iran (557 million) came in second place, and Russia rolled back to third place with 389 million cubic meters.

Turkey has been replacing Russian gas with liquefied natural gas, which is delivered in abundance to the European market and is much cheaper. In May, spot prices at Europe's largest gas hubs fell to $40-45 per 1,000 cubic meters. The June rebound to $72 did not last long, and in July the quotes again fell.

At the end of last week, the “day-ahead” price at the Dutch trading platform TTF fell to 67 dollars per thousand cubic meters. Gazprom is trying to sell gas more expensively, using contracts with a large delay of delivery - for the coming winter or next year.

But it is impossible to keep export prices in the break-even zone: at the end of June, on average, a thousand cubic meters of fuel from Russia went to Europe at 94 dollars, which is lower than the profitability point of Gazprom, which Fitch estimates at 105 dollars.

LNG imports to Turkey soared by 300%. The largest suppliers Qatar (786 million cubic meters) and the United States (370 million). The remainder was purchased in Algeria, Nigeria, Cameroon and Egypt.

Gazprom's gas was uncompetitive in price. According to the Daily Sabah, from April 1, Turkey must pay 228 dollars per thousand cubic meters, which is almost 4 times higher than spot quotes. According to the Central Bank of the Russian Federation, in the second quarter Gazprom's export revenues collapsed almost threefold and reached the minimum since 2002 - 3.5 billion dollars.

  TurkStream, Gazrom, Russia, Turkey