
The South-East European Gas Initiative
The South-East European Gas (SEEGAS) Initiative, launched by the Energy Community Secretariat in December 2020, is a response to stakeholders’ increasing interest to establish organized gas exchanges and improve cross-border trading.
Recognising the need for dialogue and cooperation well before the first signs of the current energy crisis, the Energy Community Secretariat launched the SEEGAS project, an initiative aiming to foster closer cooperation between gas exchanges and transmission system operators central, southern and Eastern Europe. The goals are to enable market opening, better services for traders and ultimately to benefit end-consumers through increased competition in gas trading.
This page presents milestones, studies and discussions conducted in the context of the SEEGAS initiative.
SEEGAS deliverables
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Memorandum of Understanding
July 2021: Memorandum of Understanding
On 21 July 2021, a Memorandum of Understanding about trans-regional cooperation on the development of an integrated South-Eastern and Eastern European gas market was signed by the Energy Community Secretariat, energy exchanges and trading service providers BRM, UEEX, TGE, CEEGEX and ECG and transmission system operators Moldovatransgaz, GTSOU, FGSZ and GAZ-SYSTEM. The signatories aim to cooperate on the development of cross-border natural gas trading, e.g. on exchange platforms, and introduce transparent and competitive interregional market-based pricing mechanisms and efficient cross-border gas transmission and interoperability.
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Document Name Published on 19.07.2021- Meetings
SEEGAS Stakeholder Meetings
In order to establish a dialogue between the relevant stakeholders in the region with the aim of facilitating the goals mentioned and tackling potential obstacles to gas market integration, the Energy Community Secretariat established the SEEGAS Stakeholder Meetings. The meetings take place in two formats; Joint Steering Committee and SEEGAS Stakeholder Platform.
These recurring meetings served as a platform to introduce the current, most significant stakeholders in the SEE & EE regions and to share best practices towards further development of regional exchange traded markets for gas. The first meeting took place on 15 December 2020, with follow-up meetings in various constellations taking place every three months.
- Public consultation
May 2021: public consultation
From 12 May 2021 to 30 June 2021, the EU Agency for the Cooperation of Energy Regulators (ACER) and the Energy Community Secretariat (ECS) carried out a joint public consultation regarding gas capacity availability and use on a number of interconnection points (IPs). The IPs concerned are located on the borders of the EU Member States and the Energy Community Contracting Parties and between the Energy Community Contracting Parties. By way of this consultation, ACER and the ECS aimed at gaining a firmer understanding of stakeholders’ views on best practices in pursuit of enhancing connectivity, optimal use of existing capacity, market integration, and competition.
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Report on regional transmission routes
September 2022: SEEGAS Report on regional transmission routes
In preparation for winter but also with an eye on the months and years ahead when Europe expects to wean itself off Russian gas supplies, the Secretariat carried out research into regional supply corridors and found a number of routes that are taking shape, opening up access to alternative gas imports. The hands-on report offers practical information on the import and transmission capacity that is available regionally, identify and describe the projects that are being developed and recommend solutions to barriers that are causing bottlenecks.
Although the SEEGAS project has the double mission to integrate exchanges and infrastructure, this study focuses strictly on the latter. More concretely, the SEEGAS Infrastructure Report has surveyed 10 national gas transmission system operators in Bulgaria, Croatia, Greece, Hungary, Moldova, North Macedonia, Poland, Romania, Turkey, Ukraine, 10 existing or prospective LNG terminal operators in Croatia, Greece, Poland, Turkey as well as the operators of the recently commissioned Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline, which together make up the Southern Gas Corridor. Respondents include operators in EU Member States and Energy Community Contracting Parties which have also expressed interest in joining the SEEGAS project.
The value of the report resides in the fact that most of the data captured here was provided first-hand by operators. Other institutions such as the EU’s Agency for the Cooperation of Energy Regulators (ACER) or the European Network of Transmission System Operators for Gas (ENTSOG) were also consulted on a variety of issues including tariffs, transmission capacity or the signing of interconnection agreements. Importantly, the study also benefited from comprehensive feedback from traders who shared their experience in shipping gas regionally and their recommendations on possible solutions to tackle underlying problems.
The paper is split into four sections (more details in section below) corresponding to four supply corridors grouped around key sources of supply.
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Document Name Published on 30.09.2022- Report on gas exchange
December 2021: SEEGAS Report on gas exchange
Parallel to the 2nd Joint Steering Committee meeting, the Secretariat published its SEEGAS report with the title Introduciton to the SEEGAS Initiative and Gas Exchange Development in the Region.The report begins by providing an overview of the SEEGAS Initiative and summarizing its achievements to date. The second chapter outlines gas market and exchange developments in the SEEGAS participating countries, three Energy Community Contracting Parties (Georgia, Moldova and Ukraine), five EU Member States (Austria, Bulgaria, Greece, Hungary, Poland and Romania) and one Observer to the Energy Community (Turkey). All countries which are covered by this report are either in the process of establishing exchange traded gas markets or have such markets already in operation.
The SEEGAS report should not be considered as a regulatory report but rather as a collection of information compiled and developed by the Energy Community Secretariat based on the implementation report and on information submitted by key regional stakeholders and in close consultation with them.
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Document Name Published on 17.12.2021 - Report on gas exchange
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CROATIA – HUNGARY - CEE CORRIDOR
Croatia
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The launch of the Croatian LNG terminal on the island of Krk in Omišalj has placed the country at the heart of a new supply hub for south-East Europe, bringing diversification not only for its own market but also for the region. The terminal, using its own floating storage and regasification unit (FSRU), has been recently expanded by 0.3bcm to 2.9bcm annually but pipeline expansion projects linking to Slovenia, Hungary and the Balkans via Serbia could help increase that capacity further. Since its launch in January 2021, the offshore facility received cargoes originating in the US, Nigeria, Qatar, Russia, Trinidad & Tobago or Egypt.Croatia has been planning to expand its LNG importing and transmission infrastructure well before the EU’s push to diversify away from Russian gas imports. These plans are now likely to gather speed amid growing regional demand.
- The current facility/mooring arrangements have the capacity to receive Q-Max vessels.
- The existing vessel is owned by Croatia LNG and has an hourly sendout of 336,000cm.
- There are plans to expand it to 400,000cm/hour which would help increase the facility’s overall capacity by another 0.6bcm/year to 3.5bcm/year.
Hungary
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The Hungarian gas market has been positioning itself as a regional supply and transport hub, seeking to establish numerous routes linking southern European markets to central European hubs to the north. Hungarian shippers have been actively working to source natural gas either as part of long-term contracts with Russia, buy on the spot on hubs or secure LNG swaps for volumes imported via the Croat terminal Krk. Although Hungary does not have significant gas reserves, it has supplied volumes to neighbouring countries, including Romania, one of Europe’s larger producers.Since the launch of the Krk terminal in 2021, Hungarian companies have been active buyers, signing a six-year supply agreement with Shell in 2020 for 250mcm annually. The gas is in fact swapped, which means that gas sourced as LNG earmarked for deliveries to Hungary is retained in Croatia and the equivalent amount transiting Hungary towards the Balkan country is retained at the border.
- At the start of the year, Ukraine and Hungary decided to carry out a pilot project for firm export capacity from Hungary to Ukraine until the end of September 2022. The initial volumes were offered at 8mcm/day and there were expectations they would double depending on market interest. The two gas TSOs subsequently announced the pilot would be extended until 31 March 2023.
- If Romania fast-tracks its Black Sea exploration and production projects, Hungary would be interested in sourcing more volumes from the country via the Csanádpalota interconnection point. A total of 50GWh/day have been booked at the IP on a long-term basis from Romania to Hungary until 2029/2030 and 70GWh/day in opposite direction over the same period.
- As of mid-July, Hungary announced an energy emergency and said it would ban exports of natural gas from 1 August 2022, raising concerns about the impact on regional gas supplies.
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POLAND – UKRAINE SUPPLY CORRIDOR
Poland
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The Polish gas market is preparing for a sea-change in the upcoming decade as it is ending its reliance on Russian gas, looks to diversify sources of supply and expand the transmission infrastructure to establish a regional hub for cross-border exchanges with Ukraine, the Baltic countries and central Europe. Transformations have already been afoot for nearly a decade. Since 2010 reverse flows have been introduced at the Mallnow border point with Germany on the Yamal pipeline. During the first phase flows were netted out. The construction of an additional metering facility on the border allowed for physical reverse flows. In 2015, Poland completed its first onshore LNG terminal in Świnoujście on the Baltic Sea and the capacity is being presently expanded to respond to growing demand. As of January 2022, it stood at 6.2 bcm/year but after full expansion – scheduled by January 2024 – it will increase to 8.3 bcm/year. As of 1 May 2022, the Poland-Lithuania Interconnection (GIPL / IP Santaka) was brought online, which marked the start of commercial gas transmission via this route.
- The development of the Polish gas market is likely to continue over the upcoming years and will focus primarily on expanding the LNG importing infrastructure as well as its cross-border infrastructure to allow not only increased imports in response to growing domestic demand but also outward flows to neighbouring countries. This is already reflected in the plans that are afoot at various stages of development.
Case study: The Poland – Ukraine or Poland -Slovakia- Ukraine supply route
With the increase in LNG supplies as well as the commissioning of the Baltic Pipe, Poland expects to become a major supplier of non-Russian gas to the region. According to ENTSO-G data its onshore LNG terminal has been used at 82% of its capacity over the period 1 April – 30 June 2022. Although Poland has temporarily offered firm capacity of close to 4mcm/day for exports to Ukraine, offtakes via the existing border point are limited. GAZ-SYSTEM and GTSOU are working to address the issue and offer incremental capacity but this is to be brought to the market no earlier than 2030. However, Ukrainian shippers interested in tapping LNG imports via Poland could export the volumes into Ukraine via the Polish-Slovak Vyrava interconnector from Poland into Slovakia and is expected to be commissioned in Q3 2022. The interconnector will have an exit point in Slovakia in close proximity to the Veľké Kapušany border point with Ukraine. Before implementation of the incremental project, shippers interested in importing volumes into Ukraine could import gas via the Polish-Slovak interconnector and further via the Budince border point.
Costs
The Poland – Ukraine or Poland -Slovakia- Ukraine supply route could be one of the most attractive regionally, considering the relatively short distance to ship gas either from the LNG terminal or from the VTP system to Ukraine. In a theoretical scenario assuming that companies would be interested in shipping regasified LNG to Ukraine, they could do so either directly if there is firm border capacity between the two countries or via Slovakia once the Poland – Slovakia interconnection point enters commercial operation. However, in the current situation, it is likely that the border capacity with Ukraine would be offered on a interruptible basis or companies interested in exporting gas to Ukraine, could do so by booking firm capacity with Slovakia and ship the gas into Ukraine (physically) via the Budince IP on the Slovak-Ukrainian border point. This case study calculates the cost to book annual capacity to ship gas directly from the LNG terminal to Ukraine and includes both a scenario where the gas is shipped physically via firm capacity or netted out through interruptible capacity. The tariffs were converted from Polish zloty into euros at the spot conversion rate of 20 July 2022.
In a scenario where firm capacity is considered, the cost to ship regasified LNG to Ukraine would cost €2.105/MWh (capacity plus commodity fee) In a scenario where interruptible capacity is considered, the cost to ship regasified LNG to Ukraine would be €2.05/MWh (capacity plus commodity fee)
Regasification tariff 1.02€/MWh Commodity fee (variable fee) (€/MWh) 0.2€/MWh -
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THE TRANS-BALKAN CORRIDOR
Source: Independent Commodity Intelligence Services (ICIS), compiled by the Energy Community Secretariat
The Trans-Balkan Pipeline had been one of the key gas supply routes in Europe, being historically used for Russian gas exports shipped via Ukraine to Moldova, Romania, Bulgaria, Turkey, Greece and the Republic of North Macedonia.
The pipeline exits Ukraine at the Grebenyky interconnection point, cutting in and out of the Republic of Moldova before re-entering south-Eastern Ukraine at the Orlovka- Isaccea border point with Romania. It travels south across Romania, where it splits into four sections – one of which enters the Romanian VTP while the remaining three transit the south-Eastern Dobrogea province before entering Bulgaria at the Negru Vodă 1– Kardam border point. In Bulgaria, the three lines narrow down to two at Valchi Dol before heading down to Lozenets in the south-Eastern part of the country from where it splits into two sections. One heads further East to Strandzha on the Bulgarian- Turkish border, the other travels south-West towards Ihtiman where it splits again. One leg heads to the North Macedonian Border, the other travels south to the Greek border.
With the completion of TurkStream in 2020, a corridor linking southern Russia to Turkey across the Black Sea and supplying Turkey, the Balkans and Hungary, the Trans-Balkan lines have been mainly used for transporting gas from Bulgaria to Romania. The direction of shipments has changed for the last two years, with supplies being rerouted from the traditional north-to-south corridor to flow from East to West or south to north. Following the commissioning of the TurkStream corridor, Ukraine lost its regional transit role to Turkey, which became the transmission route for Russian gas shipped across the Black Sea. Bulgaria also gained an important transit position in the new reconfiguration.
Greece
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The Greek gas market has been fast developing in recent years to take advantage of the surge in global LNG production as well as to accommodate the opening up of the Southern Gas Corridor, linking the Caspian region to Italy via Greece and Albania. This has given Greece the opportunity not only to establish itself as a transit country but also as a supply hub thanks to its expanded LNG importing terminal at Revithoussa. The terminal as well as the domestic pipeline network and interconnections with Greece and Turkey are operated by the transmission system operator DESFA.
The Trans-Adriatic Pipeline (TAP), which links up with the Trans-Anatolian Pipeline on the Turkish-Greek border, transits Greece and travels further West into Albania and Italy is independent of the DESFA system. TAP is designed to deliver volumes to the Greek market and through it to Bulgaria as well as transit gas to Italy.
- There are plans to bring online at least four more LNG terminals in the short to medium term, which will also require the expansion of entry capacity to the Greek VTP.
Republic of North Macedonia
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The Republic of North Macedonia, a Contracting Party, has been fully dependent on Russian gas imports, which has been historically offtaken by two buyers primarily for electricity generation. Imports had been sourced via Bulgaria, which was in turn importing via the Trans-Balkan pipeline. Although supply routes changed when the TurkStream corridor was commissioned and flows were diverted away from the Trans-Balkan route in 2020, nothing changed in effect for the Republic of North Macedonia because molecules continued to flow via the existing Bulgarian section of the Trans-Balkan line towards the North Macedonian border.- GA-MA network development plans include the commissioning of an interconnector with Greece that would allow it to offtake natural gas imported as LNG from the Greek terminal at Alexandroupolis. The interconnector is expected to be brought in commercial operation in 2025 at the latest.
- There have also been discussions to make the existing interconnector with Bulgaria bidirectional and to establish new links with Kosovo* and Serbia but more details are yet to emerge.
Turkey
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
Turkey has relied for nearly 100% of its consumption on natural gas imports in recent years, building four LNG import terminals as well as supply routes for pipeline offtakes from Azerbaijan, Iran and Russia. Historically it has depended for more than 50% of its imports on Russian gas and offtakes from Iran and Azerbaijan, with LNG making up around 20% of total annual supplies. However, there have been numerous changes afoot that could spark renewed regional interest in Turkey.Thanks primarily to the expansion of its regasification capacity, the share of LNG imports has increased close to 30% in recent years, with volumes sourced across the globe. As of May 2022, Turkey had 17 entry import points with a total sendout of 320mcm/day. Most of the imports had been tied up under long-term contracts but with soaring demand in 2021, the incumbent BOTAŞ started purchasing additional volumes on a spot basis from all available pipeline supply routes.
Since 2020, Turkey has also become a transit route for Russian gas exported via TurkStream2 to the Balkans and for Caspian gas heading West towards Bulgaria, Greece and Italy along the Southern Gas Corridor. Despite the volumes imported in Turkey or transited Westwards, there has been negligible cross-border spot trading and no access 23 by domestic or regional companies to internal import terminals.
Turkey has been one of the world’s largest importers of LNG but nearly all volumes unloaded at its terminals were offtaken by the incumbent BOTAŞ. Domestic and regional companies have long shown an interest in trading on the border but there have been numerous political and regulatory barriers that prevented it.
- Most of the expansion projects that BOTAŞ has been working on have focused on storage, internal infrastructure and building the necessary berthing for a fifth FSRU in the Gulf of Saros, in inlet of the northern Aegean Sea, north of the Gallipoli peninsula.
- According to BOTAŞ the terminal and jetty as well as a pipeline linking the location of the new FSRU up across the north-Western Trakya province to the existing BOTAŞ transit grid should be complete by Q3 2022.
Bulgaria
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
Like many regional gas markets, Bulgaria has also undergone significant changes in recent years, moving from almost complete dependence on Gazprom supplies to the full curtailment of Russian imports at the end of April 2022.
Its strategy has been to tap alternative supplies such as Caspian gas and LNG imported via Greece as well as to position itself as a transit route for Russian gas exported Westwards to Serbia and Hungary or northwards to Romania, Moldova and Ukraine. This meant that by May 2022, when it was no longer off-taking any Russian gas following Gazprom’s decision to halt deliveries in response to its refusal to comply with a ruble payment scheme, Bulgaria did not witness immediate supply shocks. Even though Russian deliveries were stopped prematurely, it could substitute them with regasified LNG or Caspian volumes imported via Greece.- One of the major projects involved the expansion of the Bulgarian gas transmission system linking north-Eastern Bulgaria to the Serbian border. It also carried out upgrade works to the existing Trans-Balkan pipeline to allow bidirectional flows, including exports into Romania via the existing Negru Vodă1 (RO)/ Kardam (BG) border point.
- Most importantly, Bulgaria is expected to commission the 3bcm/year Interconnector Greece-Bulgaria (IGB) at the end of the year and expand its Chiren storage facility by the end of 2024, which will allow it to increase its Caspian gas offtakes and tap more LNG volumes.
Romania
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
Historically, Romania has been a transit country for Russian gas exported via the Trans-Balkan pipeline via Ukraine and Moldova and shipped further to the Balkans and Turkey. The corridor, which splits into four lines once it enters Romania from Ukraine, was not only important because it provided transit revenue but also because one of the lines was connected to the internal system, allowing Romanian companies to offtake volumes for their own needs.
Romania signed an interconnection agreement for one of the three transit lines (T1) with Ukraine and Bulgaria but failed to extend it to the northern Tekovo-Medieșu Aurit border point and to the second transit line of the Trans-Balkan route (T2). The third line (T3) is thought to be still controlled by Gazprom under a legacy transit agreement which is due to expire in 2023.
- As Europe is now looking to diversify away from Russian gas, Romania has also signalled its intention to change its offshore legislation to attract more investments and fasttrack its offshore production. It could play an important regional role not only as producer and regional supplier but also as a transit country along the Trans-Balkan pipeline.
- There are now discussions that Romania could sign another interconnection agreement for T2 with Bulgaria and possibly with Ukraine, which would allow more volumes secured as LNG in Greece and Turkey to be exported or transited in reverse into Romania and further to Moldova and Ukraine. Romania was also expecting to create a southern transit corridor linking Bulgaria and volumes from the Romanian Black Sea region to Hungary and Austria via the BRUA pipeline.
Moldova
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
Historically, the Moldovan gas market has been fully dependent on Russian gas imports, lacking its own storage facilities and supply routes other than the Trans-Balkan pipeline linking it to Russia via Ukraine. However, with major reform in the Ukrainian gas markets, the expiry of some of Gazprom’s legacy transit contracts in the region and the construction of an interconnector with Romania, Moldova has been able, for the first time ever to tap alternative sources. It could inject gas in Ukrainian storage in 2020 and purchase volumes on a spot basis for a brief period of time in October 2021.
In May 2022, the Moldovan gas transmission system operator, Moldovatransgaz, registered the first ever transaction on the country’s virtual trading point (VTP) between two suppliers, the incumbent Moldovagaz and state wholesaler, Energocom. Although it continues to be supplied by Russia via the Ukrainian section of the Trans-Balkan pipeline, it lost its transit role across this corridor when exports were rerouted to TurkStream 1 and 2.
- The most pressing need is the introduction of backhaul at Moldovan border points to streamline transit and reduce risk to physical flows.
Ukraine
Source: European Network of Transmission System Operators for Gas (ENTSOG), compiled by the Energy Community Secretariat
The Ukrainian gas market has made remarkable progress in terms of aligning its legislation with EU rules and regulations and enforcing them in recent years. For nearly five decades, Ukraine has been the main Westward route for Russian gas, shipping at its peak in the 1990s, over 140bcm/year. With Russia building alternative transmission routes, that role has been shrinking as volumes dropped to 40bcm/year from 2021.Its internal supply dynamics also changed dramatically. Up until 2015, Ukraine was heavily dependent on Russian gas imports for domestic needs but following Russia’s annexation of Crimea and the start of war in the Eastern Donbas and Luhansk provinces, Ukraine stopped all imports and started to offtake volumes in reverse from neighbouring Hungary, Poland and Slovakia.
Following the expiry of its legacy long-term transit contract with Gazprom and the signing of a new five-year ship-or-pay agreement, the transmission system operator GTSOU signed numerous interconnection agreements with all neighbouring countries, introduced short-haul for the cross-border transport of gas over shorter distances or into domestic storage facilities and implemented virtual interconnection points with Hungary and Poland.
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THE SOUTHERN GAS CORRIDOR
Source: Independent Commodity Intelligence Services (ICIS), compiled by the Energy Community Secretariat
Ever since it was first mooted, the Southern Gas Corridor positioned itself as an alternative route to Russian gas supplies, aiming to bring much-needed diversification. The first volumes, produced in the Azeri offshore zone of the Caspian Sea reached Turkey in June 2018 along the newly completed Trans-Anatolian Pipeline (TANAP) linking the Eastern Turkish border with Georgia to Western Turkey. In 2020, TANAP was joined up with the southern European leg – the Trans-Adriatic Pipeline (TAP) at the Kipi border point with Greece.A few regional projects connecting to the Southern Gas Corridor (via TAP) such as the completion of the Interconnector Greece – Bulgaria, the development of the Vlorë LNG terminal in Albania as well as the construction of the Ionian Adriatic Pipeline (IAP) could help establish an integrated southern European – Balkan gas market.