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Ankara, August 6 (Interfax) - Russian Prime Minister Vladimir Putin and his Turkish counterpart Recep Erdogan signed a number of key agreements in the energy sector in Ankara on Thursday. Foremost among them was an agreement to boost gas deliveries along the so-called western route, involving both Blue Stream-2 and South Stream. Deals were also signed between hydrocarbons majors Rosneft and Gazprom and their Turkish peers, and in the nuclear sector, including a deal on building Turkey's first nuclear power plant, which a Russian-Turkish consortium is prepared to build dependent on the outcome of a tender.

South Stream

Putin and Erdogan signed a protocol on cooperation in the gas sphere under which Ankara gave preliminary consent to build the South Stream gas pipeline and Russia will be allowed to carry out survey work for the pipeline in Turkey's territorial waters.

The protocol also states the two countries' intent to prolong a contract on supplies of Russian gas through Ukraine, Moldova, Romania and Bulgaria, which expires in 2011.

Russia and Turkey agreed to boost gas deliveries on the so-called western route, r Putin said.

The gas deliveries are covered by a contract signed in 1986 that expires in 2011.

"It is subject to an extension and an increase in the volumes of gas delivered," Putin said.

Putin said South Stream is important for the energy security of Europe as a whole. "We have reached agreements on major joint projects with Turkey and Italy. The project deserves attention in view of growing volumes of production in Russia," he said.

"We discussed in practical terms development prospects for economic cooperation, Projects such as Blue Stream 2 and South Stream play a key role in it," Putin said after the talks.

The signing comes shortly after the European Union and five transit countries, including Turkey, signed an agreement on the rival Nabucco gas pipeline project, which transport Central Asian and Caspian gas westward to Europe.

Competition between the South Stream and Nabucco gas pipeline projects is more intense than the competition between two oil pipeline projects, Samsun-Ceyhan and Burgas-Alexandroupolis, Putin said Ankara.

"South Stream and Nabucco are in competition. The competition between them is more intense than between Samsun-Ceyhan and Burgas-Alexandroupolis. Even construction of South Stream won't shut out Nabucco. Our number one priority is South Stream," Putin said.

Putin said the two sides had reached agreement "on everything."

"The talks were difficult and even complicated. Our Turkish friends - and one of them is standing next to me - are formidable negotiators. But we found solutions and compromises on all issues," Putin said.

Erdogan said the two gas pipeline projects are not in competition, but rather a broadening of options.

No one should refuse to invest in implementation of the projects, he said, adding that specialists are well aware of the resources available for the projects.

Turkey has given "the necessary consent" concerning the South Stream project, Erdogan said.

There is no reason to postpone South Stream, the project to build a gas pipeline across the Black Sea from Russia to Southern Europe, Russian Energy Minister Sergei Shmatko said.

"I don't see any reason for postponing project implementation. I estimate that possibility to be minimal," Shmatko told journalists in Ankara ahead of the ceremony.

Shmatko acknowledged there might be serious technical challenges to construction of South Stream "of which we are not aware."

Shmatko also said the possibility is being discussed of Turkey taking a more active role in the South Stream project than initially envisioned.

"However, it will only be possible to talk about something specific after the feasibility study has been made," he said.

"The possibility of Turkey participating in one way or another was discussed. I believe that a rather detailed feasibility study taking into account surveys carried out earlier should be prepared for the discussion of such things, after which the discussion could likely be continued," he said.

In mid-May Gazprom CEO Alexei Miller and Eni CEO Paolo Scaroni signed the second supplement to their memorandum of understanding on further steps in the South Stream project. It provided for boosting capacity on the pipeline to 63 billion cubic meters (bcm) a year from 31 bcm previously. Gazprom estimates the project will cost 8.6 billion euro. The pipeline might enter service as early as late 2015. South Stream is expected to pass through the Turkish sector of the Black Sea.

South Stream's main goal is to bypass Ukraine, which has been an instable transit country. It will run along the Black Sea shore of Russia to Bulgaria or Romania and then on to southern Italy and Austria. The new gas pipeline system is to have capacity to carry 63 billion cubic meters per year. The cost of the project is estimated at 8.6 billion euro.

Blue Stream-2

In addition, the document notes plans for cooperation in the realization of the Blue Stream-2 gas pipeline project.

Putin also said that Russia and Turkey had agreed on the realization of the Blue Stream-2 project. "We have begun studying opportunities related to the upcoming construction of the Blue Stream branch - Blue Stream-2 – with subsequent gas exports to third countries via Turkey," he said.

The Blue Stream-2 project envisions Russian gas being supplied to such countries as Cyprus, Israel, Lebanon and Syria, he said. "Thus, Turkey will become an extremely large transit state in this region," he said.

Gazprom built the Blue Stream gas pipeline along the bottom of the Black Sea in 2001-2002 in a partnership with Italy's Eni.

Blue Stream-2 will run parallel to the existing Blue Stream pipeline, extending through the Middle East to Israel. Gazprom plans to hold talks on project implementation with Turkey and Israel in the near future.

Gazprom and Turkey are discussing the possibility of the joint marketing of gas from the Blue Stream-2 pipeline, Shmatko told journalists.

Marketing of gas from this project will likely be carried out in countries where Turkey "has interests," he said.

Gas deliveries between the two countries are currently covered by a contract signed in 1986 that expires in 2011.

"It is subject to an extension and an increase in the volumes of gas delivered," Putin said.

Russia supplies gas to Turkey via two routes - through Ukraine and along the Blue Stream pipeline. Russia delivered 10.5 billion cubic meters (bcm) of gas to Turkey via Blue Stream in 2008 and 14 bcm via Ukraine.

Gazprom is prepared to increase gas supplies along the Blue Stream pipeline to 14 bcm per year starting in 2009. The Blue Stream pipeline has projected carrying capacity of 16 bcm per year.

Erdogan called Russia "the number one partner for Turkey." Trade between the two nations has reached an annual volume of $40 billion.  Erdogan said cooperation with Russia in the energy industry is of strategic importance to Turkey and that the two countries are determined to maintain their relations in the oil, gas and electricity industries.

He praised a protocol that enables Turkey to import natural gas from Russia and said the protocol would be successor to a gas trade contract between the two countries that expires in 2012.

Hydrocarbons majors

Russian hydrocarbons majors Rosneft and Gazprom also penned deals in the Turkish capital.

Turkey's Aksa Energy is forming joint ventures with Russian gas giant Gazprom and oil producer Rosneft, an Aksa representative told reporters.

The joint venture with Gazprom Export LLC, a Gazprom subsidiary, will sell gas in Turkey and the joint venture with Rosneft will build combined heat and power plants in Turkey and other countries.

Ownership of the JV will be 50-50. The top job will go to a representative from Aksa, which owns gas and electricity distribution networks in Turkey.

The JV will begin operation immediately. It plans to sell 15 million cubic meters of gas on the Turkish market in 2010.

Aksa has 15 combined heat and power plants in Turkey, Iraq and Cyprus. Aksa officials said there has been no decision on where to build the new stations with Rosneft.

In addition, Putin said an agreement had been reached on the construction of large underground gas storage facilities in Turkey. "Setting up such reserves, of course, will contribute to stability in the energy sphere for the growing needs of the region," he said.

Samsun-Ceyhan

Putin and Erdogan also signed a protocol on cooperation in the oil sphere.

The protocol envisions the creation of working group to study the feasibility of building the Samsun-Ceyhan oil pipeline.

Specifically, the working group will study the resource base for filling the Baku-Ceyhan pipeline and the transportation parameters of the project.

"A working group will be set up in the near future that will start studying all the issues related to the realization of this project. The first conclusion it should make is a feasibility study, based on which conclusions will be reached about the [pipeline's] resource base and other issues necessary for the successful realization of the project," Shmatko said.

Shmatko said he had recently spoken with Scaroni, who "believes that U.S. companies working in the Caspian region will be the first clients for future transit via the Samsun-Ceyhan pipeline."

Putin spoke highly of the Samsun to Ceyhan project, saying it would make it possible to carry less oil through the Bosporus and Dardanelles straits with their intensive ship traffic.

The participants in the Samsun-Ceyhan pipeline are not currently considering bringing in any other partners to the project, Nikolai Tokarev, president of pipeline operator Transneft, told journalists.

"We aren't considering this for now, but there is a likelihood. The economic parameters [of the project] need to be determined first," he said.

At present, some 110 million tonnes of oil and 40 million tonnes of petroleum products are being transported through the Bosporus and Dardanelles straits per year. "This is a colossal amount. This is too much," he said.

The working group that will study the resource base for the Samsun-Ceyhan pipeline will include representatives of Transneft, Rosneft and Gazprom Neft in addition to Deputy Energy Minister Sergei Kudryashov. It will also include representatives from Turkish and Italian companies. Besides analyzing the pipeline's resource base, the working group will be tasked with determining the economic parameters of the project and calculating the volume of transported oil.

Italy's Eni S.p.A. launched construction on the Samsun-Ceyhan pipeline, which will transport oil from Turkey to the European market, in late April 2009. The 555-kilometer pipeline will have capacity to carry 1.5 million barrels per day.

The Samsun-Ceyhan pipeline will run from the Black Sea port of Samsun to the Mediterranean port of Ceyhan. It will make it possible to bypass the Bosphorus Strait and the Dardanelles Strait on the Black Sea in transporting oil. Tanker movement in the straits has been made complicated by restricted thoroughfare in addition to environmental problems.

TNK-BP had expressed interest in the Samsun-Ceyhan project in 2005-2006, when it was still in the stage of discussions and drafting. Eni also proposed that Gazprom take part in the project.

Burgas-Alexandropoulis

Russia, however, came up with its own project to bypass the Bosporus and Dardanelles straits - the Burgas-Alexandroupolis pipeline, which would allow for tankers to transport Russian and Caspian Sea oil from Black Sea ports to the port of Burgas in Bulgaria and then on to Alexandropoulos in Greece via the pipeline. The Burgas-Alexandroupolis pipeline is to have carrying capacity of 35 million tonnes in its initial stages and will eventually be able to carry up to 50 million tonnes of oil. Russia has a 51% stake in the project, Bulgaria - 24.5% and Greece - 24.5%.

Russia's involvement in Turkey's plans to build the Samsun-Ceyhan oil pipeline does not mean that Moscow is scrapping plans to take part in the construction of the Burgas-Alexandroupolis oil pipeline, Tokarev said. "These are two different projects. Everything's going as planned," he said.  Commenting on the Burgas-Alexandroupolis project, Tokarev said that "everything is proceeding on schedule. All the structures are working: financial consultants and legal consultants."

"The actual realization [of the project] should begin in summer 2010," he said.

Tokarev said Russia is concerned about recent statements by Bulgarian officials regarding that country's participation in the Burgas-Alexandroupolis pipeline as well as the construction of a nuclear power plant in the city of Belene. Moscow has already sent Sofia inquiries on this issue, he said.

Bulgarian Finance Minister Simeon Djankov told the Finance Times in an interview in late July that Bulgaria could review its participation in the construction of the Burgas-Alexandroupolis pipeline.

Bulgaria announced in late July that, in addition to concerns about the Burgas-Alexandroupolis pipeline, it would also consider mothballing the construction of the Belene nuclear power plant. "During crises, we do things that we wouldn't do in another situation. We don't have the financial resources to complete these projects," Djankov told the Financial Times.

Recently appointed Bulgarian Economics, Energy and Tourism Minister Traicho Traikov told local media that the ministry was planning to only review large energy projects. The list of such projects includes, the Belene plant, the South Stream gas pipeline and the Burgas-Alexandroupolis pipeline, he said.

Bulgarian Prime Minister Boyko Borisov in July called on his country to suspend talks on all large energy projects, including South Stream and Belene, before he had assumed his new post.

Nuclear

Russia and Turkey also signed an agreement on cooperation in nuclear energy.

The head of the Rosatom state corporation, Sergei Kiriyenko, signed for the Russian side and the acting head of Turkey's atomic energy agency, Zafer Alper, signed for Turkey.

They also signed an agreement on timely notification in the event of a nuclear accident and on information exchanges concerning nuclear facilities.

The intergovernmental agreement on cooperation in nuclear energy is a framework document that will provide the legal basis for implementing joint projects. The document covers a wide range of potential areas of cooperation, including scientific research, construction and operation of nuclear facilities, delivery of nuclear materials, provision of services over the entire nuclear fuel cycle and exploration and development of uranium deposits. The agreement is for 10 years with automatic extension.

The Turkish leadership made the decision in 2007 to diversify its electricity sector and develop nuclear generation. It plans to build a nuclear power plant at the Akkuyu site in Antalya and the Synop site on the Black Sea coast.

Russia and Turkey signed a protocol on cooperation in the nuclear sphere than envisions the construction of Turkey's first nuclear power plant  The document stipulates the amount work that Turkish construction companies will have to carry out and also provides for a tied preferential loan to Turkey to build the plant.

Turkey plans to build four NPP blocks each with 1.2 gigawatts along the Mediterranean coast 200 kilometers from Antalya. Turkish authorities are ready to guarantee investors electricity output for 15 years on purchase of total capacity. The winner of the tender will construct the NPP while an investor will later operate the plant. The only contenders for the project are Russia's CJSC Atomstroyexport (subcontractor) and OJSC Inter RAO UES (investor), as well as Turkey's Park Teknik.

The Turkish government guarantees purchase of electricity from the nuclear plant at a fixed price for 15 years, but not past 2030.

The key issue is the cost of electricity produced by the future plant. Initial proposals by a Russian-Turkish consortium envisioned a price of 21.13 cents per kilowatt-hour, although this figure was adjusted to 15.33 cents later.

The consortium believes the first block of the nuclear plant might be brought into service in 2016 and subsequent blocks would enter service in 2017, 2018 and 2019.

Gas-fueled Combined Heat and Power Plants (CHP) currently provide Turkey 50% of its electricity while coal and hydroelectric generation provide 25%. The state has made a priority of diversifying the country's fuel-power balance and lowering gas dependency partially through nuclear power. Turkey plans the construction of three NPPs by 2013.

In March 2008 a tender was announced on construction of the nation's first nuclear power plant at the Akkuyu site on a build-own-operate (BOO) basis. That is, the builder will receive ownership of the plant. The only contender after two rounds of the tender are a consortium of Russian Inter RAO UES and Atomstroyexport and Turkish Park Teknik. It would be the first time a builder wins a BOO contract for a nuclear facility in a foreign country.

A Russian-Turkish consortium will be ready to launch construction soon, if it wins a tender to build the first Turkish nuclear power plant, Putin said. "Concerning the peaceful uses of nuclear energy, a Russian-Turkish consortium's victory in a tender to build Turkey's first nuclear power plant is opening up vast opportunities for our two countries. Both parties are apparently interested in the project, and they plan to negotiate the details soon and launch the construction," he said.

"Mr. Erdogan today set forth requirements to the implementation of this project. We have taken note of them. During today's consultations we found it possible to agree with many of the positions laid down by the Turkish side. We will work thoroughly on them in compliance with the document signed today," Putin said.

"This involves the work to specify the cost of construction and the price for electricity [the Turkish government is ready to guarantee to the investor the purchase of the nuclear power plant's electricity at a fixed price for 15 years."

"An additional analysis is required to make the project cost effective," the Russian prime minister said. "In cost per kilowatt terms, the Russian bid is comparable with the cost of projects to build hydro power plants. "This is unprecedented, because nuclear power plants always cost more than hydro power plants," he said.

In the United States the construction of a nuclear power plant is about two times more expensive, Putin also said. He cited Westinghouse's nuclear power plant project in Florida as an example.

Fertilizer

Russian fertilizer producer Acron intends to bring Turkey's Ost Olgun into its Olenii Ruchei project in Russia, Acron's board chairman, Alexander Popov, told reporters in Ankara.

Popov said Acron intended to increase mineral fertilizer sales to Turkey, and to involve Turkish partners in its upstream projects, notably Olenii Ruchei.

He told Interfax that a protocol signed on Thursday envisions the possibility of the Turkish company acquiring a blocking stake in the project.

Commenting on the amount of financing from Turkey, Popov said, "The more, the better."

Acron won a tender for the license to the field, which contains an estimated 392 million tonnes of apatite-nepheline ore, in October 2006. The company intends to invest $500 million in the project.

Production should start in 2011. The mine should be producing at least 1.9 million tonnes of apatite concentrate and 1.8 million tonnes of nepheline concentrate from 6 million tonnes of ore per year within ten years.