Gas Supply in SE Europe and the Key Role of LNG Final Report
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Gas Supply in SE Europe and the Key Role of LNG An IENE Study Project (M46) Final Report Athens, December 2018 Gas Supply in SE Europe and the Key Role of LNG Contributors: Costis Stambolis, Executive Director, IENE Dimitris Mezartasoglou, Head of Research, IENE Institute of Energy for SE Europe (IENE) 3, Alexandrou Soutsou, 106 71 Athens, Greece tel: 0030 210 3628457, 3640278 fax: 0030 210 3646144 web: www.iene.gr, e-mail: [email protected] Copyright ©2017, Institute of Energy for SE Europe All rights reserved. No part of this study may be reproduced or transmitted in any form or by any means without the prior written permission of the Institute of Energy for South East Europe. Please note that this publication is subject to specific restrictions that limit its use and distribution. 2 Gas Supply in SE Europe and the Key Role of LNG December 2018 This IENE Study (M46) was largely funded by contributions from Institute corporate members. Disclaimer This document contains the best opinion of the contributors at the time of issue and does not necessarily represent IENE’s official position. Neither IENE nor the sponsor company offer any warranty or guarantee regarding the accuracy of any forecasts, estimates or analyses contained in this report. The contributors, IENE and the sponsor company are not responsible for any liability in association with this content. 3 Table of Contents 1. Introduction – Raison d' être ..................................................................................... 6 2. Global gas demand and supply overview .................................................................. 8 3. Gas demand for Europe and SE Europe and supply overview................................. 14 The case of SE Europe .............................................................................................................. 17 (a) Turkey ................................................................................................................................. 21 (b) Bulgaria ............................................................................................................................... 24 (c) Romania .............................................................................................................................. 26 (d) Serbia .................................................................................................................................. 27 (e) Croatia ................................................................................................................................. 28 (f) Greece.................................................................................................................................. 30 (g) FYROM ................................................................................................................................ 33 (h) Italy ..................................................................................................................................... 34 (i) Ukraine ................................................................................................................................. 40 4. The rising role of LNG in meeting global gas demand ............................................. 44 5. Existing and planned gas infrastructure projects in SE Europe ............................... 63 (a) Cross-border main gas pipelines in SE Europe .................................................................... 63 (b) Main national gas pipelines ................................................................................................ 82 (c) LNG Terminals in SE Europe ................................................................................................ 90 (d) Gas Storage Facilities in SE Europe ..................................................................................... 96 6. LNG supply overview in SE Europe ........................................................................ 100 4 7. The strategic role of LNG in securing future gas supply in SE Europe ................... 103 The Alexandroupolis FSRU project as part of an expanded South Corridor .......................... 105 8. Geopolitics and energy security in SE Europe ....................................................... 110 (a) Uncertainty over future Russian gas supply to SE Europe ................................................ 117 (b) Alternative gas supply sources and routes ....................................................................... 120 I. North Africa .................................................................................................................. 120 II. Middle East.................................................................................................................. 123 III. Eastern Mediterranean Region .................................................................................. 127 IV. Caspian Sea Region .................................................................................................... 136 V. LNG options ................................................................................................................ 141 9. Regional gas hubs and their role in enhancing energy security ............................ 145 (a) SWOT Analysis................................................................................................................... 147 (b) A Roadmap for Setting Up A Regional Gas Hub ................................................................ 148 (c) Economic Implications from the Operation of a Gas Hub in SE Europe – A Discussion .... 151 (d) Trading Activity and Prices at European Gas Hubs ........................................................... 155 10. Financing of gas infrastructure projects in SE Europe ......................................... 177 11. Conclusions .......................................................................................................... 183 12. Key messages ....................................................................................................... 186 References ................................................................................................................. 190 Appendix .................................................................................................................... 192 5 1. Introduction – Raison d' être Natural gas is a relatively new fuel for the SE European region1 while a number of countries, especially in the West Balkans, do not yet include gas in their energy balances or they are using only minimal quantities. In two key countries of the region, in terms of infrastructure and consumption, gas was introduced as late as 1996 in the case of Greece and in 1989 in the case of Turkey. But also in the case of the ex-COMECON countries in SE Europe, gas was not widely used, since priority was given to much cheaper and locally available lignite with Moscow preferring to sell most available gas quantities to Germany and other European countries in exchange of hard currency. The same approach was more or less valid for ex-Yugoslavia where emphasis was placed in maximizing the use of indigenous resources, largely based on lignite and hydro, with Croatia providing limited supplies of oil and gas. Again, gas was a late-comer and arrived only when Russia decided to make Slovenia a key junction for shipping gas to Italy. The present study covers primarily the gas demand and supply conditions which together with critical gas storage issues are examined on a global and regional basis. Special reference is made to LNG because of its growing importance for the safe operation of the gas networks of various countries and because of its potentially crucial role in market development and competition. In this light, all ongoing and planned gas interconnection projects are examined together with the major cross-country gas pipelines currently under construction or in a development phase. In addition, a discussion is made on the possibility of establishing both national and regional gas trading hubs very much in line with similar gas hubs currently operating in several European countries. It is anticipated that the setting up of such a regional hub(s) will greatly facilitate gas trading and hence enhance regional market integration and competition, ultimately helping maintain prices at reasonable levels for benefit of the consumers. The targets of the present study can be summarized as follows: 1. examine the past and present situation in the global gas market as well as in the gas markets of selected countries in Southeast Europe (i.e. Greece, Turkey, Bulgaria, 1 The SE European region as defined by IENE comprises a group of 13 countries (i.e. Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Cyprus, FYR of Macedonia, Greece, Kosovo, Montenegro, Romania, Serbia, Slovenia and Turkey) which have been chosen on the strength of geography but also on the basis of economic and political criteria. Turkey is a much larger country compared to any of the other states and its economy, because of its size and dynamism, affects to a large extent financial, trade and energy flows to the rest of SE Europe. 6 Romania, Serbia, Croatia and FYROM), but also in Italy and Ukraine, with specific reference to how all these markets are expected to be shaped over the next few years 2. examine the past and present situation in the global LNG market as well as in the SE European region, with specific reference to how all these markets are expected to be shaped over the next few years 3. analyse