euractiv
Published: 10 December 2010 Updated: 13 December 2010
Progress on South-East Europe's gas interconnectors – small pipelines that will link the region to its more developed neighbours – is a promising sign that these countries will become less dependent on Russian imports, writes Dr. Theodoros Tsakiris, energy expert at the Hellenic Centre for European Studies (EKEM) and research associate for 'The Athens Working Group: Transforming the Balkans'.
This commentary was sent exclusively to EurActiv by the Hellenic Centre for European Studies (EKEM).
''Progress on South-East Europe's gas interconnectors, small pipelines that will link the region with the infrastructure of its developed neighbours, is a promising sign that these countries will become less dependent on Russian imports.
These developments should come to fruition in a much shorter time than what has been promised to them by the three large gas pipeline projects (ITGI, Trans-Adriatic and Nabucco), which are vying for control of Azerbaijan's Shah Deniz II field.
Bulgarian Energy Minister Traicho Traikov told an international energy conference held in Sofia on 30 November that Greece's DEPA, Italy's Edison and Bulgaria's B.E.H. have finally signed a comprehensive agreement regarding the realisation of the 3-4.5 bcm/year capacity IGB project (Interconnector Greece Bulgaria). DEPA and Edison will control, in the form of the IGI Poseidon JVC, 50% of the IGB line. BEH will own the remaining 50%.
'This is an important step forward toward the actual diversification of gas supplies for Bulgaria,' Traikov said. 'We expect that the first amounts of gas will flow in the interconnection pipe [by] early 2013.'
IGB will link over a distance of 170km the Greek city of Komotini with Bulgaria's Natural Gas Transmission System (NGTS) and is expected to cost around EUR 160 million, of which EUR 45 million have been earmarked as grant assistance by the European Energy Programme for Recovery.
The Comprehensive Agreement between IGI Poseidon and BEH includes the Project's Development Agreement, the Shareholders Agreement, while the two sides agreed to speed up the necessary processes for the establishment of a commercial subsidiary of the JVC that will control the pipeline's (Third Party Access) TPA-exempted capacity. BEH and DEPA are expected to control 35% of the commercial JVC while Edison will control 30%.
There has been no decision on the percentage of gas volume that IGB shareholders will ask to be exempted from the EU's Third Party Access regulation, but it is likely to be something in the order of 50-70% of its final throughput capacity.
Greek Deputy Energy Minister Yannis Maniatis, who met with Traikov after the signing ceremony, noted that the IGB 'will contribute to the emergence of our country into a regional gas hub that will diversify the region's natural gas sources and routes. This will on the one hand increase the strategic importance of the wider ITGI project and Greece's geostrategic role and contribution to the security of energy supply in the greater region of South East Europe'.
Traikov also said that Bulgaria was now ready to sign a Road Map - equivalent to the one it signed with Greece on IGB (July 2010) and with Russia on South Stream (November 2010) - which will spearhead the construction of the IBR (Interconnector Bulgaria Romania) project.
The IBR will extend for less than 24km and will connect the two national gas systems by crossing the Danube River from Russe in Bulgaria to Giurgiu in Romania. It is estimated to cost around EUR 30 million, of which EUR 8.9 million have been earmarked by the European Energy Programme for Recovery.
Traikov said that Bulgartransgaz, Bulgaria's state-owned Transmission System Operator (TSO), will invest another EUR 11 million in order to complete the project by 2011. Its initial capacity is estimated at 1.5 bcm/y, even though it is expected to increase to 3bcm/y, and eventually 4.5 bcm/y, so as to reach the same throughput capacity level with its two 'neighbouring' interconnectors, IGB and IRH.
One should also include Serbia, which could also get non-Russian gas through the prospective Interconnector Bulgaria-Serbia that is estimated to become operational by 2014 and is also financially supported by the European Commission.
IRH (Interconnector Romania-Hungary) was commissioned on 14 October 2010 and, despite the fact that it is operating in one direction, from Hungary to Romania, it is expected to be equipped for bi-directional use when the Romanian side takes the necessary technical measures. It has a maximum transit capacity of 4.5 bcm/y. It was jointly built by Hungarian [state oil and gas company] MOL's gas transmission unit FGSZ and Romanian system operator Transgaz.
It extends for 109 kilometres (km) – 62km on Romanian and 47km on Hungarian territory – and has been 50% financed with a EUR 68 million grant from the European Energy Programme for Recovery.
On 29 November, Hungary's state oil and gas company, MOL, signed a long-term 'soft-loan' agreement with the European Investment Bank that would help MOL foot most of the bill for the construction of another bi-flow interconnector pipeline between Hungary and Croatia that will link the two NGTS (National Gas Transmission Systems) over a distance of 294 km (88 km in Croatia and 206 km in Hungary).
The EUR 150 million EIB [European Investment Bank] loan will be used to finance the construction of the Hungarian part of the pipeline from the central Hungarian town of Varosfold to the Hungarian-Croatian border. ICH is expected to have an initial transportation capacity of 6.5 bcm/y so as to also accommodate the increased volumes of the future Adria LNG (10-15 bcm/y capacity) terminal that is currently being constructed on the island of Krk.
Adria LNG is controlled by some of the largest EU gas companies, like Austria's OMV, Germany's E.ON and France's Total, while Croatia's Natural Gas Transmission Company Plinarco owns just 1% of the Krk/Adria LNG consortium, which is expected to become operational 'not before 2017', according to the company's website.
In the meantime it is quite unclear where Hungary or Croatia would find enough gas to commercially operate the line before Adria LNG becomes operational. The ICH will most likely be used as an emergency crisis-management interconnector in case supplies from Russia are severed once more, as happened during the January 2009 gas crisis.
This is not necessarily the case with the Eastern Balkan interconnectors, thanks to the 3.6 bcm/y capacity Greek-Turkish gas pipeline or ITG, which has been operating since November 2007 and is currently covering around 20% of Greek final demand.
Through the ITG/IGB system Bulgaria expects to secure relatively prompt access to supplies of gas from Azerbaijan via the ITG pipeline. Bulgaria signed a memorandum of understanding (MOU) in late 2008 with Azerbaijan's Socar for the import of one bcm/y of gas, which has yet to materialise.
As a result, most regional states are aggressively attempting to secure Arab LNG supplies from North Africa and Qatar. During the first half of 2009 Bulgaria signed separate MOUs with Egypt and Qatar for gas that could be supplied via the Greek LNG terminal in Revythousa.
Greece had also discussed the prospect of massive Qatari LNG imports to a new LNG terminal that would be constructed in the southwestern part of Greece, near the port city of Astakos, but the project was sunk on 20 October 2010, when the consortium decided to 'abandon ship' due to the lack of commercial interest from Italy, which would have accounted for more than 70% of the terminal's LNG exports.
Bulgaria's Prime Minister Boyko Borissov, has claimed that his government will be unable to fulfil its financial obligations of EUR 2 bn vis-à-vis its Nabucco partners, if the European Commission does not grant Sofia an exemption in book-keeping rules that would somehow exclude Nabucco from Bulgaria's national budget, and in particular from its inclusion in the calculation of the budget deficit.
'I will not halt the project, but we all must understand it would lead us to an over deficit,' Borissov noted. Borissov's position should not come as a surprise. Regional states do not have to gain as much as north and central European gas consumers from the construction of the three competing natural gas mega projects, namely Nabucco, ITGI and Trans-Adriatic.
These projects, of which only one can be built by 2016, depending on who wins the ongoing Shah Deniz II tender, are too costly to bear for the crisis-hit economies of Southeast Europe. IMF-sustained Bulgaria and Romania would have to pay around $1.3 billion each for their share of Nabucco in order to get approximately the same volumes of gas they could get from the intra-regional interconnectors.
On the other hand, these aforementioned interconnectors can become commercially operational with Arab LNG imports as early as 2013 and constitute the cheapest, fastest and most geopolitically risk-free means of limiting the region's dependence on Russian gas imports, which still satisfies more than two-thirds of Greek demand, and almost all demand in Bulgaria, Serbia and the former Yugoslav Republic of Macedonia.
So energy diversification is within the region's reach if it can follow through on the gas interconnectors built, above all else, on the principle of a 'win-win' mentality.''
read more: euractiv
