underground gas storage

South Kavala UGS tender likely to conclude without result

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A deadline for the submission of binding bids in a tender staged by privatization fund TAIPED for the almost depleted natural gas field of “South Kavala” in the Aegean Sea’s north, being offered for the development and operation of a prospective underground natural gas storage facility (UGS) for a 50-year period, has been finalized for November 28, approximately two-and-a-half years after the tender was announced, energypress sources have informed.

However, the tender’s two final-round qualifiers – Energean and a partnership bringing together gas grid operator DESFA and construction company GEK Terna – have complained related pricing regulations are far from making the investment viable. Subsequently, the participants will most likely not submit binding bids, sources closely following the procedure have noted.

If so, the tender will most likely be declared inconclusive, setting back the country’s plan for a domestic UGS. Its gas storage capacity would offer crucial protection for Greece against international market price volatility.

Officials representing the energy ministry, TAIPED and RAE, the Regulatory Authority for Energy, held a meeting last week on the South Kavala UGS, where a decision was reached to complete the ongoing tender as soon as possible, with the current pricing regulation intact.

The tender for the South Kavala UGS was launched by TAIPED in June, 2020.

South Kavala UGS qualifiers in March, plenty of work needed

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Privatization fund TAIPED is expected to have completed its appraisal of first-round bids in a tender offering development and operation of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece next month, possibly within the first half of March, energypress sources have informed.

The fund, at that point, will be ready to announce its list of second-round qualifiers.

TAIPED and the government are taking cautious steps for this project, regarded as complex, especially on matters concerning the tender’s binding-offers stage, sources informed.

Three bidding teams have submitted non-binding expressions of interest for the first round. These are: China Machinery Engineering Co. Ltd. (CMEC) – Maison Group; DESFA – GEK Terna; and Energean Oil & Gas (in alphabetical order).

Much work appears to still lie ahead for this privatization, whose completion is not expected any sooner than next autumn, sources noted.

Pending matters include the delivery of a finalized operating framework for the South Kavala UGS by RAE, the Regulatory Authority for Energy.

This framework will determine the pricing system for the UGS, or the proportion of the facility’s earnings to be regulated and the proportion to be shaped through competitive procedures.

Besides RAE’s operating framework, bidders will also need to conduct due diligence before submitting second-round offers.

 

 

Two, possibly three, bidders for South Kavala UGS license

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An upcoming tender to offer an underground natural gas storage facility (UGS) license for the almost depleted South Kavala offshore natural gas field in the country’s north is expected to attract the interest of two, or possibly three, bidding teams.

Interested parties have been given an extension to express non-binding first-round interest. Prospective participants are busy preparing.

The participation of Storengy – a three-member consortium formed by France’s Engie, Energean Oil & Gas, holder of the South Kavala field’s license, and construction firm GEK-Terna – is considered a certainty as this consortium was established in anticipation of this tender.

Greek gas grid operator DESFA, increasingly active, since its privatization, in various projects, including some beyond its more customary operator-related bounds, is seen as another certain bidder for the South Kavala UGS license.

Senfluga, the consortium of companies that acquired a 66 percent stake of DESFA, appears very interested in the South Kavala UGS tender. This consortium’s current line-up is comprised of: Snam (54%), Enagas (18%), Fluxys (18%) and Copelouzos group member Damco (10%).

Though Senfluga’s three foreign partners – Snam, Enagas and Fluxys – are examining the prospect of joining DESFA to express joint interest, separate bids from the two sides are considered likeliest. The main reason for this has to do with certain tender rules that restrict the ability of consortiums participating in the first round to then reshuffle, if needed.

Pricing policy regulations expected from RAE, the Regulatory Authority for Energy, ahead of binding offers, will be crucial to how the tender plays out as these rules will determine the project’s earnings potential and level of bids.

PCI hopes for underground gas storage boosted by late effort

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NEWS UPDATE: 

Greek energy ministry officials have made a successful last-ditch effort ahead of this Sunday’s elections that boosts the country’s chances of keeping on the EU’s PCI list an underground gas storage facility in the offshore South Kavala region, planned through the development of a depleted natural gas field, energypress sources have informed.

An FSRU in Alexandroupoli, northeastern Greece, will also be on the PCI list, enabling favorable funding terms, the sources added.

Prior to this latest development, energy ministry officials assured that problems concerning the South Kavala project’s place on the PCI list would be overcome, while admitting the project had been negatively appraised by Brussels.

Earlier today, energypress reported: 

A project entailing the development of a depleted natural gas field in northern Greece’s offshore South Kavala region as an underground gas storage facility appears likely to be removed from the European Union’s PCI list, a status enabling favorable funding.

Delays and the country’s early elections appear to have taken their toll and are believed to be key reasons behind the project’s likely removal from the PCI list.

The underground gas storage facility has been negatively reviewed by EU authorities amid procedures leading to the determination of a new and revised PCI catalogue for 2020-2021, energypress sources have informed.

Not all hope has been lost. Final decisions by EU authorities will be reached in October, which gives Greek officials some time to present their case in favor of the project’s PCI-list inclusion.

The asset’s ownership, along with the responsibility for its utilization, have been transferred to the privatization fund TAIPED, which has significantly delayed related initiatives as it obviously does not consider the project to be a top-priority issue.

The project’s budget is estimated at between 300 and 400 million euros, while its storage capacity could end up being anywhere between 360 and 720 million cubic meters, as much as 10 percent of the country’s annual natural gas consumption.

France’s Engie, as well as Terna and Energean, have formed a consortium to bid for the project whenever a tender is staged.

Engie, Terna, Energean join for underground gas storage facility

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Three major firms, each specializing in its own respective field, have formed a consortium to seek a contract to develop and operate a depleted natural gas field in northern’s Greece’s offshore South Kavala region as an underground gas storage facility, energypress sources have informed.

Storengy, belonging to France’s Engie group, Energean Oil & Gas, holder of a license for the South Kavala field, and technical firm Gek Terna are the three players joining forces for this contract, to be offered through a tender being prepared by the privatization fund TAIPED.

Greece remains the only country European country without an underground gas storage facility. All others maintain storage facilities covering over 20 percent of their annual natural gas consumption needs. At present, many countries in Europe are planning to develop additional such projects over the next five years.

Underground gas storage facilities play a key role in subduing carbon emissions as a result of the flexibility they offer to renewable energy sources.

Consortium member Storengy is Europe’s biggest developer and operator of underground gas storage facilities. It currently operates 21 such facilities of all types on the continent.

Offering a capacity of between 360 and 720 million cubic meters, or 10 percent of annual natural gas consumption in Greece, the South Kavala underground gas storage facility will require an investment of between 300 and 400 million euros to develop. The project has been granted PCI status by the European Commission, enabling EU funding support.

 

Turkish unrest boosts local gas storage, LNG station prospects

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Last week’s attempted coup in Turkey, the three-month state of emergency just declared by the neighboring country’s president Recep Tayyip Erdogan, the polarization of citizens, and, above all, the overwhelming fear that Turkey is entering a period of prolonged unrest amid which an eventual outbreak of civil war cannot be ruled out, are all new factors reshaping plans for the region’s energy projects.

Energy-sector players with interests have already recognized the arrival of a new era for the region and are rethinking and revising their plans accordingly, regardless of whether they are openly admitting so or not.

For example, Russia is now displaying a revived interest for the development of a stalled oil pipeline to link Burgas, on the Bulgarian Black Sea coast, with Alexandroupoli, in Greece’s northeast. The pipeline would bypass the Bosporus and Dardanelles and offer an alternative route for the delivery of Russian and Caspian oil should any shipping limitations arise in the Black Sea straits, as Nikolay Tokarev, president of the Russian pipeline company Transneft, put it just days ago.

The prospects for the Trans Anatolian Pipeline (TANAP), a major pipeline planned to transfer natural gas from the Azeri deposit Shah Deniz across the Georgian-Turkish borders, in Turkey’s west, are suddenly not as bright as a result of the latest political turmoil in Turkey. This pipeline, if completed, would transport natural gas to the Greek-Turkish border and, from there, continue via the TAP (Trans Adriatic Pipeline) across to Italy.

Yesterday, the consortium behind the TANAP project rushed to assure that Turkey’s political developments will not affect the pipeline’s progress, noting that the pipeline’s construction remains on schedule. However, it is quite obvious that a 1,800-kilometer pipeline crossing a country mired in major political uncertainty represents a business venture whose current risk greatly exceeds the level originally anticipated. Without a doubt, within this context, the consortium will reassess its plans.

The prospects of other projects have gained ground as a result of the situation in Turkey. These include a planned floating LNG station in Alexandroupoli, as well as an underground natural gas storage facility at a depleted deposit in the Gulf of Kavala, northern Greece.

Development of the Alexandroupoli’s floating LNG station, if the required capital and entrepreneurial participation are secured, promises to establish the facility as a safe supply point for the TAP pipeline, if the TANAP project is delayed or rerouted. The Alexandroupoli LNG station also promises to support the planned Greek-Bulgarian IGB interconnector.

During a recent meeting in Athens with Greece’s energy minister Panos Skourletis, officials of US energy company Cheniere, primarily active in LNG-related businesses, declared, clearer than ever before, the company’s interest to take part in the development of the Alexandroupoli LNG station.

Gastrade, a Copelouzos corporate group company and fundemantal proponent behind the investment plan for the Alexandroupoli station, plans to have finalized an investment plan and capacity commitments from traders by the end of the year. The objective is to complete the LNG station’s construction by the end of 2018.

Interest rekindled for Gulf of Kavala natural gas storage unit

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The Greek government envisages the conversion of a depleted natural gas deposit in the Gulf of Kavala, northern Greece, into an underground natural gas storage facility as part of a wider effort to bolster the country’s geopolitical role and establish it as a regional energy hub.

Speaking in Greek Parliament, Environment and Energy Minister Panos Skourletis criticized TAIPED, the State Privatization Fund, into which this national asset has been transferred, for “not having shown any interest all these years, despite the fact that natural gas storage stands as a highly significant issue throughout Europe and such spaces are greatly sought after.”

According to energypress sources, the environment and energy ministry is prepared to press ahead with proceedings to utilize the space once a work group assembled by the ministry to study the prospect has completed its work, even if this means regaining control of the asset from TAIPED.

Even the former energy minister Yiannis Maniatis, who held the portfolio under Greece’s pre-Syriza administration and had authorized the depleted gas deposit’s transfer to TAIPED during his tenure, has appeared dissatisfied by the lack of progress.

Natural gas storage needs in the wider region are expected to significantly increase once deposits in Israel and Cyprus are fully developed for production. The scheduled launch of the TAP (Trans Adriatic Pipeline) project in 2020 also elevates the role to be played by the underground natural gas storage facility as no other storage facility exists along the pipeline’s route. Just one natural gas storage facility operates in the wider area, in Chiren, Bulgaria, not on the TAP route, but its storage and supply capacities are limited.

The Europea Union, seeking to bolster supply security, supports the development of such projects. The Gulf of Kavala deposit’s prospective conversion into an underground natural gas storage facility was initially classified as a Project of Common Interest (PCI), a status ensuring EU funding, but was removed from the list last year as the project had remained stagnant.

The depleted natural gas deposit is controlled by Energean Oil & Gas, which holds licenses for deposits in the wider area. The company’s operating license was granted a further two-year extension last November. Otherwise, the Greek State would have needed to find funds to protect and maintain the facility.

The prospect of converting the depleted natural gas deposit in the Gulf of Kavala into an underground natural gas storage facility had been examined in 2011 by Energean – according to company officials it remains interested – the Greek State, as well as DESFA, the natural gas grid operator. At the end of 2011, the national asset was transferred to TAIPED for privatization through an international tender. However, this procedure never got off the ground despite an interest expressed by Edison and Energean.

The underground natural gas storage facility’s development would offer a capacity of roughly 500 million cubic meters, which would greatly upgrade energy security in Greece.