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Teodora GEORGIEVA: «IGB is a strategic project for Bulgaria»

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15.01.2020

Diversification of gas supplies to Europe remains one of the trending topics of international agenda. The South Gas Corridor (SCG) project jointly implemented by Azerbaijan, Turkey, Georgia together with European partners paves the way for the transportation of Azerbaijani natural gas from the Shah Deniz Stage 2 project to Europe.

The opening ceremony of the second stage of the Trans-Anatolian Pipeline (TANAP) designed to deliver the Azerbaijani gas to EU was held at the end of 2019 in Turkey. The gas will then go through the Trans-Adriatic Pipeline (TAP) until it reaches the hinterlands on the continent. Bulgaria, for example, will receive gas from the IGB pipeline (Interconnector Greece-Bulgaria), which will be connected to TAP. The construction of the pipeline is ongoing.

The length of IGB, which connects Bulgaria with Greece, is 182 kilometres with 150 kilometres crossing the territory of Bulgaria. Initially, the pipeline's throughput capacity will be 3 billion cubic metres (bcm) with a potential to increase it up to 5.3 bcm.

The ground-breaking ceremony of IGB took place on May 22, 2019 in Bulgaria following a series of challenges that had to be solved along the way.

Our guest today is the Executive Director of ICGB AD, Teodora GEORGIEVA.

 

The opening ceremony of the TANAP project connecting Anatolia with Europe took place on November 30 in Ipsala, Turkey. How would you rate the significance of the project for Bulgaria and for Europe in general?

The TANAP project is of great importance for the Balkan region and Europe in synergy with TAP, contributing significantly to Europe’s energy security. TANAP is a substantial part of the Southern Gas Corridor, bringing gas from Shah Deniz field to consumers in Bulgaria. Therefore, the pipeline has a strategic importance for the diversification of sources and routes of natural gas supply in Bulgaria.

How well the construction of Interconnector Greece-Bulgaria (IGB) is going? Are there any delays in the work schedule?

ICGB has now fully activated the two major contracts for the project execution - the engineering, procurement and construction contract awarded to the Greek ECP company AVAX S.A. as well as the line pipe production and supply agreement with Corinth Pipeworks S.A. 

The EPC contractor is already well on board and currently starting work on the detailed engineering phase. In parallel, mobilization activities are taking place such as building of the main site offices, clearing the Right of Way, construction of temporary roads and pipe storage laydown areas. Corinth Pipeworks are also progressing as expected, adhering to the agreed production plan. Overall, the project is on track with only minor delays that are not significantly affecting the schedule’s critical path.  

When is it planned to put the pipeline into operation? Initially, it was announced that the IGB construction would be over in 18 months.

The planned date for receiving the Taking Over Certificate is 18 months from the commencement date of the EPC contract.  It is expected that all pre-commissioning and testing activities shall be completed in Q2 of 2021. Once the pipeline has the required certification and approval is received by the relevant authorities in Greece and Bulgaria, the commissioning and gas-in shall take place. The start up of the entire system is expected to commence in the end of Q2 or in the beginning of Q3 2021 at the latest.

When do you plan to start the test gas injection? What source of gas is the pipeline designed for? Exclusively for Azerbaijani gas from the Southern Gas Corridor or from other sources as well?

Gas injection is planned after the successful completion of all pre-commissioning activities and receiving the Taking Over Certificate. 

As part of the development of the Southern Gas Corridor, through IGB Bulgaria and its neighboring countries will have access to alternative supplies from the Caspian region, as well as from existing or future liquefied gas terminals from various sources such as the USA, Algeria, Egypt, etc. The realization of the project is strategically important and due to the many opportunities for connection with other major energy projects - the LNG terminal near Alexandroupolis, Greece; EastMed for direct connection of Eastern Mediterranean resources to Greece via Cyprus and Crete, as well as liquefied gas from Israel.

What is the overall cost of the IGB project? Sources of funding? Are the raised funds enough to complete the project?

The total expected investment cost of the project amounts to EUR 240 mln, including EUR 220 mln. CAPEX and EUR 20 mln. development cost. The financing of the project is secured from several sources. EUR 39 mln are to be granted to the project from the European Structural Fund Financing (ESIF) allocated to Bulgaria under the Operational Program Innovation and Competitiveness 2014 – 2020. EUR 45 mln, European Energy Recovery Program (EEPR) grant financing is also approved for the implementation of the project. Approximately 110 mln will come from a long-term loan financing by the European Investment Bank (EIB) secured by a state guarantee from Republic of Bulgaria. The loan is already signed and the ratification in the Bulgarian parliament is completed. The financing is provided via onledning agreement between Bulgarian Energy Holding (BEH) and ICGB that was signed this fall.

Further in order to secure the construction process, on October 10, 2019, the shareholders of ICGB signed several important agreements including amended shareholder agreement to ensure the management and operation of ICGB during construction; adoption of a final business plan and final budget for construction; a decision to increase the capital of the company by EUR 42.4 million, the capital was increased with that amount on November 1st, 2019. The money is partially used for covering the advance payments to the EPC and Line pipe Contractor.

I must say that the envisaged financing is sufficient for the completion of the pipeline. Any potential short-term liquidity needs due to delays in the reimbursement of the grant financing shall be covered by a short-term bridge financing if needed.

What is the perspective role of the IGB? What do you expect from the implementation of this project and how do you assess its future?

The construction of IGB aims to ensure diversification not only of routes but also of natural gas supply sources for Bulgaria and the region. As I already mentioned, as part of the development of the Southern Gas Corridor, IGB Bulgaria and its neighboring countries will have access to alternative supplies from the Caspian region as well as from liquefied gas terminals. The project provides gas transmission infrastructure from the Southern Gas Corridor and ensures security of supply for Bulgaria, significantly reducing the country's dependence on only one source. Azerbaijani natural gas from Shah Deniz 2 will satisfy about 25% -30% of natural gas consumption in Bulgaria, which is a serious share and will significantly increase our country's energy security.

It is important to be mentioned, that four new traders for the Bulgarian gas market have booked capacity in IGB and will have access to Bulgarian market, after the pipeline is in operation. With the start of commercial operation of IGB, the non-exempted capacity will be offered to market participants following EU regulations, which creates additional potential and opportunities for more market participants to enter Bulgarian market. In this regard, I believe that the importance of the project is not only strategic in terms of diversification and security of gas supply, but also crucial for the development of a transparent, dynamic and competitive gas market in our country.

You have stated that the Interconnector Greece-Bulgaria will ensure more competitive prices for the gas. What prices do you find competitive?

The gas market in Bulgaria will change with the implementation of IGB, which is why the project also gains the strong support of the European Commission, which aims to create competitive market conditions and to overcome the country's dependence on a single gas supplier. I am happy to say that throughout the whole process we’ve felt the constant support of both the governments of Bulgaria and Greece. The two countries are dedicated to a main goal – the diversification of gas supplies and improving the competition on the gas market.  

I believe in the importance of the liberalization of the gas market and the effectiveness of market mechanisms. In order for this process to be successful, all participants need to make an active contribution. In this regard, ICGB, as a future transmission system operator, is committed to provide the necessary gas transmission infrastructure with transparent and non-discriminatory access conditions for all network users. On the other hand, having access to different supply routes and source, I strongly believe that the gas traders will be able to offer more competitive prices to consumers in Bulgaria and the region. Those price levels will reflect the market conditions and be close to the natural gas prices in the liquid European gas hubs.



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