The signing of a bilateral agreement last Sunday (Feb 23) in Salonica by the Minister for Development on the Greek side, and the Minister for Energy and Natural Resources from the Turkish, Mrss Akis Tsochatzopoulos and Mehmet Guler respectively, for the construction of a gas pipeline which will link the two countries’s gas networks paves the way for the implementation of an ambitious international project which aims to bring natural gas from a variety of Asian producers to European consumers. Greece and Turkey are the two key countries which by pulling their resources together and by establishing close collaboration on both technical and economic matters will make this project happen.
The geographical position of Greece places the country literally in the corridor of the Caspian and Middle East to Europe route, after its crossing through of Turkey. The Greek Government has developed a comprehensive plan to introduce Eastern gas to Greece and, thereafter, to the rest of Europe. There are three main parts in this plan:
The development of the Turkey-Greece Gas Interconnector
The interconnection of the natural gas transmission systems of Greece and Turkey, the socalled interconnector Turkey-Greece (I.T.G. project), will be a major development in the international gas business. It will be the first vital step in the transportation of Eastern gas (from Caspian Sea and Middle East) to Europe.
For Greece, the I.T.G. project will be the essential tool to diversify its gas supplies, thereby stabilizing the prices and providing the basis for the liberalizatin of the gas market in 2006, according to EU directive 98/30.
The Greek part of the project includes an 85 km pipeline, linking Komotini to Alexandroupoli and the Greek/Turkish Border, and a metering station at Kipi (Greek/Turkish border).
The Turkish part includes a 200 km pipeline, from Karacabey to the Greek/Turkish border.
Given the necessary political support from both governments the two state companies, the Public Gas Corporation of Greece (DEPA) and its counterpart BOTAS in Turkey have jointly accomplished a significant amount of work and have developed the project to its present advanced stage.
The following key activities have been implemented to date:
· Several studies have been completed which normally precede the construction phase, such as, routing, surveys, environmental, basic design, issuance of permits. Currently, the project is at the initial phase of the detailed engineering study.
· The project has been presented by DEPA/BOTAS to the European Union Trans-European Networks (TEN) authorities for approval, in receiving finance for the studies.
· At the same time, a 15-year commercial gas sales and purchasing contract for 0,5 bcm per year between BOTAS and DEPA is being negotiated. The commencement date for the project to become operational is scheduled for 2005.
The natural gas transmission infrastructure in Turkey is well developed and is still expanding. Iranian gas is already flowing into Turkey. The Azeri gas is also planned to start flowing by 2006. BOTAS has a gas supply contract with Turkmenistan too. In the future, it may be possible that other Middle East gas, primarily for Iraq, to be supplied via the planned Turkey-Greece Interconnector.
The development of transit infrastructure to transport Eastern Gas to the rest of Europe.
On July 31, 2002 DEPA and EDISON GAS signed an MOU (Memorandum of Understanding) agreement in the presence of the Greek Minister of Development, with the scope of studying the Interconnector Greece-Italy (I.G.I.) as an extention of, and in conjunction with, the Interconnector Turkey – Greece project. In August 2002, BOTAS joined the project and co-signed the MOU, thus participating in all relevant activities.
The Interconnector Greece – Italy will be an extention of the North-East high pressure transmission pipeline through Western Greece, onshore (280 km) and the Ionian Sea offshore (224 km, max depth 1.450 m). Additionally, some looping of the North-East transmission system, and compressor stations, will be needed.
The project is currently at the prefeasibility study, phase which is been carried out jointly by the three parties.
Except for the transportation of new supplies to the fast-growing Italian market, the Interconnector Greece-Italy will also provide access for Greece to the big gas storage infrastructure existing in Italy, thus increasing the security of supply of the Greek market, and of the broader region.
Another potential future routing of the Eastern gas pipeline is along the Turkey – Greece – West Balkan axis through FYROM, Albania, Yugoslavia, Bosnia/Herzegovina, Croatia, Slovenia ending up in Austria.
DEPA, BOTAS and OMV have agreed to carry out a prefeasibility study with appropriate contributions from all relevant organizations in these coutries. For this purpose DEPA and BOTAS proceeded with a joint communication with the above countries and have already received positive responses. In June 2002 the Greek Minister for Development, Mr. Akis Tsochatzopoulos, visited Bosnia/Herzegovina and Croatia and held high level discussions that included, among others, the prospects of establishing a broader interconnection between Turkey, Greece and the European continent.
Greece’s cooperation with potential gas suppliers in the Caspian region
The development of close cooperation in the energy sector with the countries in the region is a vital part of the Greek energy plan. During last year the Minister for Development Mr. A. Tsochatzopoulos visited, among others, Azerbaijan and Iran.
Subsequently, DEPA signed MOU’s with the Iranian National Oil Company (NIOC) in March 2002, and with the Azeri SOCAR in April 2002 and December 2002 respectively. It has been agreed that DEPA with each counterpart will discuss and evaluate terms and conditions for purchasing Eastern gas for supplying the Greek market and furthermore, to promote transit gas sales to Europe and the Balkan area.
It should also be mentioned that, DEPA closely follows the developments in the LNG export projects of Egypt, as the geographical proximity between Greece and Egypt favours the importation of LNG through this source along with the present LNG supplies.(i.e. Algeria)
European Commission an Essential Partner
The European Commission, in implementing European common energy policies, has proved a valuable partner in the development of the above plans. Starting with the trilateral meeting among E.C, Greece & Turkey in July 2000, and extending to the financing of the studies under the Trans-European Energy Networks programme, has offered an important contribution to this end. Also, the Interconnector Turkey to Greece and Greece to Italy projects have been included in the list of Trans- European Energy Priority Projects, according to the new T.E.N. guidelines. The construction of the Greek part of the project is eligible for co-financing under the Community Support Framework (C.S.F.) III for Greece.
According to Development Ministry sources Greece is committed to open the Eastern gas to Europe corridor, and is confident that through joint efforts with Turkey, European Union and other partners, will accomplish this project on schedule.
Natural gas in Europe
Demand
Natural Gas (N.G.) has covered 23,8% of the primary energy consumption of the E.U. (EU 15) in 2001, amounting to 403,8 bcm, in total.
The outlook for the future is for an even higher share for natural gas. According to latest estimates 25% of primary energy consumption by 2010, or 467,2 bcm/yr, and 28% of primary energy consumption by 2020, or 509 bcm/yr. (source: EUROGAS Annual Report 2001)
Three are the main reasons for this anticipated increase:
· the environmental policy of E.U. which drives the use of cleaner fuels in all consuming sectors, and to the gradual abandonment of nuclear power generation.
· the technological developments in power generation with N.G., which results to increases in overal efficiency and cost savings in gas power plants.
· the liberalization of the electricity and natural gas markets in the E.U., which favours the decentralized production of electricity by N.G., including combined heat and power generation. Simultaneously, provided that adequate gas-to-gas competition will be realized, a gradual de-coupling of N.G. prices from the oil prices, is expected thus increasing the competitiveness of N.G. against coal.
Supply
E.U. owns ~2% of the world N.G. reserves (mainly in the Netherlands, the U.K. and Denmark), while it utilizes ~12% of the world production.
In 2001, E.U. –15 imported 45% of its natural gas needs. Its pipeline imports originate from Russia, Algeria and Norway, while smaller quantities are imported from other countries in the form of LNG.
The outlook for the future is for an increase of import dependency to 59% by 2010 and 77% by 2020 (source: EUROGAS Annual Report 2001).
The reason is the forecasted increase of demand with a parallel decline of E.U. indigenous production due to the depletion of the respective resources.
This situation will not change with E.U’s enlargement, since none of the accession countries is a significant gas producer or holder.
The geography of future gas supply to Europe.
Potential suppliers of E.U. with N.G. in the future are the current ones, together with Caspian Sea region (Azerbaijan, Turkmenistan, Kazakhstan, Uzbekistan), Middle East (Iran, Iraq, etc.) and new suppliers from Northern Africa (Egypt, Libya). These countries contain considerable, yet unexploited, reserves, and the outlet of these huge quantities to Western Europe will have obvious beneficial results in stabilizing N.G. prices, and fueling Europe’s future development in an environmentally friendly way.
This is even more important for certain member states, as their geography and current supply networks have created monopolistic or oligopolistic situations in their N.G. market, and for the time being, it has only one pipeline connection (with the Russian network through the Balkans).
Background
(A) The Greek Natural Gas System
The Natural Gas Infrastructure of Greece, built by the Public Gas Corporation of Greece (DEPA) S.A., consists of the following:
· A main pipeline for the transportation of high pressure natural gas from the Greek/Bulgarian border to Attiki, ultimately connecting with the LNG Receiving Terminal at Revithoussa island, a distance of approximately 511 km. Diameter of the trunkline is 36 and 30 inches and the maximum operating pressure is 66.4 barg.
· An LNG receiving terminal on the island of Revithoussa in the gulf of Megara, Attiki. The terminal has two gas storage tanks with a capacity of 65.000 m3 LNG each. Current regasification capacity is 220.000 Nm3/h, but will be upgraded shortly to 600.000 Nm3/h.
· Branch pipelines for the transportation of high pressure gas to eastern Macedonia and Thraki, Thessaloniki (two pipelines), Volos, Attiki (Lavrio and Keratsini), Plati Imathias and Inofita, with a total length of approximately 450 km.
· Medium pressure gas pipelines with a total length of approximately 350 km.
· Low pressure distribution system with a total length of 1560 km until now in the cities of Athens/Pireaus, Thessaloniki, Larissa and Volos. In the above areas, affiliate local Gas Supply Companies (GSC) have been established since 2001, with the participation of foreign investors experienced in gas distribution, and have started the expansion of the network.
· Four Operation and Maintenance centers, metering and/or regulating stations at inlet and outlet points of the system, and the remote control and communication system for the supervision and control of the natural gas infrastructure, including two control centers.
The above infrastructure was built between 1989 and 2000 and was co-financed by the European Union (Community Support Frameworks I & II).
Two are the inlet sources in the system: Russian pipeline gas through the Greek/Bulgarian border, after passing through Ukraine, Moldavia, Romania and Bulgaria, and Liquefied Natural Gas (LNG) transported by sea and unloaded at the LNG Receiving and Regasification Terminal of Revithoussa. Currently, DEPA imports LNG from Algeria.
Today, the Greek market of natural gas is at the level of 2 bcm/yr, out of which ¾ are consumed by the power generation sector. About ¾ of the imports originate from Russia.
After having completed the main infrastructure, and being faced with the imminent liberalization of the market according to EU directive 98/30, DEPA, in cooperation with the Ministry of Development, has planned the upgrade of the system, in order to ensure:
· New diversified supplies of gas, thus creating the conditions for gas-to-gas competition.
· The security of supply to consumers.
· The expansion of the system to new areas of the country.
· Many of the projects in the above context have been included for co-financing in the Community Support Framework III.
(B) Highlights of Greek Turkish Cooperation so far
On July 7, 2002, at the initiative of the European Commission, a Concluding Statement, was signed in Brussels at a political level, between representatives of EC, Greece, and Turkey. This statement takes into account the broader energy policy of the European Union and the security of gas supply, the rapprochement between Greece and Turkey, the importance of the future establishment of the routing for the Caspian gas transport to Europe and points to the initiation of close cooperation between Turkey and Greece with the primary scope of examining the possibility of constructing the Gas Interconnector Turkey-Greece.
The highlights of activities so far include the following:
18.01.2002:
Signing in Ankara of:
(a) a Joint Statement by Government representatives.
(b) a Memorandum of Cooperation between DEPA-BOTAS
June 2001:
Completion by DEPA-BOTAS of the preliminary technical study of the Interconnector Turkey – Greece project (ITG).
July 2001-Feb.2002:
Completion of the feasibility study of the ITG project by Societe Generale.
13.02.2002:
Signing in Athens, at a political level, of a Memorandum of Understanding during the first Session of the Greek – Turkish joint Economic Commission.
11.03.2002:
Signing in Athens of a Memorandum of Understanding between DEPA and the Iranian NIOC in the presence of the Presidents of the Republics of the two countries.
28.03.2002:
(a) Joint Statement made in Ankara by the Greek Minister of Development Mr. A. Tsochatzopoulos and his Turkish counterpart Mr. Z. Cakan concerning the implementation of an action plan for the promotion of the ITG project.
(b) Signing of a Memorandum of Understanding between DEPA – BOTAS for the realization of the ITG project within the framework oulined in the Joint Ministerial Statement.
23.04.2002:
Signing of a Joint Declaration between DEPA and SOCAR in Baku, Azerbaitzan for the initiation of cooperation, on the occasion of the visit to Azerbaijan of the Greek Minister for Development Mr. Akis Tsochatzopoulos.
17.06.2002:
Visit by the Greek Minister of Development Mr. Akis Tsochatzopoulos to Bosnia/Herzegovina and Croatia. The broader gas Interconnection project between Turkey-Greece and the European Continent was discussed at the highest level.
25-27.06.2002:
(a) High level contacts in Istanbul by the Greek Minister of Development Mr. Akis Tsochatzopoulos concerning the promotion of the broader TransCaspian Interconnector Project.
(b) High level discussions in Istanbul between DEPA, BOTAS, OMV, SOGAR concerning the prospects of alternative routings for the Caspian gas transport via Turkey and Greece.
31.07.2002:
Signing of a Memorandum of Understanding between DEPA and EDISON GAS for the Study of the Interconnector project linking Turkey – Greece – Italy. BOTAS participated and co-signed the MOU later on.
30/10-01/11/2002:
Management level discussions in Ankara between DEPA and BOTAS for reviewing the overall progress of the Turkey – Greece Gas Interconnector project including the gas sales and purchasing contract.