The South-East European Gas Initiative

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.

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

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.