South east European gas markets represent something of a ‘final frontier’ for energy companies and politicians alike, the former seeking out new business opportunities and the latter trying to promote greater security of supply and competitiveness.
This summer several developments have turned the spotlight back onto the area, dangling the promise of greater gas interconnectivity and new trade routes:
– Gas flows from Ukraine to Bulgaria will be possible from 1 October, as two of Gazprom’s legacy contracts on the route expire. Following an agreement between the TSOs involved to test flows, Romania will host the first ever capacity auction on the route in September
– The European Commission has shown some interest in new supply infrastructure from Russia to the Balkans, which could mean reviving the South Stream pipeline – or part of it – bringing gas across the Black Sea to Bulgaria
– The Interconnector Greece-Bulgaria (IGB) has moved on to a second market testing phase, in which qualified companies can bid for capacity on a future bidirectional pipeline between the two countries. The target date for start-up of the pipe is the second half of 2018
Of the three developments listed above, the first seems most likely to lead to a concrete change in the short-term. The inauguration of the Budince point on the Slovak-Ukrainian border two years ago allowed western European majors to sell into Ukraine, and onward connections could provide access to the Romanian and Bulgarian markets. That said, the link between Hungary with Romania that has been in existence for a number of years – which should theoretically allow flows to the Balkan state from Austria – has seen little activity.
As for the second two, these are still at a more tentative stage – although it is true that a number of companies have already expressed interest in the IGB pipeline. We should be wary of enthusiastic but fuzzy statements from Brussels about creating new regional ‘hubs’. Much depends on the economic viability of new pipelines, as well as the accessibility of the target markets – which in south east Europe are still hard to break into because of incomplete liberalisation, grid inefficiencies and dominance of historical incumbents.
Nevertheless, the appetite for increased trade in the region clearly exists and the market is making the most of existing resources. This is also demonstrated by recent virtual reverse-flows from Greece to Bulgaria, which in commercial if not physical terms, will allow LNG coming into Revithoussa to be sold northwards.
Market participants and TSOs are proving adept at using existing interconnections for new trade opportunities. It remains to be seen whether a tipping point can be reached to push bigger projects into the realm of reality. emma.slawinski@icis.com