London — The transformation of the isolated and fragmented southeast European natural gas network into a region that can flow gas freely between borders is moving ever closer to reality, with some key developments in recent weeks.
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There have been doubts about whether all of the many projects designed to improve gas interconnectivity in southeast Europe would see the light of day, but progress seems to have picked up pace, with the European Commission praising the collaborative efforts made by the countries in the region.
Brussels has been particularly active in encouraging new infrastructure in southeast Europe given the region's significant dependence on Russian gas imports -- some countries such as Bulgaria have traditionally been almost 100% reliant on gas supplies from Russia.
Arguably one of the most important projects in the region is the planned interconnector between Greece and Bulgaria, which will link into the much-touted Southern Gas Corridor to bring gas from Azerbaijan.
Long on the drawing board, it had been feared that the 180-km (112-mile) pipeline -- which would allow Azeri gas to flow northward from Greece to Bulgaria and beyond -- may not be economically viable given the low gas prices of recent years.
However, the operating company ICGB this week said construction of the link was now set to start in mid-2018 following the award of a key construction permit on Bulgarian territory.
"This is a key and significant milestone in the project development which demonstrates readiness to start the construction after successful completion of the tender procedures," Teodora Georgieva, ICGB executive officer, said.
Her Greek counterpart in ICGB, Konstantinos Karayannakos, said the permit award in Bulgaria was a major breakthrough.
"The process for issuance of the construction permit in Bulgaria is much more complicated compared to Greece -- not only because 83% of the route of the pipeline is on Bulgarian territory but also due to the long administrative procedures," he said.
Greek permitting will be awarded once the interconnector obtains a license as European transmission system operator.
ICGB said this would happen after the decision for exemption from the rules for tariff, ownership and access to third parties under EU law is taken -- expected to be adopted by the regulatory authorities of both countries in October this year and by EU at the beginning of 2018.
The interconnector Greece-Bulgaria is designed to transport up to 5 Bcm/year in forward flow to Bulgaria and up to 2 Bcm/year in reverse flow.
It would allow gas from the second phase of Azerbaijan's giant Shah Deniz gas field to split off to supply Bulgaria and other markets via Greece.
It had been hoped that work to build the pipeline would begin by the end of 2016 and flows start up by the end of 2018.
But there have been many delays, and the project suffered a setback at the end of 2016 when it attracted just five binding offers for capacity in a market test with only 1.57 Bcm of long-term capacity reserved.
A total of 2.7 Bcm of capacity had been offered in the binding market test.
The capacity booked in the final binding bids fell well below the original expressions of interest for 5.3 Bcm/year.
ICGB said it would look at new ways to offer capacity not booked in the market test.
ICGB is 50% co-owned by Bulgaria's state-owned BEH and a joint venture between Greece's DEPA and Italy's Edison.
In Greece, a process is also underway to sell DEPA and the Greek state's stakes in DESFA -- Greece's gas grid operator -- with the significant number of bidders evidence of the renewed interest in gas infrastructure in southeast Europe.
Greece is expected to play a bigger part in gas transmission in southeast Europe in the coming years and has ambitions to become a regional gas hub due to new gas infrastructure being built that moves through the country -- including a new LNG import facility.
The bidders for the 66% stake in DESFA include: a consortium of Italy's Snam, Spain's Enagas, Belgium's Fluxys and Dutch Gasunie; a consortium of Romania's Transgaz and France's GRTgaz; Spanish gas TSO Regasificadora del Noroeste (Reganosa); and Qatari energy company Powerglobe LLC.
The winning bidder is expected to be announced before the end of 2017, with the Greek government to retain a 34% stake.
Improved gas interconnectivity in southeast Europe has been a keen focus of the European Commission, and in 2015 it launched the Commission Initiative on Central and South-Eastern European Energy Connectivity (CESEC) in a bid to lessen the region's dependence on Russian gas imports.
Its aim was to guarantee that all countries in the region had access to a more varied mix of energy sources and are properly interconnected to the rest of Europe.
At the latest meeting of CESEC in Bucharest at the end of September, top EU energy officials praised the efforts of the countries to work together on gas projects.
"Cooperation under the CESEC umbrella has turned into an exemplary success story, proving that solidarity is the solution," the Commission Vice-President for Energy Union, Maros Sefcovic, said.
The governments and TSOs of the countries in the region have signed a slew of agreements allowing for gas to cross borders more easily over the past two years.
"Thanks to the high level political commitment we have witnessed, and to the smart mobilization of EU funds, we will continue to complete the energy infrastructure the region needs," EU Commissioner for Climate Action and Energy, Miguel Arias Canete, said.
Projects include the Greece-Bulgaria interconnector, the planned LNG import terminal at Krk, an interconnector between Bulgaria and Serbia, and the reinforcement of the Bulgarian and Romanian transmission systems, part of the BRUA corridor.
There has been some controversy over the future of the BRUA corridor -- designed to create better links between Bulgaria, Romania, Hungary and Austria, home to the key Baumgarten gas hub -- in recent months.
The project -- a combination of existing and new pipeline infrastructure -- was thrown into doubt in July after Romania's TSO Transgaz said the link would no longer cross Hungary because Budapest was looking to send gas onward to countries other than Austria.
However, the parties involved reaffirmed their commitment to the project in its original form at the CESEC meeting on September 28, putting it back on track to become a reverse-flow style pipeline project that would ultimately link Baumgarten to Romania's Black Sea gas finds.