Re-affirming the greek energy strategy on Energy Union

Within the framework of the event organised by the Greek Energy Forum (GEF) in Brussels on “EU 2030: the Prospects of the South East Mediterranean”, Greece’s role as a key transit country for Europe’s energy security was highlighted.

In particular, the event analysed EU energy diversification efforts and the impact of these policies on the energy markets of South East Europe.

A number of government officials, representatives of EU institutions and the oil and gas industry reiterated the importance of interconnectors to catalyse the realisation of an integrated and fully functioning EU internal energy market.

Investments in infrastructure will represent a step towards the establishment of regional solidarity mechanisms and the enabling of bidirectional gas flows that the EU has been promoting for years. They will also contribute towards the concept of a Union that is energy interdependent and less at risk from single source dependency; an issue that is of significant importance, particularly for Member States in South East Europe.

Following the publication of the EU’s new flagship initiative, Energy Union, the new Greek government has to clearly define the role that it aspires to play in the region. The government’s priority thus far has been to tackle issues related to the economy and relations with its creditors.

Energy policy has until now been a secondary objective; the new administration has to undergo a steep learning curve. If the new Government wants to maintain the strategic positioning of Greece as a Mediterranean gas hub in the making, quick and decisive actions are necessary.

The first opportunity for the Greek government to test its credentials on the international energy scene were mired by a lack of know-how and inexperience. Greece’s new energy team met with Azeri officials from the State Oil Company of Azerbaijan Republic (SOCAR) to reaffirm their support for the Southern Gas Corridor and discuss three requests which were subsequently brushed aside:

Firstly, the request for transit fees from the Trans Adriatic Pipeline (TAP) was rejected as transit fees do not apply within the EU.

Secondly, Greece’s request to renegotiate Shah Deniz II gas prices was premature considering that volumes will not be received prior to 2020. When gas deliveries begin, renegotiations can take place, but only in the case of proven significant market developments – e.g. US shale revolution.

Lastly, Greece’s involvement as a shareholder in the TAP project was not ruled out. However, one has to contribute financially in order to become a shareholder. Despite these initial setbacks for the Greek government, what they lacked in experience was made up for by a willingness to listen and engage with international investors in a cordial manner.

The Final Investment Decision (FID) in favour of the TAP project in December 2013 put Greece on the EU energy security map last year as the gateway for Caspian gas to Europe. Greece should not limit itself to becoming a gateway country for new energy supplies to Europe. Instead, it should be more ambitious about the role it can play in the region and leverage the potential that TAP will provide. It must view TAP as an opportunity for increasing its regional significance rather than as a mere opportunity to increase state revenues.

The next pivotal step towards enhancing Greece’s role in the region is through the realisation of the Greece-Bulgaria Interconnector (IGB) which is the starting point of the vertical corridors which were referred to in the Joint Statement signed by the Energy Ministers of Greece, Bulgaria and Romania on December 9th in Brussels.

IGB’s completion will represent a crucial milestone in the EU’s efforts to build a regional energy market in South East Europe, as it will enable gas flow from TAP and a new LNG facility in Northern Greece to filter into Bulgaria, extending onwards to Central Europe, through the Balkans and South Eastern Europe.

After the inaugural meeting of the newly formed Central Eastern South Europe High level working group (CESEC) in Sofia on the 9th February, the Energy Ministers of Greece and Bulgaria agreed to accelerate works related to IGB and set a goal of arriving to a final investment decision in May 2015, ahead of the next CESEC meeting in June.

The projected cost of the IGB currently amounts to €220 million. The project has been awarded the status of a project of common interest, and features in the short term priorities of the EU’s energy security strategy published in May 2014. As such, it has already received €45 million in financing from the European Economic Programme for Recovery, while it has significant potential for further financing – Connecting Europe Facility, Juncker Plan.

However straightforward this project might seem, significant forces have been delaying its development. Notably, the loss of the Nabucco and the South Stream projects has alienated the Bulgarian authorities, making the next steps in their energy policy unclear.

Bulgaria’s ambiguity is emphasised by the recent agreement of Bulgargaz with Botas on the Turkey-Bulgaria Interconnector (ITB), as well as the Prime Minister’s request to have Turkey participate in the CESEC meeting, only to be rejected by the EU Vice President for Energy Union.

The situation becomes more complex if we consider that the ‘Eastring’ project – originally planned as a counter balance to South Stream that would link Bulgaria to Romania, Hungary and Slovakia – has been touted as a possible link to Gazprom’s new Turkish Stream concept, which would include the building of a gas hub in Turkey.

Such developments would be at odds with the Greek energy policy as mapped out by the former government. Turkish analysts in Botas have stated that if Greece were to develop newly planned LNG capacity in Alexandroupoli and Kavala, there would be no added value offered by ITB given the relatively small size of the regional gas markets in South East Europe.

The Greek government needs to act swiftly in re-affirming its energy strategy and capitalise on the current willingness from the EU to fund Greek projects – e.g. IGB, Aegean LNG. Greece should build on the political momentum achieved at the EU level following the signing of the vertical corridors declaration on December 9th 2014.

Simultaneously, it also has to address the Bulgarian question at the highest political level, ensuring that alignment is achieved. The current polyphony and ambiguity may result in a zero sum game in which the EU goals of energy diversification, regional development and energy market integration will be the losers. 

* Constantine Levoyannis is deputy head of Greek Energy Forum in Brussels, and Dr. Angelos Gkanoutas-Leventis is Vice Chairman of the Greek Energy Forum. The opinions expressed in the article are personal and do not reflect the views of the entire Forum or the companies that employ them.