WHITE STREAM: ADDITIONAL OUTLET PROPOSED FOR CASPIAN GAS TO EUROPE

White Stream, a project to transport Caspian gas via Georgia and the seabed of the Black Sea to Europe, was presented during the summit-level Energy Security Conference in Vilnius on October 10-11. This pipeline project could encourage investments in Caspian gas field development by diversifying export options and transport routes directly to European Union territory. The availability of more directions and capacity could advance the timeline for Caspian gas resources coming on stream.

The proposed pipeline would branch off from the Baku-Tbilisi-Erzurum main pipeline, once the second and third phases of field development are reached at Azerbaijan’s Shah-Deniz field. The availability of the White Stream transit option should encourage the acceleration and expansion of production at Shah-Deniz as well as other offshore Azerbaijani fields (such as the deep-layer Azeri-Chirag-Guneshli gas fields). With an additional option such as White Stream reducing overall transportation risks, investors can move faster and commit to higher production targets for EU markets.

Initially named GUEU (Georgia-Ukraine-European Union), this project envisaged a seabed pipeline from Georgia to Crimea, with options to continue toward EU territory either through Ukraine’s gas transit system or, alternatively, from the Crimea to Romania’s Black Sea coast, entering EU territory there. At present, however, GUEU-White Stream project developers are also envisaging a direct route from Georgia to Romania on the seabed.

Recent positive developments on the Nabucco project and dialogue with Turkmenistan reopen prospects for trans-Caspian deliveries of Turkmen gas and involvement of Western companies in exploring and developing Central Asian gas fields. Once Turkmen gas crosses the Caspian and reaches the South Caucasus, White Stream would open one more outlet to Europe, in addition to the southern loop through Turkey. Thus, the availability of White Stream would help enhance confidence of potential Western investors in Turkmenistan and create incentives for that government to partner with the West.

The London-based GUEU-White Stream Pipeline Company is in charge of the project. Deep-water pipelines such as White Stream are constructed in a stage-by-stage process involving limited throughput capacities in each successive stage. Planned to be built with state-of-the-art technology, White Stream is projected to carry 8 billion cubic meters of gas annually in each of its strings.

With more than one trillion cubic meters in just commercial reserves at Shah Deniz, Azerbaijan has ample potential to support the existing Baku-Tbilisi-Erzurum pipeline (BTE) and its planned continuations — Turkey-Greece-Italy and first stage of Nabucco — as well as the first string of White Stream. Thus, White Stream does not compete with BTE or Nabucco for upstream resources in the first stages of these projects. In their second phases, the availability of all these pipeline outlets to Europe should attract major volumes of Central Asian gas.

Projected to have a diameter of 42 inches for the overland sections and 24 inches for the seabed sections, the White Stream pipeline would branch off from BTE west of Borjomi and run approximately 100 kilometers to Georgia’s Black Sea coast in the general area of Supsa. From there, two versions are possible, both involving ultra-deep levels across the seabed.

One version would run 650 kilometers to Ukraine’s Crimean shore near Feodosiya; cross the Crimea from east to west for 250 kilometers, with a possible connection to Ukraine’s mainland pipeline system; and continue on the seabed to the Romanian coast for 300 kilometers in shallow waters. The other version envisages laying a seabed pipeline from near Supsa in Georgia, running 1,100 kilometers to a point near Constanta in Romania. This long version may require construction of an intermediate floating compressor station in the open sea.

The highly challenging seabed construction will benefit from the experience gained in laying the Blue Stream gas pipeline from Russia to Turkey on the seabed of the Black Sea. A technological feat of Italy’s ENI and Saipem, that line runs in ultra-deep waters reaching 2,200 meters below the surface in some places — the world’s deepest-running pipeline. White Stream would run at similar depths as Blue Stream. Some of the engineers who worked on Blue Stream are said to be involved in the White Stream project. White Stream intends to use a J-lay barge of the same type as that used by Blue Stream, which was key to that technological accomplishment.

The White Stream pipeline would intersect with Blue Stream on the seabed. The project envisages lifting the White Stream line by an overpass bridge to be built at the point of intersection.

The project has an attractive range of market options, once EU territory is reached. Countries in central-eastern Europe are keen to diversify their supplies away from overdependence on Russian gas. If White Stream is to use Ukraine’s transit system for that purpose, it would require the adoption of European standards of operation and management. Ukraine’s potential membership in the EU-led Energy Community can open that prospect. In that case, White Stream could use the Ukrainian transportation network’s spare capacity to deliver Caspian gas to Poland and farther afield. Ukrainian transit pipelines have some unused capacity already now and will have even more spare capacity if and when Russia switches some export volumes to other pipeline routes.

Investment for White Stream’s first phase is estimated to be in the range of $2.5 to $3.5 billion — depending on the route version chosen — based on an annual throughput capacity of 8 billion cubic meters of gas, over a five-year period from the start of implementation. The second phase would add another 8 billion cubic meters of gas annually, either again from Azerbaijan or from the eastern Caspian shore. That expansion would require a parallel 24-inch diameter pipeline on the seabed of the Black Sea. The third phase expects another 16 billion cubic meters of eastern Caspian gas. In that relatively optimistic eventuality, White Stream could carry a total 32 billion cubic meters of Caspian gas annually to European countries.

The White Stream project can provide a politically safe, shortest-route supplemental outlet for Caspian gas, adding an incentive for construction of trans-Caspian pipeline links and Western investments in Turkmenistan. White Stream’s planned second- and third-phase schedules are calculated to advance the time for more ambitious involvement in gas extraction in Turkmenistan by Western companies.

(White Stream documentation, October 2007)