by Kerin Hope

Greece will help Bulgaria, its EU partner and Balkan neighbour, maintain access to supplies of natural gas after Russia cut off deliveries to Sofia in April. A much-delayed new gas pipeline linking the two countries across Rhodope mountains in Thrace will now be completed in June as part of a broader EU-backed scheme to establish a southeast European gas hub serving the Balkan region.

Gas from Azerbaijan is due to start flowing in July through the Inter-connector Greece-Bulgaria (IGB) linking Alexandroupolis in Thrace with Stara Zagora, a gas pipeline hub in central Bulgaria.

The war in Ukraine has accelerated completion of a joint venture launched a decade ago by the state-controlled companies DEPA of Greece and Bulgargaz. The Euro160m project, which would break Gazprom’s near-monopoly in Bulgaria, an EU and NATO member, made slow progress earlier because of political pressure from Moscow.

The IGB took on new significance when Bulgaria’s new pro-western government refused to accept Gazprom’s demand for payment in roubles on grounds of breach of contract. On April 27th, Russia cut off deliveries to Bulgaria through the Turkstream II pipeline, which sends Russian gas across the Black Sea to Turkey, Bulgaria and Greece. Bulgaria relied on Gazprom for more than 90 percent of its annual 3bn cubic-metre gas requirement.

Greece has stepped in to fill the gap, pledging to pump gas to Bulgaria both through the IGB and through the existing DESFA (the Greek National Natural Gas System) pipeline network, using a reverse flow system.

Map of the pipeline network that brings Russian natural gas to Greece, source: National Natural Gas System of Greece-Bulgaria.

The move marks the start of a broader cooperation that would also include Serbia and North Macedonia — countries that currently rely on Russian gas to cover heavy industry, smaller manufacturers and domestic heating needs. Greece plans to build a separate inter-connector with North Macedonia to be partially funded by the European Investment Bank.

The European Commission has set up a regional task force based in Sofia to monitor the gas supply in the region and better manage the overall use of gas and electricity infrastructure to ensure security of supplies. It will focus on filling storage facilities ahead of the winter and implementing joint preparedness plans for gas purchases, storage and interconnections.

The medium-term aim is for Greece and Bulgaria to become a joint hub for supplying non-Russian gas to Europe. Bulgaria’s extensive network of pipeline connections linking the Balkans and Turkey with Ukraine and Central Europe would handle LNG supplied by several floating storage and re-gasification units (FSRUs) located off ports around Greece. The units would handle shipments of LNG from the US, Qatar, Egypt and Oman.

Ending the Balkan market fragmentation

An EU decision calls for reducing dependence on Russian gas by two-thirds this year and eliminating it completely before 2030.

“Ending the fragmentation of the Balkan energy markets is critical to neutralising Turkstream II. There are plenty of synergies to be exploited and the IGB is going to be the main game-changer,” says Ilian Vassilev, a Sofia-based energy consultant.

DEPA and Bulgargaz have already agreed to make joint purchases of LNG, a move that would boost their negotiating power with suppliers, according to Greece’s energy ministry.

At the time of writing, the final piece of the project, a compressor station at Komotini in the 31km Greek section of the 180km pipeline, was still being completed. The IGB has capacity to carry 5bcm annually, but plans to double capacity are underway by constructing a second, parallel pipeline along the same route.

Turkstream II, with 20bcm of annual capacity, was built to consolidate Gazprom’s hold on the Balkan and Central European market. It carries gas from Turkey through Bulgaria to Hungary.

Greece, which covers around 40 percent of its annual energy needs with imports of Russian gas, plans to pay Gazprom in a way that would not breach EU sanctions. The remainder is covered with Azeri gas from the TAP pipeline transiting northern Greece to Albania and Italy, and LNG from several sources. With its gas requirement projected to reach Euro10bcm annually by 2025, Greece expects to buy additional amounts of LNG which would be stored at FSRUs .

Gastrade, a consortium of Greek, Bulgarian, Italian and Cypriot companies, is constructing an offshore FSRU terminal at the port of Alexandroupolis that will be connected with Greece’s gas national transmission network through a 28km local pipeline. Due to be completed at the end of 2023, the terminal will have an annual re-gasification capacity of 5.5bcm.

The consortium has already been granted licences to build a second FRSU off Alexandroupolis with similar capacity.

DESFA, the operator of Greece’s gas transmission system, plans to double its re-gasification capacity of 7bcm yearly by 2024 at the Revithousa islet offshore terminal off Piraeus port. An LNG carrier anchored off the islet would provide extra capacity in addition to the three existing terminals.

2 Turkstream Pipeline

Gaslog has won a tender to provide a vessel to serve as a floating storage facility for the next 12 months, increasing capacity at Revithousa by 70 percent — enough to cover a possible future cut in supplies of Russian gas to Greece.

Greece’s brightening prospects as an LNG import hub are also encouraging private energy companies to invest in building FSRUs.

Motor Oil Hellas, a leading Greek oil refiner diversifying into alternative energy and electricity production, is expected to begin developing an offshore terminal close to its refinery near Athens later this year. Another project to build an FSRU off the central Greek port of Volos with possible participation by Exxon Mobil and investors from the Gulf states is under discussion.

Map of the Turkstream pipeline, which connects the largest gas reserves in Russia to the Turkish gas transportation network, source: Turkstream Project.

Greece also plans to resume natural gas surveys that were placed on hold as the country accelerated plans to decarbonise. Two local companies, Hellenic Petroleum and Energean, have agreed to conduct surveys within a shortened time frame, with results from one onshore and five offshore areas due to be completed by the end of 2023.

Two offshore areas, the Ionian Sea and part of the Libyan Sea off southwest Crete, could hold gas deposits of between 70 and 90 trillion cubic metres, according to a report by the Athens-based Institute for Energy for Southeast Europe.

This article is published in the May/June 2022 issue of Greek Business File, available here.