The White Stream Gas Transportation Project

Home , Blue Stream, White Stream

The White Stream gas transportation project

- a project to deliver Caspian gas to the EU

Giorgi Vashakmadze Director – Corporate Development

13-14 May 2009 Energy Charter Secretariat Amsterdam Group on Trade and Transit

Project development by the White Stream consortium GUEU - White Stream Pipeline Company Ltd

White Stream

• Length: 1100 km (subsea to Romania)

• Length: 630 km (subsea to Ukraine)

• Depth: 2150 m

• Diameter: 26 inch

• Volume: 8 Bcm/y (times № of ‘strings’)

• Commissioning: 2015

Transporting gas from Azerbaijan and the Caspian region directly to Romania, Ukraine and markets in Central and Eastern Europe White Stream is the logical source of gas for the PEGP

Volume Bcm

32 Stage 3: • The pipeline will be 24 developed in 3 stages 32 Bcm/y 16 Stage 2: 16 Bcm/y • The volume of gas will 8 build from 2 to 32 Bcm/y Stage 1: 8 Bcm/y 0 2015 2020 2025 2030 2035 2040 2045 • The volume can increase thereafter

Importantly, the first 8 Bcm/y stage is viable by itself

WS stage 1 can be developed with gas from Azerbaijan

White Stream will cross the Black Sea at the same depth as Blue Stream alternate option for the Black Sea crossing using LNG tankers was also examined but pipeline was found to have the advantage, particularly for large volumes over this relatively short distance.

Elevation m 1 105 km 133 km 3 000

SCP offtake 2 000 Constanza Supsa 1 000

< West0 East > 1 400 1 200 1 000 800 600 400 200 -1 000 Black Sea -2 000

-3 000 Distance km

Romania Georgia

flow

The White Stream project has been approved as a Project of Common Interest and a Priority Project…

The work supported by the TEN-E programme of the European Commission demonstrates • Market feasibility • Demand for gas • Supply of gas • Economic and commercial feasibility • Technical feasibility proven ultra-deep water pipeline technology • Legal feasibility UN Law of the Sea Convention

Volume Bcm White Stream: 32 Bcm (to scale)

• The future import 2020 import gap yet to be contracted gap is very large 700 Other pipeline & LNG 7 x 32 Bcm/y 600 Russian imports Europe needs to: already-contracted 500 EU27 consumption • Replace its declining 400 production 300 200 North Sea production

• Plus meet its future demand 100

Continental Europeanp roduction growth 0 1960 1970 1980 1990 2000 2010 2020 2030 2040 Data from: BP Statistical Review of World Energy, 2002-2007 and other sources ⇒There is plenty of room for additional gas from new supply routes to the EU

‘The EU will need an additional 200 to 300 billion cubic meters per year in 25 years, so we have enough demand for at least seven Nabuccos’ – EU Energy Commissioner Andris Piebalgs BBC News, Nabucco gas pipeline is approved, Tuesday, 27 June 2006, 16:22 GMT, http://news.bbc.co.uk/1/hi/business/5121394.stm

• Most countries of Central Future demand-supply gaps in example countries: and SE Europe will be Romania seeking additional gas

• Cooperation between White Stream and the planned Pan-European Poland Gas Pipeline to link to other EU markets

1.3 1.9+ 1.7+

……and and wellwell-placed-placed toto diversifydiversify 1.3+ EUEU gasgas supplysupply ifif linkedlinked directlydirectly 20+ 6.7+ 3.2 4.5 2.1

• There are enormous gas riches in the Caspian

• There is a growing demand in Europe

Why are supplies from the Caspian to Europe not linked directly to match the supply and demand potential?

The EU plan includes both key concepts needed for a successful Caspian gas strategy to facilitate western investments in Caspian that White Stream promotes:

1 BIG GAS concept - EU to show resolve for securing much larger import volume from Caspian (over 100Bcm/y) to become a preferred buyer

2 Effective CORRIDOR concept - dramatic reduction of perceived transportation risks on the Georgia-EU segment of the ‘Southern Corridor’ through the conjunct development of White Stream and other ‘Southern Corridor’ projects

• The ‘paradigm’ has changed from bilateral state-to-state to multilateral

•“…we, the European Union, should have a view on the pipelines and their respective merits. My own view … is that any pipeline that delivers the most gas into the most liquid markets … provides regional security benefits in the Southern Balkans in particular and that links up to initiatives such as the Balkan Gas Ring and NETS should be favoured.”

— Jozias Van Aartsen, Activity Report Sep 2007 - Feb 2009

•“White Stream, Nabucco, TAP and ITGI … are mutually reinforcing if combined with the integration of isolated networks …”

• “Politically, though, we must increase diversification in the Southern Balkans as a priority.”

• “I therefore welcome the … [TEN-E funded] study on White Stream. I am especially intrigued by the prospect of developing a direct sub-sea route from Georgia to Romania and then overland to Italy (along the Pan-European Oil Pipeline Route).”

— Jozias Van Aartsen, Activity Report Sep 2007 - Feb 2009

A factor important for Caspian region governments and for potential upstream investors is the security and continuity of demand The concurrent development of White Stream with Nabucco WhiteWhite StreamStream offers producers and exporters such security of demand Nabucco

Therefore the two projects are mutually reinforcing

The important result is not only 60 Bcm+ of capacity, but also dramatic reduction of perceived transportation risks The EU gas plan’s key elements

November 2008 - The new Energy Review The European Commission has proposed: •a new company: the Caspian Development Corporation to: – make financial commitments to buy Caspian gas – encourage development of new production and invest in infrastructure (likely to include TCGP) – bring in private sector companies • backed by the European Investment Bank (EIB) • stimulating investment in ‘a network of new pipelines’ • ultimately transporting 60 to 120 Bcm/y direct to Europe

ThisThis isis ‘BIG‘BIG GAS’GAS’ through through anan EFFECTIVEEFFECTIVE CORRIDORCORRIDOR

FT November 13, 2008 by Joshua Chaffin By Joshua Chaffin in Brussels They also call for a new consortium, known supplies 42 per cent of Europe’s imported The European Commission has proposed a as the Caspian Development Corporation, gas. “When it comes to energy security, our new company to bring gas from central Asia which would make a commitment to buy gas policy is not directed against any single EUto Europe viaplans the Caspian Sea in a move in the region, to encourage the development country. It’s just a matter of being cautious,” likely to raise tensions at Friday’s meeting of of new production, and invest in he said.José Russia will be Manuel invited to use the Barroso, TheEU and RussianEuropean leaders. Commissioninfrastructure, which is likely to includehas the proposedJosé Caspian route to Manuel export its gas to Barroso, TheThe Caspian route,European which would require the Commissiontrans-Caspian pipeline. has the EU,Commission said the Commission. Russia has president, proposedconstruction of a new pipeline,a newwould enable company The CDC would bringto in privatebring sector opposedCommission the idea of a trans-Caspian pipeline, president, proposedthe EU to bypass Russia in ordera tonew access the companycompanies, but would tobe backed bring by the and wants to increase its imports of gas from resources of Kazakhstan and Turkmenistan, European Investment Bank, the EU’s funding Turkmenistansaid and Kazakhstan.Europe risked gaswhich fromlast month centralannounced it hadAsia arm. to Europe via Infrastructuresaid improvements: Europe risked gasdiscovered from one of the centralworld’s biggest gas AsiaIts aim willto be ultimately Europe to bring 60bn-120bn via ● connect“sleepwalking” Baltic states to gas and electricity into an thefields. Caspian Seacubic metres of gas… perCaspian year to the EU – networks“sleepwalking” of the EU into an theThe plan was launchedCaspian as a centrepiece of an equivalentSea to 12-25 …per Caspiancent of European ● developenergy southern corridor crisis. to supply gas “We have energy security plan that seeks to cut EU consumption today. from Caspianenergy and Middle Eastcrisis. to EU “We have Developmentmember states’ reliance on Russia. CorporationThe greatest obstacle to developing gas supply ● improve LNG terminals and storage DevelopmentThe strategic energy review comes Corporation at a routes from the Caspian such as Nabucco has capacityto address this urgently delicate time as the EU will on Friday try to been the excessive reliance they place on gas ● developto blueprint address for North Sea offshore this urgently restart talks with Russia over economic and from Azerbaijan, which may not be able to grid, to bring offshore wind energy to EU energy agreements that were cancelled in the deliver the ambitious production growth plans by increasing our energy wake of its invasion of Georgia in August. It it has set out, and is also being courted by ● closerby links increasing between EU and our energy also comes after steep rises in energy prices, Russia. Iran and Iraq both have very large Mediterranean for gas and solar networks …and whichinternal squabbling would over an EU climate… enableresources, but theare unlikely EU to becometo ● moreefficiency north-south links for centraland and reducing …package which that would force would member states …to significant enable gas exporters the for theEU foreseeable to eastern Europeanefficiency gas transport. and reducing …accessreduce greenhouse thegas emissions resources by 20 per future. of Kazakhstan our imports,” he said. …accesscent by 2020. the resourcesA pipeline of across Kazakhstan the -Caspian would change our imports,” he said. The EU’s strategic energy review also sets out the picture by opening up the resources of andplans forTurkmenistan, making buildings more energy whichTurkmenistan and last Kazakhstan. month andefficient, bolstering Turkmenistan, emergency oil stocks, and Gurbanguly which last Berdymukhammedov, month announcedconnecting electricity from Northit had Sea wind discoveredTurkmenistan’s president, one has ofbeen announcedfarms and Mediterranean solar it panels had to the discoveredresponsive to overtures onefrom western of European grid. companies and officials, and the country has Its aim will be ultimately theJosé Manuel world’s Barroso, Commission biggest president, gasbeen usingfields.. its increased negotiating power to Its aim will be ultimately thesaid Europe world’s risked “sleepwalking” biggest into an gasraise the fields.. price at which it sells its gas to energy crisis. “We have to address this Gazprom, Russia’s state-controlled gas to bring 60bn-120bn urgently by increasing our energy efficiency company. The price at which Gazprom to bring 60bn-120bn and reducing our imports,” he said. purchases gas from Turkmenistan is still well The proposals outline a network of pipelines below the price at which it sells gas to the EU, cubic metres of gas per …that would as carry a gas fromcentrepiece the Caspian region, however. of an energy cubic metres of gas per …including as the Nabuccoa project,centrepiece for a pipeline Mr Barroso of deniedan the energyCommission’s securitysecurityfrom eastern Turkey plan toplan Austria. proposals were aimed at Russia, which yearyear to to the the EU EU 17 © 2009 GUEU-White Stream Pipeline Company Limited, EU position at the recent Prague Summit

• The Southern Corridor ‘… comprises three key pipelines, all in "advanced stages" of planning, according to EU officials. These are Nabucco … White Stream and ITGI.’ • ‘Combined, all three could supply up to 10 percent of the total EU gas need by 2020, or some 60 bcm. But, as one official noted, the potential is higher.’ • ‘Officials in Brussels … underlined that the EU is giving the undertaking its full backing. The bloc will commit "whatever political, economic, or — if needed — financial support necessary," said one official.’ • ‘The three Southern Corridor pipelines, as well as the trans- Caspian link, would be purely commercial propositions, built and operated by private companies. The EU officials said securing finances for any of them would not be a problem, as long as supplies are guaranteed at profitable prices.’

— Ahto Lobjakas, ‘EU Seems To Be Getting Serious About Southern Energy,’ Radio Free Europe/ Radio Liberty, http://www.rferl.org/content/EU_Getting_Serious_About_Southern_Energy/1622033.html

Georgia is an essential and indispensable link for foreseeable future Supsa Kazakh The White Stream consortium has proven Sangachal experience from the Erzurum development of the first three East-West corridor Picture from CB&I John Brown Limited pipeline projects Ceyhan

The three success stories from the East-west corridor prove that market-transforming pipelines can be built

‡§ European Union: strong European Commission support § Estonia: active interest ‡: via TEN-E programme § Latvia: in diverse gas supply §: via Caspian-Black Sea- ‡§ Lithuania: Baltic Energy Transit Space alternatives ‡§ Poland: § Ukraine: public statement of support from Prime Minister ‡ Romania: Ministry of Economy and Finance § Georgia: statements of support from President

§ Azerbaijan: SOCAR (State Oil Company of Azerbaijan Republic) US: Government encourages White Stream development

- a project to deliver Caspian gas to the EU

Giorgi Vashakmadze Director – Corporate Development

13-14 May 2009 Energy Charter Secretariat Amsterdam Group on Trade and Transit

Project development by the White Stream consortium GUEU - White Stream Pipeline Company Ltd

Phases 1 2 3 4 Operation

1 Feasibility study, reaching Activities agreement with buyers and sellers

2 Detailed design, FEED, permitting, gas contract negotiation

3 Project financing, procurement, construction planning

4 Construct undersea pipelines, onshore pipelines, terminals, commissioning

Milestones Heads of Contracts & Financial Commis- Commercial Agreement design close sioning Operation 2010 2011 2012 2015 2016 >

ISSUE 613-614 / DECEMBER 15, 2008 p11 www.platts.com White Stream secures study funding

The European Commission is going for bust with gas from the Caspian, envisaging that it will need to present sellers with demand for more than just Nabucco if it is going to secure supplies that can compete with Russia. This needs a network of lines flowing west.

The European Commission’s Anything less than that The plan includes the White plan for Caspian gas amount, and it will be Stream pipeline which would procurement has grown, with difficult to persuade the carry gas from Georgia under up to four pipelines projected producing states of the the Black Sea to Romania and to carry some 60-120 billion advantages of selling to the possibly also to Ukraine for cubic meters/year to Europe, EU rather than Russia, onward shipment to Poland, from some as-yet-unknown according to industry and cutting across Russia’s date. EU sources. sphere of influence.

23May 2009 © 2009 GUEU-White Stream Pipeline Company Limited, All the pipelines that cross Georgia and eastern The head of the White Stream project company Development Agency agreed with Romania in Turkey though are at risk from aggression from Giorgi Vashakmadze said his company had been September to fund a study to provide an updated conflict between Russia and Georgia, and between trying to establish the notion of ‘big gas’ and a view on LNG feasibility. Kurds and Turks. diversified, effective corridor. Volumes of over “The technology used to cross the Black Sea is White Stream could carry anything from 8 to 32 100 Bcm/year from the region could make the EU not important – it should simply be the most cost- Bcm/year to Europe, with a later phase of the a preferred buyer in the region, and most effective solution,” he said. “However, some pipeline perhaps landing on Ukraine’s Crimean importantly help spur upstream investment, he believe a pipeline Peninsula – which many Russians view as their added. would build more confidence on the part of own territory – for delivery to Ukrainian and EU For the Caspian strategy to be successful, a receiving states.” Crossing Ukraine, whose markets, including Poland. trans-Caspian pipeline will be necessary to bring political turmoil is reflected in the battle with The European Commission awarded funding to gas from Turkmenistan and Kazakhstan, Russia over gas each year, would bring its own White Stream for a study in early December, an EU Vashakmadze said. But it is not worthwhile for risks. source told Platts December 9. The route that these countries to assume the risks associated White Stream will consist of a number of pipeline White Steam proposes is the “most valuable, cost- with a trans-Caspian project unless the volumes strings, each with capacity of 8-9 Bcm/year, like effective route for Caspian gas deliveries” from the are significant, he argued. This is particularly true Russia’s Blue Stream pipeline to Turkey. EU’s perspective, the source said. since other Caspian littoral states would object to Under the EU’s current conception, however, gas The EU’s continuing support for White Stream and a pipeline taking Turkmenistan’s gas across the from White Stream would be mixed with LNG the Georgia-Romania delivery route comes on the Caspian seabed. shipped through the Turkish straits to Constanta, heels of the EU’s Second Strategic Energy Review At the same time, Vashakmadze dismissed Romania. Together, the LNG and pipeline gas communication, released November 13, which potential objections to the line as “nonsense,” would supply a trunk gas pipeline introduced the idea of a Caspian Development because “there are already too many successful running parallel to the planned Pan-European Oil Corporation as a “block purchasing mechanism” for pipelines in the Caspian Sea, starting from the Pipeline from Constanta to Trieste, Italy, according Caspian gas. center and going to the shore in all directions.” to the EU source. The EU’s continuing support for White Stream and While Vashakmadze said White Stream has the Georgia-Romania delivery route comes on the Diversifying transport attracted the interest of industry majors, he heels of the EU’s Second Strategic Energy Review declined to name names, saying it will be up to the communication, released November 13, which Regarding White Stream itself, Vashakmadze companies themselves to decide when they wish introduced the idea of a Caspian Development said the project’s initial focus would be on to talk about the project. Two European gas Corporation diversifying transport routes. Although a pipeline majors, Gaz de France and E.ON Ruhrgas, have The CDC would aim to buy some 60-120 Bcm/year is seen as the preferred option, liquefied natural interests in Romania, for example, and both are from the Caspian region – enough to supply four absent from Nabucco. So far, there are no western pipelines, one of which would be White Stream, gas shipments across the Black Sea have also been considered. The US Trade and producers involved directly in Nabucco either. – according to the EU source. Ted Fisher

Blue Stream has already crossed the Black Sea

UKR RUS International and National laws define the rights and GEO ROM obligations BUL TUR Key legal issues: • Coastal states do not have the legal means to prevent construction and operation of White Stream • White Stream will be outside the 12 nautical miles of territorial waters • The LOSC (law of the Sea Convention) guarantees the right to lay pipelines in the Exclusive Economic Zone • The existence of Blue Stream is not a legal obstacle to White Stream – pipelines and cables are frequently crossed • White Stream will implement the EIA requirements