Extracting natural gas from the Black Sea: Regional interconnection projects worth billions of Euros

One of the European Union (EU) priorities is the security of gas supply to the Member States, the objective being subsumed to a more ambitious energy programme, which provides the access to at least three different sources of energy in the future for Central and South-Eastern European countries. In the current European geopolitical context, dominated by the armed conflict between Russia, Europe’s main natural gas supplier, and Ukraine, the main transit corridor of Russian gas to European consumers, the obtaining of a larger autonomy from Russian exports has generated the development of new gas pipeline projects.

Although in the long term, until 2050, the European Union aims to replace fossil fuels with renewable sources and to set up an integrated market for electricity, in the medium term natural gas will continue to be a vital resource. In the current European energy architecture, Romania can play a very important role after the start of gas supply from the Black Sea. In order to achieve this, the related domestic infrastructure and also the cross-border one should be completed. Moreover, the cross-border infrastructure deficiency - not only the one related to the natural gas transmission - is a Central and Eastern European feature.The route of BRUA project

ROMANIA RECEIVES MONEY FOR BRUA

On September 9, at the high level summit of the Working Group to connect gas networks in Central and South-Eastern Europe/CESEC, Transgaz representatives signed with the Innovation and Networks Executive Agency/INEA the agreement for transition to the implementation phase of BRUA interconnecting pipeline transport network for natural gas in Bulgaria, Romania, Hungary and Austria. For this agreement has been allocated a grant of EUR 179.32 million for the works on the pipeline connecting Bulgaria-Romania-Hungary-Austria (BRUA). The project is in the phase of obtaining environmental permits and of the agreements with land-owners where the pipeline will go through. BRUA will connect Central Europe to the Southern Corridor which brings Azeri gas from the Caspian basin, via Turkey, through Greece and Albania. BRUA is an adding to Romania’s policies to consolidate its position as a regional energy market hub. The future BRUA connection with the expected LNG terminal in Constanta, by an extension of 300 km, will continue the policy of securing the European energy market. This will facilitate the access to both the Romanian natural gas blocks in the Black Sea, as well as to an alternative route for gas from the Caspian basin, operated by the Azeri company SOCAR, with which Transgaz has already signed a Memorandum of Understanding.

BRUA is a project of about EUR 560 million, which involves, in Romania, a 528 km pipeline on the route Giurgiu-Podisor-Corbu-Hurezani-Hateg-Recas-Horia and three new compression stations (Podisor, Bibesti and Jupa), which will connect the existing interconnection points to the natural gas transportation systems in Bulgaria (Giurgiu) and Hungary (Csanadpalota). On the route to Bulgaria the transport capacity in both flowing directions will be 1.5 billion cubic meters/year and on the route to Hungary the transport capacity will be of 1.75 billion cubic meters/year in Phase I and of 4.4 billion cubic meters/year in Phase II. Also, Transgaz has agreed with the carriers in Ukraine, Bulgaria and Greece to deepen the cooperation in order to ensure a reverse and uninterrupted gas flow through the trans-Balkan pipeline and has signed with the operators in Greece, Bulgaria and Hungary a statement on the future development of the Vertical Corridor (aiming to connect the regional projects in order to create an integrated gas transmission corridor on the North-South direction).

Documents signed in Budapest

  • EUR 179.32 million grant agreement for the BRUA gas pipeline, under the inter-connecting Europe Mechanism
  • Joint statements by the governments and the operators of transmission systems in Greece, Bulgaria, Romania and Hungary on cooperation in natural gas projects along the so-called Vertical Corridor
  • Memorandum of Understanding between the transmission system operators in Ukraine, Romania, Bulgaria and Greece regarding the reverse flows in the trans-Balkan pipeline
  • Action plan on regulatory issues necessary to facilitate the operation of the existing and planned infrastructure in the region and to improve the market functioning
  • Furthermore, the ministers participating in the summit decided to extend CESEC in other fields too in order to create a regional market for electricity and to promote renewable energy and energy efficiency in the region.

TRANSGAZ AND SOCAR TO REVIVE AGRI

On July 19 Transgaz signed in Baku the Memorandum of Understanding with SOCAR that set the details of a new stage within the AGRI project (Azerbaijan-Georgia-Romania Interconnector). The AGRI project, blocked for several years, aims to carry seven billion cubic meters of natural gas annually from the Caspian region to Romania, crossing Azerbaijan and Georgia territories and the Black Sea by vessels. This project, in which a first memorandum was signed in 2010, involves the construction of at least two liquefaction terminals on the Georgian Black Sea coast. The energy ministers of Azerbaijan, Georgia and Romania signed in 2015 a joint declaration on the AGRI project. The agreement aimed at natural gas transmission, increased opportunities for gas use in Romania and of the distribution capacity in the Caspian Region, supply and selling of natural gas on the Romanian market.

TRANSGAZ AND UKRTRANSGAZ, INTERCONNECTION AGREEMENT

Transgaz and Ukrtransgaz, natural gas transmission system operators in Romania and Ukraine, signed in July an interconnection agreement of the Transit 1 Isaccea-Negru Vodă pipeline, the aim being to facilitate the transmission of gas across the border. Ukraine and Romania share two gas interconnection points at Isaccea and Mediesu Aurit. At Isaccea there are three pipelines and the capacity of two of them is reserved entirely by the Russian group Gazprom for gas supply to Bulgaria, Greece and Turkey. Transit 1 pipeline Isaccea-Negru Vodă was used exclusively by Gazprom to supply gas to Bulgaria via Romania.
But in 2016 the contract between Gazprom and Bulgargaz has expired, so that the two operators of pipelines in Romania and Ukraine have decided to bring their operations in line with the European regulations. The interconnection agreement is part of the European Commission’s regional initiative to connect gas networks in Central and South-Eastern Europe (CESEC). Together with the recent interconnection agreements signed by Greece and Bulgaria and between Bulgaria and Romania, the agreement signed by Transgaz and Ukrtransgaz will allow gas flow in both directions from Ukraine to Greece, thus allowing the local users of the network to diversify the sources of supply.

GIURGIU-RUSE GAS PIPELINE, COMPLETED IN 2016

In April this year Bulgartransgaz and Transgaz signed a contract with Habau PPS Pipeline Systems for the construction of the underwater section of the Ruse-Giurgiu interconnector that will connect the Bulgarian and Romanian gas transmission systems. The construction could be completed by the end of this year and once the project is completed Bulgaria will have its first alternative source of gas supply, thus breaking the Russian monopoly. The Giurgiu-Ruse pipeline will have a total length of about 25 kilometres, of which 15.4 km in Bulgaria, 5.2 kilometres in Romania and 4.14 km underground, crossing the Danube River. Also, two stations are to be built for the measuring the natural gas technical parameters. The gas pipeline will have a transmission capacity of 1.5 billion cubic meters of gas per year from Bulgaria to Romania whereas from Romania to Bulgaria the capacity will be of 500 million cubic meters per year. The estimated total value of the project funded by the European Commission amounts to EUR 23 million of which EUR 10 million allocated for works on the Romanian bank of the Danube and EUR 13 million for works on the Bulgarian side.

IASI-UNGHENI, A FAILED ROUTE IN THE ABSENCE OF EXTENSION TO CHISINAU

In August of 2014 took place the official inauguration of the Romanian-Moldovan gas pipeline Iasi-Ungheni, and the plans include extending it to Chisinău. For this part of gas pipeline, Chisinău will have to build compressing stations and another gas pipeline, i.e. Ungheni-Chisinău. The total costs of these projects amount to about EUR 200 million.

Iasi ungheni

 Yet, it is a huge amount for the Republic of Moldova, given that this country had no money for the construction of the Iasi-Ungheni pipeline, asking for the EU’s and Romania’s support. The lack of money could block the project in the end, especially that the European Union is not interested to offer substantial financial support, assuming only 5% of the expenditures to build the infrastructure for the transmission of Romanian gas to Chisinău. If the project is cancelled, the importance of Iasi-Ungheni gas pipeline will be minimal as it ensures gas supply for only two counties in the Republic of Moldova, the rest still remaining under the Gazprom control. The emergency version for the Chisinău authorities would be the imports of liquefied gas from the US, but they would have to build the necessary infrastructure.

EUR 2 BILLION PROJECT

Another project joined also by Romania is the Eastring pipeline, proposed by Slovakia. Through this connector, the Slovak market would be interconnected to Romania and Bulgaria via Hungary or Ukraine by a pipeline with an initial capacity of 20 bcm, which could be further expanded to 40 bcm. Eastring, a project valued at about EUR 2 billion, could transport natural gas in both directions and would largely require the existing infrastructure, such as transit pipelines in Romania and Bulgaria, which do not yet allow the access of the third party, contrary to the Energy 3 Package requirements. In the event TurkStream pipeline is built (with a capacity of up to 63 bcm) the Eastring pipeline could carry Russian gas in Central Europe. The project was listed as Project of Common Interest in November 2015 and is currently eligible to apply for EU funding. For now, there are two possible options for the pipeline’s route in Romania, of which the Eastern route would allow strengthening the network and the possible connection to Moldova and is part of the Transgaz programme (the Black Sea project) for the access of the Black Sea gas to the regional gas market. The Black Sea project would cost EUR 820 million on the southern branch (EUR 560 million for BRUA, EUR 260 million for the Black Sea - Podisor); EUR 544 million - the central branch, which partially overlaps one of the Eastring routes and EUR 110 million to strengthen the network in the north-western region and to complete the interconnection with Republic of Moldova.

FUTURE PROJECTS

Regarding future projects, energy ministers met in Budapest and pledged to rapidly finalize a series of projects considered as priorities for energy security: the liquefied natural gas (LNG) terminal in Croatia and the infrastructure to connect it to Hungary, the interconnector pipeline between Greece and Bulgaria and the one between Bulgaria and Serbia.

CROATIAN PROJECT, NEARLY 10 YEARS OLD

As regards the LNG project in Croatia, it is an old one, of almost 10 years. In 2007 in Zagreb, OMV Gas International (25.58%), E.ON Ruhrgas (31.15%), Total (25.58%), RWE (16.69%) and Geoplin (1%) founded Adria LNG project company. According to the project at that time, the terminal would have had at the beginning a capacity of 10 bcm/year and was designed for tanks with a volume of up to 265,000 cubic meters. The terminal was to become operational in early 2012.

BULGARIA-GREECE, PROJECT WORTH EUR 220 MILLION

Late last year, Bulgaria and Greece signed an agreement to build a pipeline in order to connect the two countries’ gas networks, an interconnector that would allow Bulgaria to diversify gas supply and Greece - to get connected to the rest of the European network. The agreement was signed by Bulgarian Energy Holding and IGI Poseidon, a joint venture between the Greek state supplier DEPA and Italian company Edison. The interconnection project will be managed by Interconnector Greece-Bulgaria (IGB), the pipeline is to become operational in 2018. The estimated cost of the project amounts to EUR 220 million, of which the EU will provide EUR 45 million. IGB gets support from the European Commission, being included on the list of common interest projects - part of the Southern gas corridor, which will transport natural gas from Azerbaijan to Italy via Turkey, Greece and Albania. The gas pipeline will be 182 kilometres long, will initially have an annual capacity between 3 and 5 billion cubic meters and will lie from Komotini (Greece) to the Bulgarian city of Stara Zagora. Bulgaria currently depends almost entirely on Russian gas supply via Ukraine.

BULGARIA-SERBIA INTERCONNECTOR, THE FIRST STEPS

The project for the construction of a gas pipeline between Bulgaria and Serbia has made the first steps at the end of last year, when the Bulgarian authorities designated as project consultant the company Control Engineering OOD. The contract is worth EUR 100,000 and aims the overseeing of the building and conformity assessment between construction and the set parameters by the Bulgarian side. The company will submit a report and data sheets on the pipeline. The Bulgarian side of the pipeline between the two countries will have a length of over 61 kilometres and an annual transport capacity of 3.5 billion cubic meters of gas annually. The project receives EU funding of EUR 49 million within the Competitiveness Operational Programme (COP) 2014-2020.

Consequently the money will be funded, especially that in the current geopolitical context the increase in energy security is European Union’s main objective and a prerequisite for ensuring flexibility and access to diversified sources of supply.

We note that, in order to stimulate the development of trans-European energy infrastructures by implementing projects with strategic potential, the EU has allocated a total budget of EUR 4.7 billion for 2014-2020 within the Connecting Europe Facility (CEF).

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