Almost 13 years ago, on 14 July 2009, the first GERB government (2009-2013) declared the gas link with Greece gas interconnector to be a project of national importance, crucial for reducing Bulgaria's energy dependence on Russia. And if Boyko Borissov, who used to be prime minister for most of the time until April 2021, really wanted to diversify Bulgaria's natural gas supplies, he could easily have done so.
The project is a real game-changer - once it becomes operational, it would significantly alter the existing situation not only on the Bulgarian, but also on the regional gas market. It can fully satisfy the country's domestic consumption, as deliveries agreed already with non-Russian suppliers would cover 30 percent of it, and at lower prices than what Sofia pays to Gazprom. In addition, the Gas Interconnector Greece-Bulgaria (IGB) can provide opportunities for additional gas transit towards Ukraine, Romania, Serbia and even Hungary, as well as access to LNG terminals.
A very long construction
However, this is precisely why throughout the years there has been consistent resistance to its implementation. According to initial plans, alternative gas supplies were supposed to flow as early as 2013, but the construction of the pipeline had not even started by then. After a series of postponements its construction formally started on 22 May 2019, with plans that the pipeline would be commissioned in mid-2021. The combination between Covid-19, the prioritizing of the Balkan Stream gas pipeline in 2020 and the political destabilization in the country that started in the summer of the same year stalled the project. Even if it had been completed on time, however, the use of its full capacity would have depended largely on the Greek side, which is still to construct a compressor station to provide the necessary pressure for gas flows.
Work properly kicked off in early 2021 under the caretaker cabinets of Prime Minister Stefan Yanev, but it was not completed by the end of the year. Then a new, elected cabinet took office. "I hope that if it is completed at the end of June, Azeri gas will flow in by September. I am angry that this winter the gas price was so high due to the fact that the project was not completed," Prime Minister Kiril Petkov said on 21 March when he visited the construction site.
"The physical infrastructure is already in place, the hydraulic testing is currently being done, this means that we have progressed a lot, which confirms the thesis that more has been done in the last three months than in the last year," Mr Petkov added, as quoted by the Bulgarian News Agency. As of 14 April, 91 percent of the construction works on the pipeline were completed, according to information by the ICGB company that leads the project implementation.
The company added that the hydrotests along the entire route of the interconnector have also been successfully conducted and now the process of reclamation - the restoration of the land in compliance with environmental standards - has begun. At the end of March, the ICGB announced that the gas pipeline was already connected to the Trans Adriatic Pipeline (TAP) at the Komotini Metering Station in Greece. The piepline still has to be connected to the Bulgarian gas transmission network near Stara Zagora.
The aim of the project company is for the gas connection to become operational by 1 July, but according to observers it is more reaslistic to expect this to happen in the autumn. One reason is the certification procedure, which could take about six months after ICGB submitted the necessary documents to the regulators of Greece and Bulgaria on 23 February 2022.
Where will the gas come from
Currently, the reserved capacity for the interconnector with Greece is about 1.57 bcm/year. "It is reserved by five traders, four of whom are new to our market. This means real competition and hence lower prices," explains Teodora Georgieva, executive director on the Bulgarian side of ICGB. The largest share, about 1 bcm, is reserved by state-owned gas supplier Bulgargaz. This is natural gas that will come via the Southern Gas Corridor (the TANAP pipelines in Turkey and TAP in Greece) from the Caspian region and will be sold by Azerbaijan's SOCAR, which also has reserved capacity, but the quantities are rather symbolic with an expectation of future increases.
The remaining volumes have been booked by Greece's DEPA, Italy's Edison, and the US' Linde (for LNG). According to Ms Georgieva, at this stage there are no risks of penalties in case of possible project delays, as the consequences can be managed by various measures - schedule compensation, securing transmission services with alternative scenarios during the first months of delivery. "The project will be insured for all risks, including delays to the start of commercial operation," she says.
Once the project company is certified as the transmission system operator, which could happen while the pipeline is still under construction, new capacity tenders would be possible. The spare capacity will be offered on a market platform, the important thing here being the tariff policy, in which there are certain specifics that are pending settlement.
For all this to happen, however, there is one more condition - a compressor station must be built on Greek territory to ensure the necessary pressure for the transmission of the respective quantities of natural gas. At this stage, only the supply of Caspian gas via TAP is certain, as the pressure in that pipeline is sufficiently high. Due to the lack of potential of the DESFA network in the north of Greece, gas imports from the liquefied natural gas (LNG) terminal at Revithoussa 45 km west of Athens, for example, are hindered. In other words, of the 1.57 bcm/year reserved, only 1 bcm can reach Bulgaria unimpeded for the time being, and any agreements in future tenders are questionable.
"We believe that we will convince our partners to invest in their system, as the IGB project has a positive impact not only for gas transmission and trade in Bulgaria, but also for the system in Greece. This will attract more gas traders through the Greek network as well, i.e. these are investments that can bring new revenues," Ms Georgieva explains, pointing out that the absence of technical capacity for transmission does not mean that there are no commercial mechanisms that would allow for the supply of the respective volumes without building a compressor station. One such possibility is, for example, to make swap deals between DESFA and TAP. On the one hand, it is uncertain how sustainable this approach would be, while on the other, it would inevitably involve more complications and perhaps costs for traders.
There will be no need for a compressor station if the Alexandroupolis LNG terminal project is implemented, as it will provide a strong enough pressure in DESFA's network. However, the final investment decision to build the terminal off Greece's Aegean coast only came in January of this year, with the facility expected to become operational by the end of 2023. Until then, Bulgaria's almost total dependence on Russian gas will remain unchanged.