by Madalina Sisu Vicari

From South Stream to TurkStream but with much less gas

On October 10, 2016, on the sidelines of the World Energy Congress in Istanbul, and in the presence of the presidents Vladimir Putin and Recep Tayyip Erdogan, it was signed the intergovernmental agreement (IGA) of the TurkStream pipeline project. Turk Stream is a scaled down version of the project initially announced by Vladimir Putin on December 1, 2014, during his visit to Turkey and its conclusion represents the de facto cancellation of the South Stream pipeline, a grandiose project that was intended to supply 63 billion cubic meters (cbm) of gas annually across the Black Sea to the Balkans and forward to Austria and Italy[i]. Aimed to achieve full capacity at the end of 2018, the South Stream pipeline would have substantially reduced the volume of gas transported through Ukraine, if not completely eliminated it[ii].  South Stream was a project  fiercely contested by the European Commission-which had launched infringement proceedings against Bulgaria on the grounds that internal market rules were breached- but also called into question by the European Energy Security Strategy, which called upon its suspension until its full compliance with the EU legislation[iii]. Bulgaria halted twice the works on the South Stream pipeline, in June, respectively August 2014.

At first, the TurkStream pipeline was designed to be made of four lines with a capacity of 15.75 billion cubic meters (bcm) each per line. However, as in September 2015 Gazprom and five European energy companies signed the agreement on Nord Stream 2, the Russian company changed its plans and announced, in October 2015, a severe downgrade of TurkStream’s initial capacity to up to 32 bcm per year.  Following the shot down of a Russian jet by a Turkish F-16 in November 2015, and the severe deterioration of the relations between Russia and Turkey, the negotiations over the pipeline were suspended. After Erdogan’s apology letter sent to Putin on June 27, 2016 and the restoration of Moscow-Ankara bilateral relations, the TurkStream project was officially revived during the two president’s rapprochement meeting held in St. Petersburg, on August 9, 2016.

The IGA provides the construction of two lines, with a capacity of 15.75 bcm per line and a total capacity of 31.5 bcm annually. The first line is aimed to serve the Turkish market, a large recipient  of Russian gas, and it would divert the gas currently supplied through the Trans-Balkan pipeline, which crosses Ukraine, Moldova, Romania, Bulgaria; in 2015, Turkey imported 27.1 bcm of Russian gas and as much as 15.58 bcm were delivered through the Blue Stream pipeline. The onshore part TurkStream’s first line-nearly 180-km long- will be financed and constructed by the Turkish owned state company, BOTAS.  The second line is destined to the European markets but its route is not yet determined and the IGA provides that its construction can be easily cancelled, as it would require only the notification to the Turkish side.

The overall cost of TurkStream is estimated at € 11.4 billion whereas the investments into the offshore segment could attain € 7 billion[iv].  The IGA stipulates the possibility of third party participation and funding: “Third party funds may be drawn by joint decision of members in the company for the onshore segment 2 and by decision of the Russian member to the offshore segment “[v]. The offshore segment, expected to be 900 km long, will be made up of two parallel lines running through the Black Sea from the Russian coast of Anapa and coming ashore on the Turkish coast, near Kiyikoy, from where it will be built a connection with the gas network at Luleburgaz (for Turkish market) and further to Ipsala, near Turkish- Greek border (for the second line). A Dutch-registered company, South Stream Transport B.V., a Gazprom’s subsidiary initially established to build the South Stream pipeline, will construct the offshore section of TurkStream.  This decision has an economic rationale: part of the assets of the South Stream B.V. would be used for the construction of TurkStream, enabling Gazprom to recover-though partially-some of the funds spent for the South Stream project[vi].

On December 2016, South Stream Transport B.V. signed a contract with Swiss company Allseas Group S.A., for the construction of the first line of TurkStream offshore segment, with an option for laying the second line.  The construction of the first line of TurkStream is due to start in the second half of 2017 and to be finalized at the end of 2019.

 Gazprom intends to reach Italian market through ITGI, a project awaiting gas sources

On February 24, 2016, Gazprom, Edison and DEPA signed a MoU regarding the establishing of a southern route to deliver Russian natural gas to Europe, across the Black Sea via third countries to Greece and from Greece to Italy. The wording of Gazprom’s statement gives a very clear indication on the designation and route of the second line of TurkStream.  Thus, the statement says that Gazprom and its partners-Edison and DEPA-“are committed to take advantage of the work done by Edison and DEPA within the ITGI Poseidon project to the fullest extent possible”[vii].  At the moment of the signing of the MoU, the TurkStream project was stalled; hence, the possibility of Bulgaria as “third” transit country-within a re-shaped South Stream project- appeared to be a more feasible option than Turkey. The revival of the Turk Stream,  its tight schedule and especially the measures taken so far for its implementation indicate that the “third country“ of the planned Russian southern route will be, in all likelihood,  Turkey. Furthermore, the meeting held on December 13, 2016 by the CEOs of Gazprom, Edison and DEPA to discuss about “determining an optimal route for gas exports from Russia to Greece and further to Italy”[viii] indicates that the southern route for Russian gas deliveries via Greece to Italy has substantial prospects.

The ITGI project is a joint venture between Italian Edison (part of EDF-Electricité de France, which controls 99 per cent of Edison) and DESFA (a 100 per cent subsidiary of Greek state-controlled DEPA). The project consists of the following pipeline sections: the Turkish grid; the Interconnector Turkey-Greece (built by BOTAS and DEPA, this pipeline section is operational since 2007 and it has a transport capacity of 11.5 bcm per year); and the Interconnector Greece-Italy (IGI), which is not yet built. The latter would consist of two pipelines: IGI onshore, a 600 km onshore pipeline running from Komotini, near the Turkish border, to Thesprotia area; and IGI Poseidon, a 207 km onshore pipeline across the Ionian Sea, which would start in Florovouni in Thesprotia and end to the Italian landfall, east of Otranto. IGI onshore is developed by DESFA (a 100 per cent subsidiary of DEPA), whereas IGI Poseidon is developed by IGI Poseidon S.A., a 50-50% joint venture between Edison and DEPA. In 2007, at the request of Italian government, IGI Poseidon was granted by the European Commission a third part access (TPA) exemption for a 25 year period. The TPA exempted capacity is of 8 bcm of gas per year, of which Edison has 6.4 bcm and DEPA 1.6 bcm; the open season capacity would be no less than 0.8 bcm per year. Though, the IGI pipeline section is intended to transport more gas than the TPA exempted capacity, as its overall capacity is planned for 12 bcm of gas annually.

ITGI was-together with Nabucco, White Stream, South East Europe Pipeline (SEEP) and Trans Adriatic Pipeline (TAP)-one of the highly publicized projects to be included in the Southern Gas Corridor (SGC). Later, only Nabucco, ITGI and TAP competed within the SGC project. Supported by the governments of Greece and Italy, which signed the intergovernmental agreement (IGA) for the offshore section in 2005, ITGI secured also Turkey’s commitment. Hence, in 2007, Ankara agreed, through an IGA signed with Athens and Rome, to provide transit services for the volumes destined to Greece and Italy. ITGI was promoted by its proponents as a project having strong commercial viability and the main arguments in this regard were that its planned transport capacity would match with Shah Deniz II’s gas volumes and the SGC’s gas supplies would reach Bulgaria and the Western Balkans through the Interconnector Greece-Bulgaria (ICGB) pipeline.

Nevertheless, several factors determined the fate of ITGI: Turkey’s decision to move towards a strategic  cooperation with Azerbaijan, which led, on October 25, 2011, to the conclusion of an agreement allowing the transit of 10 billion cubic meters of Azeri gas to Europe and further to the signing of the IGA on the construction of Trans Anatolian Gas Pipeline (TANAP); Statoil’s decision, taken in 2008, to join the consortium set up for the development of the TAP pipeline[ix] ; the effects of the Greek debt crisis, which raised concerns on DEPA’s financial position and subsequently on ITGI’s financial and commercial deliverability. Therefore, in February 2012, the Sha Deniz II consortium announced that TAP, and not ITGI, would be used as route for gas supplied to Italy via Greece. Nevertheless, Edison and DEPA did not completely give up the ITGI project and, in 2013, IGI Poseidon moved ahead with a deed of coastal concession signed with Gallipoli Port Authority, which grants the company a state property to construct docking in the pipe at Otranto[x].

Therefore, ITGI is a project that needs (one or more) viable source of gas to be revived and to become commercially feasible. As it was mentioned above, though the IGI Poseidon’s secured TPA capacity is 8 bcm of gas per year, the IGI pipeline is planned to carry 12 bcm of gas annually, which can be wholly shipped to the Italian market. At this point, given the many uncertainties related to the short-term availability other SGC’s gas sources, the Russian gas shipped through Turk Stream seems the most concrete and proximate option for the developers of the ITGI project. By taking advantage of the TPA exempted capacity volumes, by bidding for the IGI Poseidon’s open season and by contracting supplementary volumes,  Gazprom would be able to flow to the Italian market as much as 12 bcm of gas annually. In addition, through the IGB pipeline (another project of IGI Poseidon S.A.), Gazprom could ship 3 bcm per year-and further up to 5 bcm, in case of capacity expansion-to the Bulgarian market. Consequently, all the gas volumes supposed to be transported by Turk Stream can reach the Italian, respectively Bulgarian market via IGI/IGI Poseidon and IGB pipelines.

Which rationale to eye the Italian market?

 The natural gas plays a very important role in Italy’s energy sector, being its “largest fuel”[xi] . For instance, in 2015, gas amounted for 36.7 per cent of country’s total primary energy supply and 38.8 per cent of electricity generation[xii]. Also, in 2015, the overall natural gas supplies to Italy were 67.4 bcm, of which the gas imports amounted to 60.8 bcm, representing approximately 90 per cent of supplies, up to 5.5 bcm from the previous year[xiii].

Though Italy’s gas supply sources are diversified, the most part of the imported gas originate from Russia and is injected into the country’s national transmission network at Tarvisio and Gorizia entry points. In 2015, Gazprom’s exports to Italy totalled 24.4 bcm, a 12.6 per cent increase from the previous year; in 2016, the Russian gas supplies have also continued to increase as, for instance, the gas volumes supplied in November 2016 are up by 36.5 per cent compared with November 2015.  Moreover, Gazprom announced that, based on the results of 11 months of 2016, Italy has become the second largest gas market for Russian gas exports among all foreign destinations[xiv].  Therefore, Italy represents a very important customer for Russian gas-which is supplied by pipelines via Ukraine and Slovakia under three-long term contracts that run until 2035-concluded between Gazprom and the dominant player of the Italian energy market, Eni.

Until 2012, Italy’s reliance on Russian gas imports was far less significant than nowadays, as the imported Algerian gas and the Russian gas played equal role in the country’s gas mix. Actually, they “were almost equal in volume, each accounting for approximately 35% of total imports” but a decision of Eni, which decided “to give the priority to the flows from Russia”[xv], re-shaped significantly the supply mix of Italy’s gas imports.  Eni’s decision should be considered in the frame of company’s long-term cooperation with Gazprom initiated at the end of the 60s, when Italy became net gas importer and started to import gas from the Soviet Union. Later, the Eni-Gazprom strong collaboration expanded to several projects along the gas chain, of which most notable are: the 50-50 joint venture in Blue Stream Pipeline Company (1999); the agreement on strategic partnership that allowed Gazprom to start direct gas deliveries to the Italian market; Eni’s acquisition (2007), via SeverEnergia consortium, of gas production assets in the Russian upstream (sold in 2014 to Novatek); and the signing of the MoU for the building of South Stream pipeline (2007). In 2012, when Eni had undertaken the decision that shifted the supply mix of gas imported by Italy, not only that the prospects of South Stream looked positive but there was also the interest that the realisation of the project to be granted to Saipem, a company whose main shareholder is Eni. In this regard, it is worth mentioning that in 2014 Gazprom awarded a € 2 billion contract to Saipem for the construction of the first offshore line of South Stream.

According to the forecasts made by Snam Rete Gas- which owns and operates approximately 95 per cent of Italian gas transmission network- over the decade 2016-2025, the gas demand in Italy would increase of approximately 1.9 per cent annually[xvi]. In the high case scenario, in 2025 and 2030 the gas imports would be 74.6 bcm, respectively 75.7 bcm whereas that in the low case scenario Italy’s gas import needs would be 73.7 bcm in 2025 and 74.7 bcm in 2030[xvii]. Therefore, in the high case scenario, Italy would need to import additional 13.8 bcm of gas by 2025 and additional 16.9 bcm up to 2030; in the low case scenario, the country’s gas import needs would increase with 12.9 bcm by 2025 and 13.9 bcm by 2030. To put it differently, over the next 10-15 years, the Italian gas market would need to import large additional gas volumes.

Italy aims to become a gas hub and opposes Nord Stream 2: which place for TurkStream’s gas? 

Given that Italy has continuously challenged the Nord Stream 2 pipeline project, how additional Russian gas volumes would fit into the country’s gas market?  Italy’s opposition to Gazprom’s latest project to divert the gas from Ukraine is primarily triggered by commercial reasons. If the project succeeds to be completed, then Italy’s gas imports from Russia which are actually supplied via Ukraine would transit through Germany and Rome fears that this would lead to higher gas prices for Italy. Hence, Eni’s CEO sees Nord Stream 2 “as a pipeline for the north of Europe” whose impact would be “a stronger hub in the north” and “a higher price for the south of Italy”[xviii]. Furthermore, the Italian Minister for Economic Development, Carlo Calenda, considers that the concentration of large volumes of gas in Germany would generate an increase of delivery tariffs, leading to supplementary costs, which would be supported by the consumers.  Therefore, according to Calenda-who expresses the position of Italian government on the issue- “expanding Nord Stream’s capacity does not have any advantages for Italy”[xix].

Reducing the cost of gas supply and converting it into reduced bills is one of the aims pursued by Italy’s National Energy Strategy[xx].  In this regard, it is worth mentioning that by 2011, the average price of gas on the Italian PSV (Punto di Scambia Virtuale-Virtual Trade Point) spot market “was about 25% higher than on the principal north-European hubs”, and the price of long-term Italian take-or-pay (TOP) contracts “was expected to have also been higher, on average, than similar European TOP contracts”[xxi].  However, starting with 2012, the differences between Italian PSV hub prices and the North European ones started to be reduced and that led, among other things, to contract re-negotiations between Gazprom and Eni, the latter obtaining important concessions on its gas supply terms. Presumably, this element played a role in Eni’s abovementioned decision to give priority to gas flows from Russia.

Italy intends, according to its National Energy Strategy, to fully take advantage of its “geographical position as a link between Europe and the Mediterranean” [xxii] and it plans to become by 2020 “an energy trading hub and possibly transit country” offering “high value-added services for other countries”[xxiii].  Therefore, Italy’s position on Nord Stream 2 has been determined not only by concerns regarding possible increases in gas prices but also by considerations that the project would jeopardize the country’s ambition of becoming an energy trading hub. If Nord Stream 2 completed, important gas volumes can be distributed from the German-Czech border to Central Europe, Italy and Southern-Eastern Europe. By making Germany the most important transit route for Russian gas to Europe and a critical gas physical nod and trading hub, the Nord Stream 2 project would reduce not only the benefits of developing the TAP pipeline project, but also Italy’s role in redistributing the Caspian gas within the SGC. In the first phase (the first supplies  from Shah Deniz II are expected by early 2020 ), the project is planned to flow no more than 10 bcm  gas per year in the Italian market but its capacity can be expanded to 20 bcm by adding two compressor stations, one in Greece and one in Albania. By expanding TAP to the northwest and connecting it with the Ionian-Adriatic Gas Pipeline (IAP) it would be established a new supply route for the Southern-Eastern Europe and it would also be enabled the gasification of Albania, Bosnia and Herzegovina, southern Croatia and Montenegro-countries whose gas infrastructure networks are still largely underdeveloped.  IAP’s bi-directional capacity of 5 bcm per year may provide gas supplies to Albania (1 bcm/year), Bosnia and Herzegovina (1 bcm/year), Croatia (2.5 bcm/year) and Montenegro (0.5 bcm/year.  Conversely, the Nord Stream 2 project pipeline can significantly impact the Balkans: the project may reduce the incentives to construct new gas transmission infrastructure in the region, it can hamper the regional gas market integration and the region’s ability to meet the N-1 standard and it can also prevent the diversification of supply sources and routes.

Nevertheless, as John Roberts indicates, Gazprom has also other option than IGI/IGI Poseidon to reach the Italian market: it can send 10 bcm of Russian gas via the TAP pipeline[xxiv].  Turk Stream’s end point will be at Ipsala, near Turkish-Greek border, while TAP will start nearly 11 km away, at Kipoi, near Greece’s border with Turkey. As it was abovementioned, TAP’s current capacity of 10 bcm per year can be expanded to 20 bcm annually by adding two compressors, in Greece and Albania and this supplementary capacity would be open to third-party access. Gazprom has the right to bid for the 10 bcm expanded capacity and if the Russian company “were to do his in a year or two, then it would likely find itself the sole bidder” as Azerbaijan may be unable to send additional large gas volumes to Europe, via TAP, until the mid- 2020s[xxv].  If, eventually, the Russian gas were to be transported by TAP, that would be the outcome of the commercial decisions of Gazprom and TAP’s operators. Nevertheless, this situation may as well be strongly disputed within the European Union: ultimately, one of the five Energy Union’s goal is the diversification of energy sources, suppliers and routes and having the Russian gas flowing through a section of SGC would only enhance the Union’s overreliance on a single major supplier. More, the SGC is seen by EU not merely as new supply route aimed to bring the gas from Caspian and Central Asia countries (and eventually, Iraq and Iran) but as one of the highest component of its energy security: in the end, both its rationale –as it appears in all major Union’s official documents-is largely determined by Union’s quest to lessen its dependency on Russian gas and to find alternative suppliers.

In sum, Gazprom can reach the Italian market either by IGI/IGI Poseidon or TAP. In the first case, it can send 12 bcm to Italy whereas in the second the gas volumes would be lesser, amounting 10 bcm per year. In each case, the gas will be diverted from the Ukraine’s transit route and it will flow directly to Italy from where it could be either used for domestic consumption or (depending on further infrastructure: cross border bi-directional flow interconnections, development of storage capacities, and more) it could be further re-distributed to other Southern European markets[xxvi]. Finally, in each case, Gazprom can play on pricing strategy  (which would match the aforementioned aim of Italy’s Energy Strategy to reduce the consumers’ bills ) and use the price leverage not only as an incentive to gather support for its projects- which would bring more Russian gas into Italian market-  but also to offset Italy’s opposition to Nord Stream 2.

The Russian gas may soon face enhanced competition: preparations to monetize the East Mediterranean gas

 So far, the most certain competitor of the Russian gas for the Italian market is the gas which would flow from Shah Deniz II via the TANAP and TAP pipelines. However, there are real prospects triggered by ongoing endeavours to bring the East Mediterranean gas to Europe, for the Russian gas to face enhanced competition.  Israel, with its ample gas reserves, has embarked in an active energy-diplomacy which involves different negotiations with various actors- aimed to monetise its energy resources.  An outcome that emerged from of those diplomatic efforts is the aim to create- as part of part of the Eastern Mediterranean Corridor- of a direct export route for the East Med energy resources to the European markets, which would imply the building of a natural gas pipeline from Israel to Europe.

The project of a pipeline stretching from Israel to Europe garnered, over the past months, not only the  political support of the other countries that may be involved into it- Cyprus, Greece, Italy-but also the support of the European Commission.  Last December, two high-level meetings were held in Rome (on December 1), respectively in Jerusalem (on December 8) between Israeli, Cypriot, Greek and Italian top-officials, and the EU Commissioner for Climate Action and Energy Miguel Arias Cañete on the issue of the joint pipeline. IGI Poseidon S.A. is the company which conducted the feasibility study for the pipeline project and its results were presented at the Rome meeting. Though the public information regarding the project has been rather scarce so far, there is indication on its economic feasibility: hence, the political representatives acknowledged that the study “demonstrated the technical feasibility and commercial viability “[xxvii] of the pipeline.  Given that IGI Poseidon S.A. is the promoter of a pipeline dubbed Eastmed, the pipeline that Israel, Cyprus, Greece and Italy seek to develop would be based, presumably, on the Eastmed’s project[xxviii]. As the Eastmed pipeline is designed to have a connection with the IGI Poseidon pipeline, one can assume that the project pipeline from Israel to Europe- via Cyprus and Greece- would be connected to IGI Poseidon.  Which, in case of a positive decision on the abovementioned pipeline, would lead to two competitors for IGI Poseidon and, consequently, for the Southern- European markets: the TurkStream (second line) and the possible carrier from Israel to Europe.

However, bringing the East Mediterranean gas to Europe depends not only on political support but on a broad range factors, among which are: the development of the second phase of Israel’s Leviathan gas field (the commercial production of the first phase is expected to start late 2019/early 2020); the addition of other gas resources to the stream (i.e.: new resources located in Leviathan’s field and nearby; Cyprus’ offshore gas resources; Egypt’s Zohr gas field;  and so forth) ; securing customers from the European market; the construction of a pipeline between Israel and Turkey, which may broadly divest part of this project’s rationale[xxix].

Conclusion:

Gazprom intends to reach the Italian market through the second line of the TurkStream pipeline, and that may be done either by connection to IGI Poseidon or TANAP. Nevertheless, as the latter is considered by the European Union one of its highest energy security’s priorities, the TANAP option may be strongly disputed within the Union and, therefore, at this stage, it seems less feasible than IGI Poseidon alternative. For Italy, the TurkStream  may present several opportunities. Firstly, it can satisfy its future energy needs with gas volumes that would flow directly to the country. Secondly, if Gazprom would send larger volumes to the Italian market, it can play on gas pricing strategy: the Russian company may use the price leverage to garner support for the project on one hand and to offset Italy’s opposition towards the Nord Stream 2 pipeline project on the other. This would present Italy with the opportunity to negotiate and/or re-negotiate more advantageous gas prices for its consumers.   Last but not least, strictly from Italy’s goal to become a gas trading hub, getting access to supplementary and directly delivered gas volumes and sources can be an enhancing factor to achieve this objective.

The TurkStream may also be an opportunity for the ITGI project, which once competed for the Shah Deniz II gas volumes and which needs now (one or more) viable gas sources to be revived and to become commercially feasible.

Nevertheless, TurkStream would trigger not only opportunities, but also significant challenges. First and foremost, Turk Stream would be a challenge for the Energy Union, as it would call into question one of its main goals, namely the diversification of energy sources, suppliers and routes, set up to achieve the energy security. Moreover, it would divert large volumes from the Ukrainian transit (as much as half of the volumes, in case the two lines would be built).  In this context, it should be recalled that over the past two years, Ukraine’s importance as gas transit country has been largely taken into consideration by the European Union, through different actions: direct involvement in the political negotiations between Kiev and Moscow on gas transit, facilitation in organizing the financing for gas purchases for the Ukrainian side, support in getting reverse flows from the European suppliers to Ukraine and so forth.

Also, by increasing the Southern Eastern Europe’s dependency on Russian gas, the TurkStream pipeline would heavily impact on this region’s energy security by hampering the regional gas market integration and the region’s ability to meet the N-1 standard. Furthermore, TurkStream would be a distinct challenge for the IAP pipeline, as it would significantly reduce the incentives of its construction.

Finally, TurkStream may be a challenge for the possible pipeline involving Israel, Cyprus, Greece and Italy, and, consequently, for the new direct export route aimed to bring the Eastern Mediterranean gas to Europe.

[i] South Stream was intended to supply 16 bcm of gas to Turkey and 47 bcm to the Turkish-Greek border,  from where the gas would have been sold to the European markets

[ii] In 2015, 64.1 bcm of Russian gas was shipped through Ukraine

[iii] European Commission, “European Energy Security Strategy”, COM (2014), May 5, 2014, Brussels, p.20

[iv] TASS, “Investments into two lines of Turkish Stream estimated at €7 bln”, December 20, 2016

[v] TASS, “Turkish Stream project participants to be exempt from certain taxes”, October 11, 2016

[vi] Gazprom spent nearly €9 billion on South Stream, which includes the costs for the offshore and European section, and for the Russian Southern Corridor. In this regard, it is worth recalling  President Putin’s remark on the issue : “How could we spend €9 billion just to have all this metal sink into the sea, without having secured the right to enter Bulgarian territory? “ (cf. Russia Today, “Another change of heart may breathe life into South Stream”, August 9, 2011)

[vii] Gazprom, “Gazprom, DEPA and Edison sign Memorandum of Understanding”, February 24, 2016, http://www.gazprom.com/press/news/2016/february/article267671/

[viii] Gazprom,  “Gazprom, DEPA and Edison in talks on optimal route of Russian gas exports to the south of Europe”, December 13, 2016, http://www.gazprom.com/press/news/2016/december/article295952/

[ix] Statoil held 15.5 per cent share in Shah Deniz gas field until 2014 when it sold the stake to Malaysia’s Petronas. Following the divestment of its share in Shah Deniz field, in 2015 Statoil sold its 20 per cent share in the TAP pipeline project to Italian Snam. In all likelihood, the above mentioned Statoil’s assets along the value chain-production and transportation-played a role in Shah Deniz consortium’s decision to prefer TAP as route for gas supplies to Italy

[x] Snam, “Southern Gas Corridor, ITGI Goes Ahead “, March 20, 2013, http://www.snam.it/en/Media/energy-morning/news-upload058.html

[xi] IEA, “Energy Policies of IEA Countries-Italy 2016 Review”, 2016, p.125

https://www.iea.org/publications/freepublications/publication/energy-policies-of-iea-countries—italy-2016-review.html

[xii] Ibid.

[xiii] Snam Rete Gas, “Ten-year network development plan 2016-2025”,  October 2016, p.31, http://pianodecennale.snamretegas.it/en/index.html

[xiv] Gazprom, “Gazprom’s supplies to Italy increase by 36.5 per cent in November”, December 5, 2016, http://www.gazprom.com/press/news/2016/december/article294917/

[xv] Verda, M., “Italian gas (over) supply: how the crisis reshaped imports”,  Energy comments,

[xvi] Snam Rete Gas,  op.cit.,  p. 35

[xvii] Ibid., p. 38

[xviii] Reuters, “ENI CEO says Nord Stream 2 would raise gas prices in Italy”, May 23, 2016

[xix] TASS, “Italian minister says expanding Nord Stream-2 to complicate EU energy market”, October 5, 2016

[xx] Ministere dello Sviluppo Economico, “Italy’s National Energy Strategy: for a more competitive and sustainable energy”, March 2013, p.51 http://www.sviluppoeconomico.gov.it/images/stories/documenti/SEN_EN_marzo2013.pdf

[xxi] Honoré, Anouk, “The Italian market: Challenges and Opportunities”,  NG 76, The Oxford Institute for Energy Studies,  June 2013,  p. 36

[xxii] Ministere dello Sviluppo Economico, op.cit., p.65

[xxiii] Ibid. , p.50

[xxiv] Roberts, M., John, “With Pipeline, Russia Sustains Dominance of Turkish Gas Market”, Atlantic Council, October 24, 2016, http://www.atlanticcouncil.org/blogs/new-atlanticist/with-pipeline-russia-sustains-dominance-of-turkish-gas-market

[xxv] Ibid.

[xxvi] Gazprom acknowledged that the South Eastern Europe is the target region for TurkStream  (cf. TASS, “Consumption of Russian gas by potential users of Turkish Stream grows”, January 11, 2017, http://tass.com/economy/924434)

[xxvii]  Ministry of Economic Development, “East-med gas pipeline: constituted a working group to monitor project development”, December 1, 2016, http://www.sviluppoeconomico.gov.it/index.php/en/202-news-english/2035625-east-med-gas-pipeline-constituted-a-working-group-to-monitor-project-development

[xxviii] For more details on the Eastmed pipeline, see  here :

http://www.igi-poseidon.com/en/eastmed

[xxix] As Israel is aiming to keep its gas export options open, it initiated a ministerial-level dialogue with Turkey on the framework of construction of a 600-kilometer-long pipeline between the two countries.  By all accounts, the only feasible route for this pipeline would cross Cyprus’ Exclusive Economic Zone (EEZ) and, in the absence of a settlement of the Cyprus problem, Cyprus can rise objections- and bring them within the UNCLOS arbitration framework. That may significantly delay the pipeline and, ultimately, discourage the investors.

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