Sechin divides the Black Sea

By John Helmer

MOSCOW - Russia's Deputy Prime Minister and energy tsar, Igor Sechin, is attempting to divide the Black Sea with a stroke almost as dramatic as the biblical one with which Moses surprised the Pharaoh at the Red Sea.

If you believe the latter, the former may be credible, despite the refusal of Russian energy policymakers to clarify what they are doing and what they think the commercial logic of the move to be.
For tanker operators, the move threatens to cancel the long-planned crude oil pipeline running from Burgas, on Bulgaria's Black Sea coast, to the Greek Aegean port of Alexandropouli. Instead, Sechin now appears to favor expansion of port capacity at Ceyhan, the Turkish eastern Mediterranean tanker terminal, which will be supplied for the first time with Russian crude. This is to be piped from a new terminal to be built at Samsun, on Turkey's Black Sea coast

So, instead of a tanker shuttle moving westward from Novorossiysk across the Black Sea to the Bulgarian resort city of Burgas, which has been the plan agreed with Bulgaria and Greece until now, Sechin's plan calls for a new southward tanker route to Samsun. Swept away also are plans for Bulgaria to become a hub for storage and shipment of Russian natural gas, along two arms of the proposed South Stream pipeline.

On October 19, at a meeting in Milan with Turkey's Minister of Economics, Taner Yildiz, Sechin announced the new Russian direction for South Stream through Turkish territorial waters. In addition, it was announced that he had agreed to supply Russian crude oil to a new pipeline across Turkey from Samsun to Ceyhan, which the Russian companies, Transneft and Stroytransgas, will help to build.



According to a Russian reporter granted special access to Sechin, the new scheme has been in negotiation with the Turks since Prime Minister Vladimir Putin was in Ankara on August 6. Ahead of Sechin's arrival to meet Yildiz in Milan, Russian officials are reported to have been working out the new scheme, which, in the newspaper report at least, diverts the seabed route of South Stream under the Black Sea by up to 230 kilometers southward to Turkish territorial waters; replaces Bulgaria as Russia's energy transit partner for both oil and gas; and agrees to the Samsun-Ceyhan oil pipeline as a substitute for the Burgas-Alexandroupoli route.

Most industry analysts in Moscow believe that the Samsun-Ceyhan oil pipeline was the condition the Turks imposed in order to give the Russians the go-ahead to lay South Stream on the Turkish sector of the seabed. However, there is no evidence that this is what happened.

Sources in Moscow agree that the routing of the new gas pipeline must skirt the 12-nautical mile (22.2 kilometer) territorial limit of Ukraine to avoid more political trouble with Kiev. However, at the narrowest point between the Ukrainian coastline at the Crimean Peninsula and the Black Sea coast of Turkey, around Inebolou, the sea is 280km wide. Subtracting 12nm (22.2km) for the Ukrainian and Turkish territorial zones leaves a stretch of international water of about 235km. The seabed depth in this area is between 600 meters and 1,200 meters.

This is less than the 1,200m to 2,250m depths which Gazprom's Blue Stream gas pipeline already crosses on the Black Sea seabed between Arkhipo-Osipovka and Durusu. According to Gazprom and the sub-sea pipeline builder Saipem, parts of this route, which started delivering Russian gas to Turkey in 2005, are among the deepest ever used for pipelines.

Sources concede therefore that there is no technical reason why the proposed South Stream must be diverted so far south, out of the international zone, and at a greater distance and project cost. Current estimates for South Stream put the price tag of the entire project at about US$13 billion.

Gazprom, Russia's leading company, has told Asia Times Online that the reports of Sechin's agreement with the Turkish government to reroute the South Stream gas pipeline onto Turkish territory do not mean that Gazprom has decided to lay a land segment of the pipeline in Turkey, and bypass Bulgaria altogether.
But Gazprom is unwilling to rule that option out, or to say what it understands by the Sechin plan. The company's principal spokesman, Sergei Kupriyanov, is not answering questions, adding to the impression that his company's leadership is in disarray over Sechin's moves towards Turkey.

Another Gazprom source told Asia Times Online that Russia had asked Turkey for permission, and received it, to explore the territorial waters of Turkey to find out whether the area was suitable for the pipeline. "If it is suitable, then the pipeline may be laid across Turkish marine territory," the Gazprom source said. "Where it goes next - to Turkey or to Bulgaria or elsewhere - is not decided yet."

The doubt in that last line is challenged by the Bulgarians, who claim they have already signed commitments with Putin to lay South Stream across Bulgarian land territory.

Since 2007, Gazprom's map showing its proposed route for South Stream begins in Dzhubga, near Tuapse port, on the Russian Black Sea coast, and ends at Varna, on the Bulgarian coast. The route passes through international waters well south of the Ukrainian zone, and equally clear of Turkish territorial waters. [1]

Hours after Sechin announced his Black Sea move, embracing his Turkish counterpart Yildiz in the process, Gazprom chief executive Alexei Miller was in Belgrade, Serbia, along with Russian President Dmitry Medvedev, to agree on funding and building the Serbian section of the South Stream project's northern branch; and also to establish a major gas storage in Serbia. The regular news wires reported that Turkey's President Abdullah Gul had telephoned Medvedev there, to inform him of the decision to allow the Russians to survey the Turkish sector of the Black Sea.

"The Turkish president said that the Turkish government had taken all the necessary decisions to give permission for geological and explorative work in Turkey's economic zone of the Black Sea for the South Sea gas pipeline," Reuters quoted a Kremlin statement as explaining.

Note that the "economic zone" referred to in this report may not be the same stretch of seabed as Turkish territorial waters. Turkish Embassy sources in Moscow won't say which Gul's telephone call meant.

The hint from Sechin that he and the Turks will move South Stream away from Bulgaria altogether has produced angry reaction in Sofia, the Bulgarian capital, where the government denies it is losing to Turkey both the gas pipeline and the Burgas-Alexandroupoli crude oil pipeline, which Moscow has been backing for more than a decade - until now.

On October 22, Gazprom announced that Miller had met with Paolo Scaroni, chief executive of Italian gas company Eni, Gazprom's partner in South Stream. But their communique had almost nothing to say about the routing options for the South Stream pipeline. "The plan of further actions connected with building the marine part of the gas pipeline has been considered," Gazprom said of the meeting. Eni spokesman, Filippo Catalini, told Asia Times Online the agreement between Turkey and Russia to allow the route of South Stream to pass through the Turkish EEZ was signed on August 6, 2009, in Ankara. Eni is evidently not endorsing a change of route for South Stream.

Neither is the Bulgarian government. Bulgarian Energy Minister Traycho Traykov flew to Moscow on October 22, where he met his counterpart, Russian Energy Minister Sergey Shmatko. Bulgarian government officials told Asia Times Online they already had a signed agreement with the Russians for the South Stream pipeline to enter Bulgarian territorial waters and come ashore at Varna. How the pipeline is routed through the Black Sea before that has not been decided, they noted, adding that it made no technical or economic sense to reroute the pipeline south into Turkish territorial waters. The Bulgarians also expressed concern with the future of the Burgas-Alexandroupoli oil pipeline, as they conceded there was no commercial future for that, if the Russians decided on Samsun-Ceyhan.

Following his meeting with Traykov, Shmatko announced publicly he now thought of the Turkish pipeline option as "a new rising star ... we want to build a major refinery and jointly sell oil products from the Mediterranean coast".

Professor Alexander Kovalev is an expert on the law of the sea and on Russian maritime law at the Diplomatic Academy of the Russian Ministry of Foreign Affairs. He told Asia Times Online that an international maritime convention of 1982 requires a country laying a pipeline on the continental shelf of another country to coordinate the route between them. But he noted that in Russia there is no constitutional requirement for the Russian government to notify parliament, or apply for its ratification, if agreements are signed on seabed issues, including the Black Sea EEZ borders, or route changes of South Stream.

Deputy Prime Minister Sechin's office did not respond to questions, and he has never addressed parliament to explain what he is doing.

Adding to the confusion which Sechin has set in motion, LUKoil, Russia's second-largest oil producer and exporter, says it has no interest in supplying crude oil for the proposed Samsun to Ceyhan pipeline. Until now, the Kremlin has refused to countenance proposals for Russian crude to be delivered across Turkey, either for refining in country, or for export at Ceyhan, which is the tanker terminal on the eastern Mediterranean for a US-backed crude oil pipeline currently delivering Azeri oil from Caspian fields.

A Rosneft spokesman told Asia Times Online that it was joining the Sechin oil pipeline proposal, along with the Russian pipeline company Transneft, Eni of Italy (which had originated the project in 2005, when there was no Russian crude to fill it), and the Calik Holding of Turkey.

Sechin, who is also chairman of the board at Rosneft, the state-owned lead producer in Russia, claimed in the October 19 announcement that LUKoil was interested in the proposed 555km pipeline to Ceyhan, which will have a 1.5 million barrels per day capacity. LUKoil's statement to Asia Times Online is a categorical denial. Rosneft is equally categorical that it wants to participate.

In 2007, LUKoil tried but failed to get Turkish and Russian government agreement for a new refinery at Zonguldak, on Turkey's Black Sea coast, 400km to the west of Samsun.

Asked if a dramatic change was underway in Russia's oil and gas pipeline strategy, Moscow maritime analyst Alexei Bezborodov said the situation over oil transportation in the Black Sea had now become too complicated to understand or to express an opinion about. Most Gazprom analysts at Moscow's investment banks agree that the Black Sea's waters are now too murky for them to predict what will happen next.

Note
1. For a map of this aspect of the South Stream project, see South Stream website.

John Helmer has been a Moscow-based correspondent since 1989, specializing in the coverage of Russian business.

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