Tag Archives: north-south

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.

Hungary

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?