The Joint Declaration and how it affects the progress of ITGI

The agreements were signed on January 13th in Baku, Azerbaijan’s capital, during the official visit of the President of the European Commission, who had the energy cooperation as his unique “agenda”.

During the last 15 years, Azerbaijan has been described as one of Europe’s main alternative sources of oil and natural gas supply. The main problem that had to be tackled was its distance from sea routes. Regarding the oil, the problem was solved by the construction of the Baku-Ceyhan (a Mediterranean port in Southern Turkey) pipeline, through which approximately 1 million oil barrels per day are channeled to international markets.

Less progress has been made concerning the huge quantities of natural gas that constitutes the country’s second wealth-producing resource. The South Caucasus Pipeline has been constructed and functions since four years, transporting Azerbaijan’s gas to the Turkish market, but its continuation, the pipeline network that will carry the Caspian gas to Central Europe, is still pending.

That’s why the Barroso – Aliyev common statement that describes the creation of the “Southern Corridor” as a joint target that must be realized as soon as possible in order to assure Europe’s regular gas supply, can be characterized as a totally positive development that offers political cover to the pipeline plans. Also, of special interest is the agreement that was signed the next day by Günther Oettinger, European Energy Commissioner and Natig Aliyef, Azerbaijan’s Minister of Energy, concerning the creation of a mixed task force (European Commission, Azerbaijan, and companies involved) that will facilitate investment plans and will deal with any problems that will come up during the realization of the Southern Corridor project.

Enough natural gas pipelines are planned for the Turkey-Europe section: the Greek-Italian ITGI (Interconnection Turkey-Greece-Italy), Nabucco (Turkey, Bulgaria, Romania, Hungary), and TAP (Trans-Adriatic Pipeline-Greece-Albania-Italy). Until recently, their immediate realization stumbled at the lack of final agreements between Azerbaijan and Turkey regarding the terms of gas passage through Turkey’s pipelines. Today, this problem apparently has been solved.

However, no definite business decision has been taken in order to advance two of those projects (Nabucco and TAP); their complexity, including the passage through several countries and the need for gas quantities that cannot be secured in the near future, constitute restraining factors. On the other hand, the ITGI pipeline is in a more advanced stage, compared to the other pipelines. The Greek DEPA (natural gas state company) and the Italian Edison, an energy company in which the French EDF (Électricité de France) Company participates by 50%, support the project.

The pipeline has a total annual transport capacity of 11 bcm and its first part, the Greece-Turkey interconnector, already functions since four years. According to the agreement, Greece receives approximately 750 mcm of Azerbaijan’s natural gas per year via the Turkish network, whereas an additional supply of 1 bcm is under negotiation. Furthermore, the two companies that created the “Poseidon” joint stock company have announced the study of the offshore part of the pipeline (Greece, shores of Thesprotia – Italy, Gulf of Otranto), approximately 220 km long, as well as a tender for the supply of steel pipes that will be cast in the sea, to a depth of 1,370 m. DESFA, the Greek Gas System Managing Company, continues its preliminary studies for the placement of the approximately 600 km-long onshore pipeline. Finally, the Italian authorities in August 2010 and the Greek authorities in September 2010, gave positive expert opinions regarding the Italian and Greek parts of the offshore pipeline, respectively.

The more extensive role of ITGI

Recently, top executives of DEPA and Edison conduct business negotiations with gas suppliers in Azerbaijan, as well as with interested consumers in Italy and Central Europe. Except for its role in the transport of natural gas to Italy, ITGI assumes a more extensive function by supplying countries north of Greece with additional non-Russian gas quantities.

The project will start with Bulgaria. A second interconnector to that country will be constructed. It’s the IGB pipeline (Interconnection Greece-Bulgaria) that will be meet the ITGI at the city of Komotini and after 170 km will reach Stara Zagora. The “Poseidon” (DEPA-Edison) mixed company has undertaken the construction and operation of the IGB on Greek soil. In the beginning of December, the Articles of Association and the agreement of the company’s shareholders for the entire pipeline in which the Bulgarian Energy Holding and Poseidon participate by 50% each, was signed in Sofia. After the creation of the IGB business venture, a tender for the pipeline’s detailed study was announced, with February 12th as deadline for the submission of offers.

The EU also supports the IGB project with a contribution of approximately 45 million euros, whereas its operation will constitute the first step for the creation of similar small, relatively cheap interconnectors between Bulgaria-Romania and Romania-Hungary.

Through them, the gas that reaches Greece through the ITGI or other sources (e.g. liquefied), will supply the networks of three countries north of Greece, thus reducing their dependence on Russian gas. The Southern Corridor pipelines will be used for this goal.