Greek Business File, January-February-March 2020, No 124

By Kerin HOPE


The South Balkans energy hub

South Balkans region is transformed into an energy hub of Europe a the dedtriment of Ukraine’s role. The critical final phase is the construction of the floating LNG terminal south of Alexandroupolis.

Russian gas has begun to bypass Ukraine in favour of Turkey, the Balkans and central Europe thanks to Turkstream, a new Euro11.5bn pipeline project built by Gazprom, the Kremlin-controlled gas exporter, and the Turkish state energy group Botas.

Turkstream 1 began shipping Russian natural gas across the Black Sea to western Turkey in early January. A separate, parallel pipeline nearing completion, TurkStream 2, will bring gas across Bulgaria to Serbia and Hungary starting in May.

Meanwhile, Bulgaria, has decided to diversify its own gas sources: Bulgartransgaz, a state-owned gas supplier, has agreed to acquire 20 per cent of a new floating LNG terminal off Alexandroupolis in the northern Aegean, to be built by Greece’s Copelouzos group.

Turkstream also poses a challenge to Europe’s ambitious Southern Gas Corridor project, which will reduce the EU’s reliance on Russia for energy supplies by bringing gas from the Caspian Sea through Azerbaijan, Georgia, Turkey, Greece, Albania and Italy. Like the Nordstream 2 pipeline in the Baltic, which is already affected by US sanctions, Turkstream 2 faces opposition from Washington as a potential future threat to Europe’s energy security.

A consortium formed by Arkad of Saudi Arabia and ABB, the Swiss engineering group, which was contracted by Sofia to build the 474km pipeline crossing Bulgaria, and two Bulgarian companies that are each supplying a compressor station, could also face US sanctions according to energy industry analysts, though no details have so far been announced.

Bulgartransgaz, part of Bulgaria’s cash-strapped state energy group, is heavily invested in the new pipeline, having raised Euro200m last year in short-term loans from US, Italian and Russian banks to help finance construction of the Euro1.1bn project within Gazprom’s tight deadline.

Shrink Ukraine’s role

Turkstream 2, with annual capacity of 15.75bn cubic metres of natural gas, equal to Turkstream 1, would provide long-term supplies to Serbia and Hungary, Russia’s closest allies in the Balkans and central Europe. Together with Nordstream 2, it would drastically shrink Ukraine’s role as the main  route to western Europe for Russian gas, with damaging consequences for the country’s economy through the loss of billions of dollars in transit fees.

The Turkstream 2 project has revived Bulgaria’s hopes of becoming a gas hub for southeast Europe following the collapse in 2014 of Southstream, a project to ship Russian gas across the Black Sea to the Bulgarian port of Varna for distribution to Turkey, Romania and the Balkans. Southstream fell through because of Russian reluctance to open up the Bulgarian section of the pipeline to other gas suppliers in line with EU regulations.

Gazprom, which is currently Bulgaria’s sole gas supplier, is expected to face a similar demand from the EU to cut Turkstream’s long-term transit capacity by up to 50 per cent to give international gas suppliers an opportunity to compete in a diversified market.

Gas from Caspian

The EU-backed 880km Trans Adriatic Pipeline, which is due to launch operations this year, will have capacity to bring 10bcm annually of Caspian Sea gas across Greece, the west Balkans and Italy, rising eventually to 15bcm. TAP is the third leg of a 3,500km corridor linked with Azerbaijan through Turkey’s Trans Anatolia (TANAP) pipeline and the South Caucasus pipeline through Georgia.

European institutions, including the EIB and EBRD, have invested in the Euro4.5bn TAP project alongside more than 15 commercial banks, and the export credit agencies of France, Germany and Italy. Shareholders in the project are Socar, the Azeri state energy group and several major European energy companies: BP, Energas, Snam, Fluxys and Axpo.

TAP’s construction proved a catalyst for Greece and Bulgaria to sign a long-delayed deal backed by the EU to build a 180km cross-border pipeline (of which just 30km is in Greece) linking their respective national gas networks. Work started last year on the Euro240m Greece Bulgaria Interconnector (ICGB) which will link Komotini with Stara Zagora in Bulgaria. It will also be linked directly with TAP with a view to supplying Azeri gas to the Bulgarian gas network.

With an initial capacity of 3bcm annually, rising to 5bcm depending on demand, the ICBG will have a reverse flow capacity, opening up the possibility for two-way gas exchanges. Under EU competition rules, at least 60 per cent of its capacity will be open to competitors of Depa and BEH that want to sell gas into the Greek and Bulgarian markets.

Shareholders in ICGB are Bulgaria Energy Holding, the state energy sector holding company and IGI Poseidon, a joint venture between Greece’s state-controlled DEPA energy group and Edison of Italy. The EIB is providing a Euro110m loan for the project, on top of a Euro45m grant from an EU energy programme.

South Balkans energy hub


Construction of the floating LNG (liquefied natural gas) terminal south of Alexandroupolis, close to Komotini and to Greece’s northern land border with Turkey, marks the critical final phase of in establishing a south Balkans energy hub. Gastrade, a private Greek utility controlled by the Copelouzos group, launched the project with US backing, although initial hopes of attracting a big US oil company as an investor failed to materialize.

Current shareholders, each with 20 per cent, are Gastrade; Gaslog, an LNG shipping company controlled by Peter Livanos, a Greek shipowner; Depa and Bulgartransgaz. According to analysts, Romgaz, the Romanian state-owned gas utility, is interested in acquiring the remaining 20 per cent.

Potential bidders for the Euro380m project were due to submit expressions of interest by January 31. The terminal’s floating storage and regasification unit, with capacity to store 5.5bcm annually, would be permanently moored 5km offshore. A pipeline would connect the terminal with the national gas network.

Gastrade plans to award the construction contract by June this year. The terminal would start operating in the second quarter of 2021.

Meanwhile, a non-binding market test late last year produced bids for more than 12bcm with 20 gas trading companies tendering to buy capacity. The message from the test indicated that traders were confident that gas from the global market delivered at Alexandroupolis would be able to compete with Gazprom prices in central Europe.