Tag Archives: AGRI

North-South Interconnector – big news, but long in the making

The great thing about following the energy sector is that projects take a long time to get up and running. This means commenting on a project or policies resembles play-by-play on the golf course. With all this reflection time sometimes you hope to have some deep thoughts on ‘big developments’.

But sometimes, few thoughts come when politicians recycle long-term plans.  ‘Magical moment,’ may not be that magical after all. Particularly, when industry, regulators and TSOs and others have been working for years to increase cooperation. One of these ‘magical moments’ happened recently at the behest of the Hungarians, who are holding the EU’s rotating six-month presidency. There was (verbal?) agreement by the CEE prime ministers after  a dinner in Brussels. They stated they would all work together to form a north-south gas corridor.

The meeting was in the format “Visegrad+” (i.e. the Visegrad Four – Poland, the Czech Republic, Slovakia, and Hungary – plus Bulgaria and Romania), and was attended by Hungary PM Viktor Orban, Czech PM Petr Necas, SlovakiaTraian Basescu, Bulgarian PM Boyko Borisov, and Polish PM Donald Tusk. PM Iveta Radicova, Romanian President

The meeting was prompted by Hungary and one of its stated EU Presidency priority of increasing energy security of supply (aka, less reliance on Russian gas). However, it is clearly a rehash of an event held a year ago in Budapest, under Hungary’s previous Prime Minister. And which I wrote about here.

Now, I really don’t want to be cynical as politicians do need events to signify their influence and progress. Diversification of gas sources in the CEE/SEE region is a prime project that is not only a long-term one, but a necessity. Unlike investments necessary for carbon reductions, which are foundering, security of supply investments in gas are at least getting some attention, and most projects are moving forward. So this is good.

BUT what I fail to provide in the announcement of this BIG NEWS, is an effective analysis that has not been provided before. I think this is because while, Prime Minister Orban is heralding this as a historic moment, I view it as an artificial political moment in a long term technical project that is already well underway. The building of LNG facilities in Poland and Croatia (old news), the building of gas interconnecters in the CEE region (old news). My only observation is, a year ago, they all made the trek to Budapest to demonstrate their effort to work together on this very same plan, rather than meeting on the sidelines of a Brussels gathering.


I’m no fan of Orban, and I become less so by the day. Not only does the recycling of the north-south gas corridor event speak of a lack of innovation and sincere effort in energy policy, but his vision looks to be more rhetorical while also being overly ambitious and expensive. As he stated,

Hungary will “free itself from a giant trap” when, in just a few years, the country will be able to take energy deliveries from the Black Sea, the Baltic Sea, the Adriatic Sea, Azerbaijan and even North Africa,  Orban said.

I take this to mean that he will be supporting the AGRI gas project that will ship gas by LNG across the Back Sea. Something again, that I find wholly unrealistic due to costs and the competition it will cause for upstream gas supply with Nabucco and South Stream – which are still failing to secure their own gas sources. Essentially, there isn’t enough gas yet for these two pipeline projects, how will this be secured for a more expensive option? Diversity is great, if the supply/cost ratio is there but this is lacking in AGRI.

Finally, my two -cents-worth may indicate the big rhetoric over this diversification of supply may just be the ground work being laid for giving the Russians the contract to expand the Hungarian nuclear power plant Paks. The Hungarian government announced they will be issuing a tender in 2012 with the bids evaluated in 2013. Ah, just before the next Hungarian elections.

It has been floated that the Hungarians are ready to give the Russians the chance to build this expansion of the nuclear plant. Technically, the Russians are already in a good position, because the current configuration is based on Russian technology. This discussion is also tied up with swapping MOL shares that the Hungarian government would like to get its hands on from Surgetneftegaz, the Russian oil and gas company. All this hoopla by Orban may work to build reassurances for the domestic audience that Russian participation in Paks does not threaten the country’s security of supply. Because after all you wouldn’t want all your gas and nuclear tech to be owned by the same foreign country?

Oettinger: South Stream is the Competition

South Stream can, in the long term, be considered a rival to the Nabucco project,” Oettinger stated as an answer to a journalist’s question during the 10th Anniversary of the EU-Russia Energy Dialogue High level conference in Brussels, 22 November 2010. (Novinite.com)

What do you think? How do you perceive the role that Nabucco and South Stream will play on the security of gas supply in Central Europe? And how viable are these projects? This is what the Southern Gas Corridor Survey is setting out to answer.

Take a few minutes to contribute to the survey to find out if this is what energy professionals believe. Is Oettinger right? Your answers are anonymous.

Southern Corridor Gas Survey

And pass it along to a friend! You only have until December 6th – so do it now!

The Southern Gas Corridor Survey

Have your say! The race to extract gas from Central Asia and send it to Europe is on. But who is going to win? Or rather, which project(s) are actually viable and will be built through the European Southern Gas Corridor. And what is the reason for so many projects? Are they just political or are there solid economic and security of supply reasons behind these? These issues are addressed in this survey. And with your help we can establish what the general consensus is.

I’m seeking your cooperation to establish which of five projects may go forward in the future.

The survey can be found here: Click here to take survey

For better or worse, I excluded White Stream due to both the perceived political and financial backing and the level of general knowledge of the different pipeline projects. So my apologies to the backers of White Stream in advance.

The survey page, with the descriptions of the projects, can be found here.

And I would appreciate it if you could spread the word by email. You can copy this link into your email and spread the word about creating a shared knowledge analysis of the Southern Gas Corridor.


Further explanation of the reasoning behind launching this survey is giving in the introduction. So get busy and fill it out.. The results will be published in December/January.

Bulgaria: Oh – I have to pay for the pipeline?

Will that be cash, credit or debit?

Bulgaria appears to be ahead of most countries signing up for gas projects. Probably only for the fact that they are the only ones that might be able to squeeze a little extra money out of others. Sofia now wants a little extra help from the EU to finance its pipeline construction to connect to Nabucco. I guess a transit pipeline is not much help if you can’t get the gas out of it. Seriously, though this raises two flags.

One, Bulgarian finances are tight, but so are the other CEE countries – Romania, Hungary, how will these countries be paying, not only to build the actual Nabucco pipeline but the connections for the off-take? Will MOL and Transgaz be able to self finance these portions? For me, this is a significant point as it indicates that the other countries will be coming out with similar requests for financial help or maybe even a reduction in their share of financing portions of the project. If things are financially tight now, for companies and governments alike how will they raise the needed capital in time to begin construction in the next few years?

Point, 1.1 For Bulgaria, Serbia and Hungary it also must be asked:

– What about financing of South Stream connections?

– What about financing for South Stream pipeline portions that are more directly connected to state participation?

Two, we have a on Trend.az, of Bulgaria getting ready to join AGRI. Georgia is keen to export Azeri gas via tanker to Bulgaria. However, while the whole AGRI project remains speculative, it becomes even more unsure when it appears that Bulgaria can’t finance key aspects of the Nabucco project. Security of supply can be increased for each country, but participation in every new gas pipeline project that is announced seems dubious.

And three, what will also appeal to Hungary and Romania, is Bulgaria request to shift Nabucco costs out of national budgets – i.e. debt levels will not be seen.

Overall, the financial crunch is emerging for these projects. While countries continue to sign up and support all alternative routes – the deeper questions of who is going to pay for this still needs to be asked. In addition, if these pipelines/LNG facilities are built how much will gas cost for consumers? Will the cost be so high, as to reduce demand making these projects over ambitious?