Greece is attracting increasing attention as a key link in the transport of natural gas from East to West. With the Interconnector-Greece-Turkey (IGT) gas pipeline set to open in September, the recent signing of documents for the Interconnector-Greece-Italy (IGI) gas pipeline and a recent energy cooperation agreement with Azerbaijan, Athens is creating the political and infrastructural links needed to make Greece a southern European gas hub serving Italy, Western Europe, and the Balkans. It will also play a role in the EU-initiated South European Gas Ring Project (SEGR), designed to reduce Europes dependence on Russia for natural gas supplies.

During a visit to Azerbaijan on 2 August, Greek Minister of Development Dimitris Sioufas signed a Memorandum of Cooperation with Azerbaijani Minister of Economic Development Haydar Babeyev covering the two countries oil and gas sectors. Mr Sioufas said the accord constitutes a landmark in the promotion of political, economic and trade relations between the two countries, opening a new page in economic and energy relations. The memorandum will enable Greece to function as a corridor for the transport of Azerbaijani gas from the Caspian region to Italy and to European markets in general, Mr Sioufas said, adding that the agreement confirmed the wishes of both governments to have Azerbaijani gas transported through Turkey and Greece and under the sea to Italy and Europe by 2012. With this cooperation and this project of ours, we are linking the Caspian region and Asia with Europe, Mr Sioufas said.

Mr Babayev said the memorandum with Greece gave his country the opportunity for similar deals with other EU states: Greece is the first EU country with whom we have signed this kind of agreement It openly indicates that gas supplies are bound not only for the gas market of Greece, but also for other EU countries. Later Mr Babayev stated that Azerbaijan was first obliged to meet its commitments to countries with which it already has contracts, basically Georgia and Turkey; but after 2010 it would sign direct contracts with Greece and European states that need Azerbaijani resources and have the necessary infrastructure.

Athens has already proposed measures leading in that direction. When ministers from Greece, Italy and Turkey in Rome on 26 July signed an intergovernmental agreement covering the Interconnector-Greece-Italy, which includes the Poseidon subsea pipeline across the Adriatic (MEES , 30 July), Mr Sioufas proposed that a new intergovernmental document be drawn up between Azerbaijan, Turkey, Greece and Italy concerning the transport of Azerbaijani gas to Europe. A draft agreement is now being negotiated.

Reducing Energy Reliance On Russia

As demand across Europe for natural gas rises, the EU is aware that good market policy depends on developing alternative sources of supply to reduce reliance upon Russia. Greece, despite it close relations with Moscow, is keen to diversify its supply. About 80% (2.8 bcm/year) comes from Russia via a Bulgargaz-operated pipeline through Bulgaria. The balance of Greek gas demand is supplied by Algerian LNG. During 2005, Greeces demand for natural gas was put at 3.05 bcm/y, but as the country shifts its reliance from crude oil to gas, demand is expected to reach 6 bcm/y by 2010 and 7.5 bcm/y by 2015. The Interconnector-Greece-Turkey pipeline, scheduled to start operations on 15 September, will receive gas at the Evros/Meric River crossing at a rate of 250 mcm/year, rising to 750 mcm/y by 2009-10. The 300km, 250mn IGT connects the Greek and Turkish gas networks with a new-built pipeline running from Karacabey near Bursa to Komotini in northern Greece, including a 17km subsea section across the Sea of Marmara. At this point, the IGT has an initial design capacity of 11.5 bcm/y of which 2 bcm/y will be sold to Greece, while the balance, 8.8 bcm/y, will be shipped on to Italy (MEES , 11 July 2005).

Meanwhile, the state-owned Public Gas Corporation DEPA is building the 600mn, 590km Greek section of the IGI across northern Greece, and expanding the national grid into western Greece. DEPA has listed among its key strategic goals the promotion of Greece as a natural gas hub by transiting gas from the Caspian and the Middle East to Europe, integrating into European energy markets and strengthening its position in the wider Balkan region. Also among its goals is diversifying its suppliers for the sake of obtaining the best economic terms, and increasing gas consumption in all customer categories in Greece. Not only does Athens see future supplies coming from Azerbaijan, but it has also earmarked Kazakhstan, Turkmenistan, Uzbekistan, Iran, Iraq, Egypt and Libya as potential suppliers to ship their gas via Greece.

Poseidon And Beyond

Construction of the 350mn, 217km subsea pipeline across the Adriatic will be carried out by DEPA and Italys Edison, which have formed a 50:50 joint venture, the Poseidon Company, to carry out the task. The partners have agreed that Edison will get 80% of the pipelines capacity and DEPA 20%. The underwater section will run from Thesprotia in Greece to Oranto in southern Italy, with work to begin in June 2008 and gas shipments starting in 2012 (MEES , 30 July, 25 December 2006).

The advent of the IGI, which may soon come to be known as the Interconnector Turkey-Greece-Italy (ITGI) or the South European Natural Gas Corridor, must be seen with other proposed projects designed to bring gas from the East to develop an expanding gas market in southeastern Europe and the EU in general. Greece itself envisages a pipeline system that it calls the West Balkan pipeline project that would branch off from the IGI in northern Greece and head northwest toward Austria, supplying gas to Albania, Macedonia, Serbia, Bosnia-Herzegovina, Croatia and Slovenia on the way.

Switzerlands EGL is working on the Trans Adriatic Pipeline (TAP), which calls for a 10 bcm/y gas pipeline to branch off from the IGI in northern Greece and run through Albania from where it would cross the Adriatic Sea. The 513km pipeline, due to finish in 2010, would make landfall near Brindisi and move north through the Italian network to service four new power stations that EGL has planned for northern Italy (MEES , 16 April). A political complication with the project is that EGL has signed a contract with the National Iranian Gas Export Company (NIGEC) for the supply of 5.5 bcm/y of gas for 25 years. For the US and some EU countries, gas supplies to Europe from Iran are problematic, given Irans stance on Middle East peace and its nuclear research program.

But Turkey also has signed an agreement with Iran for the supply of natural gas to the proposed $6bn Nabucco Project, in which Austria, Hungary, Romania, Bulgaria and Turkey are partners (MEES , 23 July). A sixth partner is expected to be selected before the end of the year. The agreement was signed by Turkish Energy Minister Hilmi Guler without the official endorsement of the other Nabucco partners. Mr Guler said Turkey preferred to set up a joint venture with Iran, as well as Turkmenistan, that would sell the gas to European countries, allowing Turkey to avoid being merely a transit country. The 3,300km Nabucco pipeline, with a 30 bcm/y capacity, would carry gas into Central Europe via the partner countries. But again, the decision to sign an agreement with Iran for the purchase of gas was criticized by the US, a staunch ally of Turkey. Washington has long supported Turkey as a linchpin in its East-West Energy Corridor concept, particularly with regard to the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline and the shipment of natural gas to the West through the South Caucasus Pipeline and Turkeys domestic network; but the US opposes energy deals with Iran.

Ankaras decision to sign the memorandum of understanding (MOU) with Iran was likely the result of an announcement by Russia that it would, in partnership with Italys Eni, build a second pipeline across the Black Sea, from southern Russia to Bulgaria, from where it would form two branches into Europe: one northwest into Central Europe; and the second southwards into Greece. Russia and Turkey had been negotiating the expansion of a second Blue Stream pipeline to run parallel with the existing one and then turn west towards Europe; but Turkeys idea to buy the gas from Russia and sell it on to third parties a position that is contrary to Russian gas export policy did not sit well with Moscow. Russia has made no effort to hide its disapproval of Nabucco, and South Stream will compete against it for markets. But Europes realization that it must wean itself away from dependence on Russia gas promises to prove interesting. The most likely market for South Stream gas could be in the Balkans. Furthermore, it remains to be seen if a southern branch of South Stream to Greece will fit in with the latters own plans to reduce its import of Russian gas.

South European And East Mediterranean Gas Network


 

Source :  DEPA Public Gas Corporation, Greece.

Bosphorus Bypass

Another project shifting emphasis to Greece as an energy hub is the Burgas-Alexandroupolis crude oil pipeline (BAPline). Agreement to proceed with the project was reached by Russia, Greece and Bulgaria earlier this year (MEES , 19 March). It involves the construction of a terminal at Bulgarias Black Sea port of Burgas and a 279km pipeline to Alexandroupolis on the Aegean Sea. The 700,000-1mn b/d pipeline will carry Russian and Caspian crude and serve as a bypass around Turkeys Bosphorus and Dardanelle straits, with operations to begin in 2009. The 1bn BAPline will be 51% owned by Russia and operated by Transneft. The remaining 49% is split between Greek and Bulgarian firms and may be sold to other interested companies. BAPline is a competitor to Turkeys own version of a Bosphorus bypass, the Trans Anatolian Pipeline, in which Russias South Stream and Blue Stream partner, Eni, are involved. The pipeline, inaugurated in April, will stretch from Samsun on the Black Sea

to the BTC pipeline terminal at Ceyhan (MEES , 30 April). It will cost $2bn and capacity could eventually reach 1.5mn b/d.

When the IGI agreement was signed in Rome last month, Greek Prime Minister Costas Karamanlis called it an historic event for Greece, Italy, Turkey, and also for the countries of the Caspian Sea and the Middle East. It is an equally important project for Europe, since it ensures, via Turkey and Greece, the transport of natural gas from Asia to the major European markets. The prime minister noted that Greece was improving its position in Europe and the wider region with the Rome agreement in addition to the BAPline, the IGT and the announcement of Russias South Stream. With strategy and planning, our country is being converted into a major and powerful international conduit for oil, natural gas and electricity, and is upgrading its geopolitical position and its international standing, he said.