Ukraine is looking to take a stake of up to 10% in the Trans-Anatolian Pipeline Project (TANAP) gas route and hopes to continue talks on the issue once an intergovernmental agreement between Azerbaijan and Turkey has been signed, according to Sergiy Korsunsky, Ukrainian ambassador to Turkey.
Korsunsky was speaking at the CIS Oil and Gas Summit in Paris Wednesday in an expert capacity rather than officially on behalf of the Ukrainian government.
The current project structure for TANAP is 80% Socar, the Azeri state oil company, 10% Botas, Turkey's state-owned pipeline company, and 10% TPAO, Turkey's state-owned oil company. TANAP would be fed initially by 16 Bcm of gas from Azerbaijan's Shah Deniz Phase 2, which is scheduled for completion in 2017.
Ukraine would be ready to supply pipes for the project or invest in cash.
Korsunsky told reporters on the sidelines of the conference that Ukraine views the project as "good business", even if it fails to win any gas supplies for itself through the planned pipeline network.
On Tuesday, Vaqif Aliyev, head of the investment division for Socar, said that the intergovernmental agreement was likely to be finalized in May.
Korsunsky suggested it is more likely to be signed in June at the earliest.
Korsunsky said that Ukraine and Russia "had found no common language" on gas import prices. While Russian gas monopoly Gazprom had shown flexibility on prices with major European companies partnering it in the North and South Stream pipeline projects no such concessions had been offered to Ukraine.
Other European partners had been offered up to 16% spot prices on their import volumes, discounts and flexibility on take-or-pay contracts, he said.
As a result, Ukraine is paying much more for Russian gas despite being, he said, much closer to the source of that gas. The price gap was "unexplainable," Korsunsky said.
Regarding possible joint management of the Ukrainian pipeline network that transits the bulk of Russian gas to Europe, Korsunsky said talks on the possible establishment of a trilateral consortium to manage the pipeline continue, but a lot of details still need to be clarified, including which company might represent the EU in the consortium and what stakes each party will have. He said Gazprom is seeking more than a one-third stake in the project. At the same time, he confirmed earlier reports in the media that Gazprom has proposed a bilateral consortium to be formed by Gazprom and Ukraine's Naftogaz, excluding the EU. The Ukrainian and Russian presidents met Tuesday to discuss the project as well as price issues, he said.
Speaking about other stumbling blocks for the project, Korsunsky said that the consortium would need guarantees of transit volumes to invest in the modernization of Ukraine's pipeline network. No such agreement guaranteeing transit volumes currently exists.
He also said that, while the system was in good shape, investment was needed in particular to modernize the country's compressor stations. He put total possible investment at $2.5 billion, but this would include a new 30 Bcm/year transit pipeline, only a fraction of the cost of other proposed projects such as South Stream.
