Greek Gas Sector Eyes Flexible LNG Infrastructure
The developments in the Southeastern European natural gas market are mainly characterized by the prospective introduction of Azeri gas in the market by 2019 through the Trans-Adriatic Pipeline (TAP).
For that reason countries such as Greece are eying around opportunities to exploit the new emerging gas mix that will also be coupled with substantial amounts of Russian gas through the South Stream pipeline, as well as through independent LNG suppliers through the liberalization of the regional markets.
More specifically on the LNG sector, apart from projects aiming at either enchasing the existing infrastructure or establishing new terminals, there are two notable plans in Greece, regarding the construction of Floating Storage and Regasification Units (FSRU). They are planned to be located right beside the route of the TAP project and nearby the Bulgarian and Turkish markets so as to be able to link themselves through he planned interconnectors.
Firstly the GasTrade Company, an affiliate of Copelouzos group which is a partner of Gazprom Export, has drafted plans to initiate an FSRU of 2.5 billion cbm annual capacity. Since early 2012 it has submitted its preliminary project to the Greek energy regulator energy and has concluded its feasibility and environmental assessments. The location proposed is in close proximity of the port of Alexandroupolis a few Kilometers from where TAP route begins in Greece and around 70 Km from the Greek Bulgarian borders and the upcoming Interconnector Greece-Bulgaria (IGB). The plan calls also for a storage facility of 135,000 cubic meters and the link of the installation with the land through a 25 Km subsurface pipeline along with a 5 Km spur to link with the nationwide gas network. The budget for that project is roughly estimated at 400 million Dollars and it will be able to accommodate imports from various LNG suppliers through spot market purchases, adding thus to the “liquidity" of the local and regional markets.
Concurrently the Greek DEPA Company is also laying down its own plan concerning FSRUs and more analytically a 3 bcm per annum facility near the port of Kavala and in a strategic location close to the aforementioned pipeline and interconnector. The project aims for a 150,000 cubic meters storage capacity and DEPA already actively seeks international investor backing for this 400 million Dollar plan that it relays it is a suitable add to the IGB project. Moreover in Kavala region plans are being drafted for the establishment of a 1 billion cbm natural gas underground storage facility that it is also linked of the aforementioned plans. The final aim for DEPA is to create a gas hub in Kavala that will eventually become a nascent spot market for Southeastern Europe, having sources of the commodity from Azerbaijan through TAP, from Russia through the existing Greek-Bulgaria network, from Algerian Sonatrach through existing LNG contracts and from independent suppliers, including future Eastern Mediterranean gas imports. The business plan of DEPA calls for the mid-term to increase the annual capacity of the Kavala FSRU to 5 billion cbm.
The total investment along with the underground storage facility and various secondary infrastructure will reach around 1 billion Dollars, thus its success depends mostly on international investor interest, taking into account the state of affairs of the Greek economy nowadays that prohibits DEPA of raising such capital by itself. Moreover the moves by neighboring countries and especially Bulgaria are crucial since a series of similar and antagonistic projects of FSRU, LNG and underground storage, cannot proceed all together due to limits of the market dynamics and the rather low potentials of the regional markets, as compared to the rest of the EU.
Concluding it can be said that the selection of TAP has raised hopes in Greece and its neighbors for the possibility of creating the necessary infrastructure for the establishment of a gas hub for the first time, a move that will facilitate price reductions and will also ease security of supply concerns.