The gas pipeline, known as the Interconnector Greece-Bulgaria(IGB), officially became operational on October 1, 2022, providing access to the Southern Gas Corridor, which connects the gas transmission networks of two neighboring countries in the Balkans, and a number of new gas sources. European countries, facing a critical energy crisis due to the Russia-Ukraine War, have started to look for alternatives to Russian energy sources.
In this context, Ankara Center for Crisis and Policy Studies (ANKASAM) presents the views of Sam Williams, European Union (EU) Energy and Climate Policy Specialist at Germany-based EPICO KlimaInnovation, to assess the importance of the IGB, which started construction in 2020.
- The Interconnector Greece-Bulgaria (IGB) was officially opened on October 1, 2022. It is one of the pipeline projects that the EU funds. Do you think that this Interconnector would fully supply the demand of Europe for natural gas?
The IGB was never meant to fully supply the European Union’s natural gas demand, nor to completely replace Russian gas. Its main purpose has always been of strategic nature, diversifying gas supply in Bulgaria and in the region.
It’s also simple math. Even considering the steep fall in gas consumption in the second quarter of 2022, equal to nearly 14 bcm less than Q2 2021, the EU totally consumes around 400 bcm per year. In 2021, 155 bcm came from Russia. The IGB has a yearly capacity of 3-5 bcm of gas, fuelled by gas flowing from Azerbaijan in the TAP.
The first market test for the capacity of the IGB was launched in 2015, and construction formally began in 2020. While it is very timely for its completion to take place as the EU seeks to replace its imports of Russian gas, following the Russian-Ukrainian War. Any overreliance on a single country’s gas exports is inherently risky, and Bulgarian demand has been fulfilled by 90% from Russian gas, with a yearly purchase of 3 bcm.
It goes without saying that the IGB has a key role in the region’s diversification of gas supply. Important to note is also the additional potential that can be achieved through the LNG terminal in Alexandroupolis. While natural gas will inevitably have to be phased out in the mid-term, it remains one of the main sources of energy for the Union.
On the other hand, renewable sources of energy need to be ramped up, but for the time being, diversification of gas supply is crucial to ensure energy security, to ultimately decrease the price of energy bills for households around Europe.
- What would be the economic benefits of the interconnector for Greece and Bulgaria?
There are at least two dimensions to this answer, the first relates to the current energy crisis, and the second is connected to a wider macro-economic perspective on the energy market. Therefore, the IGB will help the people living in the region consume more affordable energy
The EU is currently entangled in a very challenging energy crisis. Member states are currently discussing various joint options to lower the price of energy. EPICO KlimaInnovation analyzed several of these measures.[*] However, none of these are optimal. This is mainly because price signals are crucial for the integrity of the energy market, as well as being drivers for the uptake of renewables. But high energy costs bear negative consequences on society. Hence, diversification of supply lies at the heart of any solution.
The economic benefits predominantly relate to the security of supply. As intrinsically liberal, the European energy market works best when the gas supply is provided by several equal actors. Such a scenario would see competitive prices for natural gas, reduced investment risks, and ultimately lower costs for households. Zooming out, this leads to growth, and the increase of pressure to adapt leads to innovation. These consequences are directly correlated with the protection of human rights and welfare. Similarly, this goes together with positive changes of political and diplomatic nature.
- Azerbaijani gas will be transferred through the Southern Gas Corridor and will be connected to IGB. Do you think any alternative countries in Central Asia would provide gas to Europe?
There are little to zero realistic prospects of gas supply from Central Asian countries to Europe, especially in the short term. However, it is a fact that the Russian invasion of Ukraine will bring alternative gas suppliers to the agenda.
The most topical point is gas coming from Turkmenistan, which benefits from gas reserves of around 14 tcm. Since the 2000s, there has been an idea of building a pipeline, ‘White Stream’, that would transport Turkmen gas from Georgia to Romania, through the bottom of the Caspian Sea. Supposedly, this would bring 30 bcm of gas to the EU.
Nonetheless, the reasons why such a project is unlikely to include, among others, the legal status of the Caspian Sea. Turkmenistan also remains diplomatically very close to Russia, which, together with Iran, has exerted significant pressure to prevent gas from being sold to the EU. As it currently stands. That’s why the White Stream will go into action in 2024.
- What will be Russia’s reactions?
Only a few days prior to invading Ukraine, Russia, through its state-owned company Lukoil, bought a 10% stake of Azerbaijan’s Shah Deniz gas project. This means that Azeri gas revenues from gas sold to the EU are also beneficial for the Kremlin. Such investment needs to be put in a wider picture of several direct investments of the Russian state in key Azeri companies and infrastructure. For example, in the same period, Lukoil also bought a 25% stake in the Shallow Water Absheron Peninsula, a gas exploration area. Not to mention the involvement of Russia in the South Gas Corridor, and its 16% share in the Azerbaijan Gas Supply Company Limited (AGSC).
Sam Williams:
Sam Williams is the EU Policy Specialist Energy and Climate at EPICO KlimaInnovation. Sam studied Politics and International Relations at the University of Kent (UK), and obtained an MSc in EU and International Public Policy from the London School of Economics, specializing in EU Policy-Making, and an MA in EU International Relations and Diplomacy from the College of Europe, specializing in Foreign Economic Relations and Sustainable Development. Sam has been focusing on EU energy and climate policy and diplomacy, at the Energy team at APCO Worldwide (Brussels), at the Energy Community Secretariat (Vienna), and in two think tanks in Italy.
[*] For more detalied information about the analysis written by EPICO, please see, “How to act?”, EPICO KlimaInnovation, https://epico.org/en/publications/how-to-act, (Date of Accession: 01.11.2022)
