Greece-Bulgaria gas link operator to press on with expansion to 5 Bcm/year

The operator of the gas interconnector between Greece and Bulgaria is to continue with plans to expand its capacity from the current 3 Bcm/year to 5 Bcm/year despite a lack of market interest in booking additional capacity.

Following a successful non-binding market test for the expanded capacity in 2023, ICGB held a binding capacity process last month, with "significantly different" results, an ICGB spokesperson said Aug. 7.

"These results will not affect the company's drive to implement the interconnector capacity expansion project from 3 Bcm/year to 5 Bcm/year," the spokesperson said.

"We believe that this is of great national and international interest and the company remains fully committed to this task."

The pipeline -- which allows gas from Azerbaijan and regasified LNG from terminals in Greece and Turkey to be moved northward to Bulgaria and the wider region -- began flowing gas in October 2022.

It had an initial capacity of 3 Bcm/year but ICGB -- co-owned by Bulgaria's BEH and a venture between Greece's DEPA and Italy's Edison -- has said it could be expanded to 5 Bcm/year with additional compression.

The pipeline flowed more than 15.5 TWh (1.5 Bcm) of gas in 2023.

Some 1.57 Bcm/year of long-term capacity was booked in the interconnector under 25-year contracts, with spare capacity offered in regular auctions.

Alexandroupolis delay

ICGB's procedure to increase the technical capacity of the pipeline went through two stages -- non-binding and binding.

"The non-binding phase was very successful, with interest expressed for about 4 Bcm/year of added capacity in several consecutive gas years," the ICGB spokesperson said.

"The binding phase ended in July, with results significantly different from last year," the spokesperson said.

The reasons for the reduced interest are now being analyzed. "But the ongoing delay in the commercial operation of the LNG terminal in Alexandroupolis is seen as the leading factor," the spokesperson said.

"This infrastructure is closely linked to the operation of the IGB and due to the great synergy of the two projects, ICGB believes that the full capacity of the interconnector can be reached only with a functioning terminal."

Greece's Gastrade -- the operator of the Alexandroupolis terminal -- expects the FSRU to begin operations at the start of October, a company spokesperson told S&P Global Commodity Insights last month.

The 5.5 Bcm/year FSRU -- Greece's second LNG import facility -- received its commissioning cargo in mid-February and had been expected to begin commercial operations at the end of April.

However, since then the commercial operation date has been pushed back a number of times due to unexpected technical issues faced during the commissioning process.

Market environment

ICGB, meanwhile, said a number of other factors likely played a part in the lack of interest in the binding capacity auction.

"The insecure market environment as well as the significantly lower price of Russian gas from Turkey, compared to European levels, are also relevant for the reduced market interest," the spokesperson said.

Russian gas supplies via the TurkStream pipeline to southeast Europe reached the second-highest monthly volume level ever in July, according to Commodity Insights data.

Russian gas deliveries via TurkStream into Europe at the Strandzha 2 entry point on the Turkey-Bulgaria border totaled 1.41 Bcm in July, averaging 45.5 million cu m/d, as Russian gas demand in the region remained strong.

It was the highest total since August 2023 when deliveries -- which began in 2020 -- hit an all-time monthly high of 1.43 Bcm.

It comes as spot LNG prices for delivery to the East Mediterranean market also remain relatively high.

Platts, part of Commodity Insights, assessed the DES East Mediterranean LNG marker at $11.86/MMBtu on Aug. 6.

Vertical Gas Corridor

The planned expansion of the Greece-Bulgaria interconnector is also part of a wider push to increase pipeline capacity in southeastern Europe under the Vertical Gas Corridor initiative.

The corridor is designed to expand transportation capacity in southeast, east and central Europe to allow for greater volumes of gas from Azerbaijan and regasified LNG to flow into the region via terminals in Greece and Turkey.

It is hoped to be able to deliver some 10 Bcm/year of gas via the corridor compared with 5 Bcm/year now.

Regional gas grid operators also held binding market tests for additional capacity along the route last month, but also attracted limited interest. The operators are to meet again in September to discuss next steps.

"The Vertical Gas Corridor is key to ensuring energy diversification and security of supply for Southeast Europe," the ICGB spokesperson said.

"Its role will be particularly strategic after the termination of Russian gas transit through Ukraine from the beginning of 2025."

The five-year gas transit deal between Russia and Ukraine is due to expire at end-2024, affecting several countries that still import Russian gas via Ukraine, including Austria and Slovakia.

In January, the gas grid operators from Greece, Bulgaria, Romania and Hungary agreed to expand the Vertical Gas Corridor group to include the grid operators of Slovakia, Moldova and Ukraine.

"Discussions to take common next steps are ongoing with the other participants in the Vertical Gas Corridor," the ICGB spokesperson said.

"Various options for financing the projects, including through US funds, are also being explored. Discussions are also ongoing with the European Commission," the spokesperson said.

"We are actively talking and we are driving sources of funding from American funds. USAID will be key for energy security and our infrastructure plays a strategic role in the corridor."