Kavala UGS procedure delay, ministry guidance needed

RAE, the Regulatory Authority for Energy, has reached a preliminary decision on a business pricing framework for a prospective underground natural gas storage facility (UGS) at the almost depleted natural gas field of “South Kavala” in the Aegean Sea’s north, but more work is needed before a public consultation procedure can be launched.

According to energypress sources, this procedure will go ahead once the authority and energy ministry have fine-tuned RAE’s terms.

RAE is expected to forward its preliminary decision to the ministry by Monday for a response ahead of the authority’s next board meeting on Thursday, when the UGS pricing framework proposal is expected to be finalized ahead of public consultation, which should begin at the end of next week.

Privatization fund TAIPED has pressed for this pending, and significant, step to be taken so that the prospective facility’s ongoing privatization can enter its final round of binding bids.

A gas grid operator DESFA and GEK TERNA partnership, as well as Energean Oil & Gas, have advanced to the second round of the project’s tender, staged by TAIPED, offering contracts for the development and operation of the facility.

The lead-up has sparked controversy. A DESFA proposal for a parallel double pipeline running from Thrace, in the country’s northeast, to northern city Thessaloniki, so that the Kavala UGS could function, would cost consumers in Greece nearly one billion euros, more than double the operator’s estimate of 450 million euros, RAE president Thanassis Dagoumas has contended.

DESFA, in response, insists the Kavala UGS pipeline proposal would cost 420 million euros and is necessary as existing infrastructure is close to saturation point, especially in the north.  Upgrades are needed to facilitate new infrastructure that would establish the country as a gas hub, DESFA officials noted, describing its proposal as a necessary network upgrade.