The 2014 EU-wide stress tests established that a year-long Ukrainian transit shutdown does not result in any loss of load in most of the European continent, with the exception of some strongly affected countries in South Eastern Europe (SEE) – “a loss of load up to 26 bcm”. This is only 7% of EU’s total annual consumption but it is vital to 6-8 countries which are still dependent on a single (Russian) gas source at a ratio of between 65% and 100%.
The Central and South-Eastern European Gas Connectivity (CESEC) Initiative, involving 16 countries and the European Commission, states that most countries in the wider region have limited gas source diversity due to:
This clearly makes South East Europe a special security of gas supply case. When it comes to comprehensive solutions however, the wider Central and South East Europe should better be addressed as an integrated regional gas market.
LNG can be a game-changer due to new developments:
• First and foremost, the US is emerging as a reliable and competitive supplier of LNG, driven by a 30-year supply of shale gas that can be profitably produced at $4.00 per mbtu or less. IEA estimates that the average price for U.S. LNG in Europe was $4.78 in 2016 – slightly below that of pipeline imports. Gazprom charges SEE importers more than their Western European peers: currently this is over $200 per 1000 cm or above $5.50 per mbtu, which should be attractive to US LNG exporters.
• Second, the floating LNG Terminal at Alexandroupolis, Northern Greece, developed by Gastrade and supported by the governments of Greece and Bulgaria, as well as Cheniere of US, will start operations latest 2020, with a send-out capacity of 6.1 bcm/a and storage of 170 000 cm. Relying on the EU-backed Greece-Bulgaria (IGB) interconnector, and interconnections further afield, the Alexandroupolis LNG Terminal will contribute to diversification, supply security and market integration in SEE.
• Third, SEE should soon have its first regional liquid gas hub. Bulgaria – based on a circular-shaped gas transmission system; planned interconnections to Greece, Turkey, Romania and Serbia, and 5 high-technology compressor stations – hopes to raise 2.4 billion euros to build Balkan European Gas Hub near Varna. This month Sofia selects from among 9 consortia the winner to conduct a 50% EU-funded pre-feasibility study on the Hub’s business model and market prospects. The study will explore several supply routes but the Government and Bulgartransgaz, the TSO, seem to favour a massive, 20 – 30 bcm/a, supply from across the Black Sea. The developer of the pre-feasibility study will have the delicate task to both keep Gazprom happy enough and provide a regional market analysis that allows for at least two more sizeable sources of gas, one of them LNG.
2018-19 will be a decisive period for consolidating a project.
Share your insights and join the conversation: Can you identify any other developments LNG can bring to South East Europe? Leave you comment below.
The Central & Eastern European Gas Conference is the leading LNG event in the central eastern region, providing the opportunitiy to hold meetings and make valuable connections; register today to attend the event in March.
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