Gazprom to build Turkish Stream at its own expense

 Gazprom to build Turkish Stream at its own expense

Gazprom will implement the construction of the Turkish Stream gas pipeline at its own expense, Deputy CEO of the Russian holding Andrei Kruglov said in London today.

"We tentatively said that the cost can be $6 bln but now we estimates it about $7 bln. We also do not rule out project financing but considering the existing reality, the Turkish Stream will be funded from the Gazprom budget initially. It will be refinanced then through an issue of project bonds. The issue was successfully offered in December," Kruglov said.

Gazprom has started construction of the offshore section of the Turkish Stream gas pipeline along the bottom of the Black Sea on May 7. The Allseas-owned Audacia vessel had already laid some more than 520 km of the pipelines.

The first string of the gas pipeline is intended for Turkish consumers, while the second string will deliver gas to southern and southeastern Europe. Each string will have the throughput capacity of 15.75 billion cubic meters of gas per year. 

First Vice-Rector for International Cooperation and External Communications of Financial University under the Government of the Russian Federation, the founder and CEO of the national energy security Fund of Russia, Konstantin Simonov, speaking to Vestnik Kavkaza, noted that there can be only reason of the increase in the Turkish Stream value by $1 billion. "The cost of any pipeline includes three main components: pipes, construction works and compressor stations. Since the Turkish Stream is a reincarnation of the South Stream, the entire infrastructure for it has already been prepared, including the Russian compressor station, so it is unlikely that the price hike could be due to a third factor," the expert pointed out in the first place.

"Proceeding from this, I see only one option - the increase in value caused by the increase in price of piping and assembling works. I do not exclude that this could be related to the tightening of the terms of construction," Konstantin Simonov explained.

The intention to issue project bonds under the Turkish Stream is related to the need to service Gazprom's debts. "Bonds are needed to raise money from the market, it's a way to refinance Gazprom's debt, which is quite high," he said.

The implementation of the Turkish Stream project under the model of Nord Stream-1, according to the expert, is very beneficial for Gazprom. "Judging from the experience of Nord Stream-1, which already has two threads, these pipes are a good commercial enterprise, since Nord Stream-1 is fully loaded. In this regard, it would be comfortable enough for Gazprom to be the sole owner of this pipe. Gazprom will pay itself instead of Ukraine to supply gas to Turkey. It will return these $7 billion of investments within 7-8 years, so it does not really need partners," Konstantin Simonov concluded.