Caspian Report - Issue: 08 - Fall 2014

The pricing formula may even be
more dependent on oil price fluctuations
than the pricing formulae used
even by Gazprom (at least until the
end of 2014), which are 50% linked
to the price of other gas supply contracts
and/or electricity prices. This
does not necessarily augur well for
the future of Greece’s industrial
competitiveness; Greece still pays
one of the highest gas prices in Europe.
Despite the complications TAP created
for DESFA’s privatisation, the
realisation of the 10 bcm/y capacity
pipeline project will also help
Greece achieve another major goal of
its foreign energy policy: the establishment
of a South-North gas corridor
that simultaneously achieves
the interconnection of natural gas
systems/markets from the Aegean
Sea to the Danube and helps protect
Central European and Balkan states
from the consequences of another
disruption to Russian imports that
are transported through Ukraine.
Since 2008, the slow pace of the development
of the EU’s Southern Gas
Corridor strategy led the countries of
Southeast Europe to look for smaller,
more affordable and more readily
available diversification alternatives
that combine the construction of interconnector
pipelines with LNG terminals
into one virtual pipeline system.
This system, based on the construction
of four 3-5 bcm/y capacity
pipelines, would link Hungary with
Greece via Bulgaria and Romania by
providing all intermediary markets
with non-Russian imports via the
ITG and the TAP.
This system of interconnecting
pipelines would also allow for the
rapid reverse-flow of gas in case of
another major gas supply/transit
crisis like the January 2009 Russian-
Ukrainian crisis, which galvanized
the European Commission and most
of the region’s governments into action.
The ongoing Russian-Ukrainian
crisis, which could result in the loss
of around 16% of European gas consumption
attests further to the strategic
importance of these interconnectors.
They are crucial to the security
of those member-states which
are the most vulnerable to a supply
shortage in the event of a Russia
shutting of gas supplies.
Around 50% of EU’s gas consumption
is transited via the Soviet-era
Ukrainian gas transmission system.
This amounts to approximately 60%
of Greek demand, 90% of Bulgarian
demand, 20% of Romanian demand,
20% of Italian demand, 52%
of Austrian demand and 49.5% of
Hungarian demand. 14 The 2009
European Energy Programme for
Recovery (EEPR) constitutes the
financial underpinning of this coordinated
EU effort. The EEPR covers
1/3 of the total investment cost for
the four abovementioned interconnectors
that aspire to integrate the
gas markets of Greece-Bulgaria-
Romania and Hungary. 15 Since all
these interconnectors are planned
primarily as a means of diversifying
gas imports away from Russia, they
could also prove to be more beneficial
to the Balkan states involved,
especially those who supported the
now defunct Nabucco West project
like Bulgaria, Romania and Hungary.
For the Eastern Balkans, the Greece-
109
CASPIAN REPORT, FALL 2014
14.
Authors’ estimates based on the BP Statistical Review of World Energy 2013, p.28. The estimate
of a 16% loss of European, not only EU demand, of Russian gas that includes states like Turkey,
Switzerland and Serbia is quoted from, U.S. Energy Information Administration (U.S. E.I.A.), Ukraine
Country Note, (March 4, 2014), http://www.eia.gov/countries/country-data.cfmfips=UP&trk=m
15.
For a detailed list of the EC funded projects under the EEPR, http://europa.eu/rapid/press
ReleasesAction.doreference=IP/10/231