Photo courtesy Gazprom

The South Stream Transport partnership last year commissioned three producers -- Europipe, United Metallurgical and Severstal -- to fabricate 75,000 12-meter pipes for $1 billion for the Black Sea section of the project. With South Stream now cancelled and the partners bought out, Gazprom looks to redirect its efforts to Turkey.

The cold bed of the Black Sea is once again the focus of the state-controlled Russian energy giant Gazprom as its engineers plot to resuscitate its South Stream pipeline project using new routes. Early in December, Russian President Vladamir Putin abruptly cancelled plans for the project to connect to European networks, instead shifting direction and resources to Turkey. Meanwhile, neighboring Ukraine, whose pipelines South Stream meant to outflank, is charting its energy plans through winter while its citizens and cities are caught under fire in a conflict between the government and Russian-backed separatists.

Gazprom's top management in recent days laid out the first routing plans for its announced four-string, 63-billion-cu-m-capacity pipeline to Turkey, with Chief Executive Officer Alexey Miller saying he expects its first gas shipments in December 2016. The “Turkish Stream” is the latest wrinkle in a long affair—part politics, part bare-knuckle business—involving Russia, the European Union and Ukraine, the transit hub for nearly a quarter of the natural-gas consumption on the continent. So far, investments are in the billions of dollars, and billions of dollars more are at stake. The original project's cost was estimated at between $20 billion and $50 billion. Various reports peg Gazprom's investment to date at $5 billion to $10 billion; the scaled-down Turkish leg would salvage that expenditure, say energy analysts. The surrounding cast involves energy and engineering firms across Europe and beyond, from Chevron to BASF to Eni.

Nearly half the total natural gas that Gazprom exports to Europe flows through Ukraine, with Russian gas coursing through two Soviet-era pipelines—Soyuz (Union) and Bratstvo (Brotherhood)—that tap Siberian and central Asian gas fields and flow along with the Urengoy-Pomary-Uzhgorod, or the Trans-Siberian, pipeline. About half Ukraine’s own supply of gas comes from Russia.

A Sorry Waltz

Both sides in recent years strained against this deep entanglement, sparring through two winter cutoffs, unpaid debts and angry accusations. Still, the embrace remains as close as ever. Gazprom’s long-nursed gambit to shake Ukraine as its transit hub was to plan a new southern route—the South Stream—which would plunge into the Black Sea at Anapa, emerge in Bulgaria at Varna, cross the Balkans through Serbia and then branch into Hungary, Austria, Croatia and Italy.

Analysts say Gazprom dumped South Stream in December because of the prospect of long-term and ultimately unwinnable regulatory disputes with the European Union, which demanded the pipes be open to gas from other suppliers; the West's sanctions in light of accusations that Moscow was fueling the Ukraine conflict; an unexpected plunge in oil prices and the ruble's steep slide. Bulgaria finally balked under European Commission pressure. “That forced Gazprom’s hand somewhat,” says Simon Pirani, senior research fellow at the Oxford Institute for Energy Studies.

Until the point in early December when Putin and Turkish Prime Minister Recep Erdogan held their joint press conference announcing Turkish Stream, Gazprom was full speed ahead on South Stream. Without missing a beat, the energy giant seems to be pivoting to Anatolia. “There’s not much info we can offer you on the matter. South Stream is closed, [and] the new pipeline project is beginning,” a Gazprom spokesman said as of late January by way of comment. A few days later, the firm announced it was pulling back from a planned expansion of its Nord Stream network, which serves Germany and northern Europe and is another prong in the strategy to pull away from Ukraine gas transit; that network presumably frees up some resources even as, Reuters reports, the company chairman told a Vienna gas conference that weaker prices are prompting project reviews.

Gazprom also said it’s going to use 660 of the Black Sea kilometers already surveyed for South Stream corridors for its new Turkish Stream; there will be 250 km remaining toward the European part of Turkey for a new corridor to landfall. Gazprom itself will shoulder the undersea construction, with Turkish transport facilities to be built jointly. The Turkish side will be contracting through state-owned Botaᶊ. As with South Stream, the plan is for four parallel strings, with each pipeline delivering 15.75 billion cu m of natural gas a year, for a total of 63 billion cu m.