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Serbia eyes 2023 startup of gas interconnector with Bulgaria after EIB loan

Highlights

Would give Serbia access to Azeri gas, LNG

One of EIB's final gas project financing deals

Separate from TurkStream expansion infrastructure

Serbia hopes its planned gas interconnector with Bulgaria can begin construction later this year and become operational in 2023 as it looks to diversify its gas import sources.

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Bulgaria and Serbia already linked their gas networks at the end of 2020 to allow Russian gas imported via the TurkStream pipeline to reach Serbia via an expanded grid. Flows began at the start of 2021.

The 170 km Bulgaria-Serbia interconnector is a separate project -- which would run from the Bulgarian capital Sofia via Dimitrovgrad in Serbia to Nis -- giving Serbia a non-Russian supply option.

It will enable Serbia to import gas via Bulgaria from the Southern Gas Corridor -- bringing gas from Azerbaijan to southern Europe -- and as regasified LNG from the existing and planned LNG terminals in Greece.

"The construction of the Nis-Dimitrovgrad gas pipeline will significantly increase the energy security of not only Serbia, but also the whole region," Zorana Mihajlovic, Serbia's deputy prime minister and energy minister, said.

Mihajlovic's comments followed the finalization of a loan agreement for the Serbian section of the line with the European Investment Bank.

The EIB will provide a Eur25 million ($30 million) loan for the construction of the Serbian section of the interconnector, which it said would enable the diversification of Serbia's energy supply.

The Bulgaria-Serbia interconnector -- backed by the EU as a Project of Common Interest (PCI) -- had already secured a Eur49.5 million grant from the EU Instrument for Pre-accession Assistance.

The pipeline -- which will have a capacity of 1.8 Bcm/year in the direction Bulgaria-Serbia with the possibility also of reverse flow -- will run for around 62 km in Bulgaria and 108 km in Serbia.

EIB loan policy

For the EIB, the project is one of the last for which it will provide funding after it pledged in 2019 to end support for unabated fossil fuel energy projects, including gas, by the end of 2021.

"As part of the EIB energy lending policy agreed in 2019, we committed to supporting a few select gas projects already under appraisal, before moving to renewables-only lending from the end of 2021," Lilyana Pavlova, the EIB vice-president responsible for lending operations in Serbia, said.

"That is why the EIB is pleased to provide Eur25 million to back the construction of the Serbian side of this interconnector, a priority project for the EU and the Central and South Eastern Europe Energy Connectivity (CESEC) initiative," Pavlova said.

"With this investment we confirm the importance of supporting the energy transition in Serbia and the whole region," she said.

Mihajlovic said that signing the loan agreement with the EIB, along with the previously approved EU grant, "practically finalizes the financial framework for the construction of the Serbia-Bulgaria gas interconnection."

"The Nis-Dimitrovgrad gas pipeline, for which construction should start this year so that the pipeline can become operational by 2023, will enable Serbia to be supplied with gas from other suppliers," she said.

These include via LNG terminals in Greece, from the TAP and TANAP gas pipelines that are part of the Southern Gas Corridor, and "possibly from the Eastern Mediterranean gas pipeline," she said.

Regional projects

Greece already has one operating LNG import terminal at Revithoussa, which started operations in 2000 and expanded its capacity in 2018, but the government is supporting a second plant as part of efforts to make the country into a regional gas hub.

Startup of the 5.5 Bcm/year floating storage and regasification unit, which secured 2.6 Bcm/year in capacity bookings following a binding market test in March last year, is expected in 2023.

Bulgaria is also building a new interconnector with Greece -- the Interconnector Greece-Bulgaria (IGB) -- which will allow Azeri gas to flow northward to Bulgaria and for regasified Greek LNG to reach Bulgaria and then Serbia.

The head of the EU Delegation to Serbia, Ambassador Sem Fabrizi, said the loan for the Nis-Dimitrovgrad pipeline was a "big step forward" toward the realization of the project.

"I welcome this project also as a key part of the wider Serbia's strategy to complete the ongoing liberalization of the gas sector, an important commitment to further advancing Serbia in accession negotiations with the EU," Fabrizi said.