Against odds
the interconnector Greece-Bulgaria is making progress
Following
recent events around the IGB, TANAP, and TAP, one can feel a growing sense of
optimism, with more gas coming into the South-East European gas market, more
competition and lower prices should come in the short term. Nevertheless,
Gazprom is ready to fight back, using every lever it has to ward off possible
loss of market shares and, more importantly, loss of revenues.
Hungary, Romania, Serbia, Croatia, and
Bulgaria import some 16
bcm/year, which accounts for $ 4 billion in revenues. The regional monopoly
premium Gazexport collects, i.e., the difference between the announced average EU
price of $169/tcm and the regional average of $ 232/tcm amounts to $1
billion in 2018.
These figures give an idea of the
resource pool and the 'motivation' Kremlin has recourse to, in securing
market shares and pre-empting access to the regional market by competitors.
While competition from traditional EU
gas companies is handled by Gazprom within the broader EU gas business
framework of 'gives and takes', offering lucrative deals, including asset swaps
in Russia and beyond, the entry of tough-to-tame newcomers, such as US LNG, is
a challenge.
Hence the strategy that the gas
monopoly applies, is focusing on the vulnerable 'weak spots' for LNG - access
to terminals, transmission capacities and tariffs, and storage.
The only entry EU entry point for LNG
is the Greek LNG terminal at Revithoussa. The operator of the terminal has
unexpectedly limited access to the regasification slots in 2020 to non-Greek
traders, thus adding to the costs and hurdles, adding suspicion of a foul play to
benefit Gazprom.
The alternative LNG terminal at
Marmara Ereglisi is theoretically an option, but again the Turkish Botas is
adamant about letting a free flow of LNG to Bulgaria and beyond. Next, come the
new FSRUs in Turkey - Gulf of Saros, and Greece - off the coast of Alexandropoulos,
that have been in a slow-motion, effectively denying LNG importers a credible
imminent alternative.
Another way to limit the
competitiveness of LNG imports to Gazprom is to drag feet on the extension of
UGS capacity in the region. The project to expand capacity at the Chiren UGS
(550 million cubic meters at present) in North-Western Bulgaria has been shelved
for more than ten years, despite clear signs of growing demand, exceeding 1,5
billion cubic meters, and the indispensable need for storage space for LNG
imports. The other potentially accessible UGS in the region at Banatski dvor
(500 million cubic meters) has also been off-limits to independent LNG traders.
The planned interconnection between the Bulgarian and the Serbian gas grids via
Turk Stream is a non-starter too, as 90 percent of the exit and 100 percent of
the entry capacities are blocked by Gazexport, making it impossible to import
and store gas in Serbia.
Where progress has been achieved in opening
the gas market to competition, it has come at a considerable cost and delays.
The most notable case is the Interconnector Greece-Bulgaria (IGB), which has
long been a target of a dedicated malign campaign, aimed to discredit the project, inflict higher cost and setbacks. The end goal is to make sure Russian
gas overwhelms the region via the Turk Stream before competitors can bring LNG en
masse via the IGB.
The government of Bulgaria is casting
a blind eye on the procedural haste, inadequate project management, and cost
control at the IGB competitor – the Turk Stream section in Bulgaria. The
nominal main contractor - the Saudi Arkad Company, has effectively given up on
its initial plans to use its procurement channels and in-house project
management. Instead, the real control has passed on to Gazprom appointed
subcontractors and suppliers, including those involved in construction works
and pipes procurement on the Serbian segment. Such moves effectively undermine
the pretense for a legitimate and competitive EPC tender, announced by
Bulgartransgaz. It turns out that the Bulgarian Turk Stream is a government and
BTG-engineered project.
Gazprom's 'agents of influence' have
been called to arms, tasked to discredit the rival IGB procedure and work
progress, in line with similar attempts in the past on Nabucco. Funny enough,
the lady that led the Nabucco team is currently one of the Executive Directors
of the ICGB, and her experience pays off.
The chosen tactic for the attack - to
exert pressure and force hasty and risky decisions, generating unrealistic
expectations for a project completion date, while blaming the ICGB management
for the delay. All paved with good intentions and concern for the timely
project execution.
Kremlin's latest pressure campaign is
embodied by a sequence of public appearances by the former interior minister
Rumen Petkov. A typical excerpt from Kremlin's playbook is to present his
politically branded campaign as a concern for letting down and 'misleading our
American friends.'
The history of attempts to put a spoke
in the wheel of the IGB ranges from procedural tricks to all-out challenges
following reviews at the Anti-Trust Commission and Supreme Administrative Court
levels. These have already caused a delay of a year and a half. The companies
behind those complaints had no relevance to the interconnector works and the
scope of suggested activities. Media investigations tied them to a notorious
Bulgarian media mogul, a close to Russia oil oligarch and one of the leaders of
the Nationalist parties - who were all acting on behalf of Gazprom.
A new pseudo-patriotic refrain is in
circulation - the IGB has denied Bulgarian companies an equal chance to
participate. The game plan is to block work, forcing a replacement of the Greek
EPC contractor. The substitution will inevitably cause a further significant
delay, as this will be challenged in court and at the EC level, but will also bring
the project in line with the average corruption standard in other
infrastructure projects. Worth recalling - there were three BG companies
shortlisted as part of different consortia - but only one presented a bid that was substantially overpriced and
uncompetitive, possibly due to accommodation of corruptive interests.
Both the government, the State Agency
for National Security, and the General Prosecutor's office had been alerted on the
attempts to block the IGB.
There has been no reaction whatsoever,
including from the Prime Minister or other senior state levels, which is yet
another proof that the IGB project is a strange bird in the constellation of
new Bulgarian infrastructure projects. It is professionally managed, with
adequate cost control - which would make it the most cost-effective
infrastructure built in recent years.
However, that is not a certainty, only
an option.
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