OBG talks to Alexander Medvedev, Director-General, Gazprom Export

Interview: Alexander Medvedev

How does Gazprom assess bids from importers in Turkey and what are the possible implications of market liberalisation in the gas sector?

ALEXANDER MEDVEDEV: Turkey is an important partner for Gazprom as it is our second-largest market in Europe after Germany. We have a long-standing relationship with BOTAfi, and since 2007 we have successfully sold our gas to private companies in Turkey as well. In principle, we do not distinguish between buyers, be they public or private sector companies.

During the recent negotiations to find importers to take over the Western Pipeline imports from BOTAfi we did not manage to agree with the private buyers. There is nothing unusual in this, business is a hit-and-miss affair. As we were able to agree a new, short-term deal with BOTAfi, the Turkish market will not be without gas. In general, there is nothing against another round of import liberalisation in Turkey, as it happened in 2007. As the Turkish market is liberalised more in the future, we may find different buyers for our gas.

Does Turkey’s lack of storage capacity for gas present an opportunity for Gazprom?

MEDVEDEV: To ensure an uninterrupted supply of gas to European consumers, some of which are more than 6000 km away from the main Russian deposits, Gazprom has adopted a strategy of developing underground gas storage (UGS) facilities in Europe. The storage system helps maintain the smooth supply level in the periods of extremely high offtake, like the very cold February 2012 in Europe, during which we quadrupled the daily productivity of our UGS facilities, much in the way our European partners did. I would like to stress that this was absolutely normal as the UGS facilities are intended to complement pipeline deliveries when the demand is high, and to help keep the pipes working when the demand is low. It’s simply another way to maintain flexibility, and it is beneficial for Turkey as well, as it has experienced a number of problems with supply interruptions from certain unstable countries. We would be happy to consider UGS projects in Turkey, but, taking into account the regulatory framework, we do not have any concrete offers now.

In light of the costs involved in pipeline infrastructure, what potential is there for cooperation with Turkey on a liquefied natural gas (LNG) terminal?

MEDVEDEV: For Mediterranean and European geography, we still see pipelines as the most economically efficient way of transporting natural gas, and we are working on that by focusing our efforts on the South Stream project so as to contribute to European energy security through diversification of energy transport routes. In 2011 we supplied 26bn cu metres of gas to Turkey from Russia. Our natural gas is exported to Turkey via two routes: the Trans-Balkan gas pipeline and the Blue Stream gas pipeline.

As to the LNG terminal, we take for granted that such a project deserves proper consideration, but several factors need to be in place first. An LNG terminal cannot work by itself: it has to be connected to the onshore pipeline, there has to be enough gas available in this pipeline, and demand needs to be secured. So far, we have not received any concrete offer for an LNG project on the part of any of our Turkish partners.

Given the high value of gas that South Stream will bring to Europe, will the project undermine Turkey’s efforts to become a gas-trading centre?

MEDVEDEV: We do not see any reason for South Stream becoming a threat to Turkey. Once completed in 2015 South Stream will be an important component of the strategy to enhance European energy supply security, and we see Turkey’s involvement in the project as a positive development. Turkey is, of course, engaged in other regional energy projects, but we do not see any contradiction in Turkey’s support for South Stream and its participation in these other endeavours, and vice-versa. The trends in Europe indicate there will be ample room for several infrastructure projects.