Gas Interconnector Greece-Bulgaria : On a progressing mode

Case Study post authorEliza Bhalerao 15 November 2020

Gas Interconnector Greece-Bulgaria : On a progressing mode

Credit : www.icgb.eu

The IGB Project (Gas Interconnector Greece-Bulgaria) is being implemented by the joint venture company ICGB AD, registered in Bulgaria in 2011, with shareholders BEH EAD (50%) and IGI Poseidon (50%). The co-shareholder IGI Poseidon is a company, registered in Greece, with shareholders being the Greek public gas corporation DEPA SA (50%) and the Italian energy group Edison SpA (50%). In accordance with its Articles of Association, ICGB AD will be the owner of the IGB gas pipeline and will finance its realization, will allocate its capacity and will receive the revenue from the transportation of natural gas.

The IGB gas pipeline will be connected with the Greek national gas transmission system in the area of Komotini and with the Bulgarian national gas transmission system in the area of Stara Zagora. The planned length of the pipeline is 182 km, the pipeline diameter will be 32” and the projected capacity will be up to 3 bcm/y in the direction from Greece to Bulgaria. Depending on the interest from the market and the capacities of the neighboring gas transmission systems, the pipeline is designed for increasing its capacity up to 5 bcm/y for following up the market evolution thus allowing physical reverse flow (from Bulgaria to Greece) with the additional installation of a compressor station. A Memorandum for cooperation between ICGB AD and TAP AG has been signed concerning joint actions in relation to future connection between the IGB pipeline and the Trans-Adriatic Pipeline.

IGB Pipeline has obtained intergovernmental support by Republic of Greece and Republic of Bulgaria via a Memorandum of Understanding signed in 2009. The Project has been designated as a Project of National Priority under Bulgarian Council of Ministers` Decisions No. 615/14.07.2009, No.452/07.06.2012 and under Greek Law 4001/2011.

IGB is listed among the PCIs (Projects of Common Interest) and is included as a leading project in the CESEC initiative (Central and South-Eastern European gas Connectivity). It has been announced as a “project of national importance” by the Bulgarian and Greek Governments. The project is a key part of the strategy for greater integration of gas markets, which includes interconnection projects Bulgaria – Greece, Bulgaria – Romania, Romania – Hungary.

FUNDING:

At European Union level, the IGB Project has obtained consistent political and financial backing, which is of utmost importance for its successful realization. The project is subject of EU financial support through the European Energy Program for Recovery (EEPR) to the amount 45 million EUR pursuant to Commission Decision C(2010) 5813, as amended by Decisions C(2012) 6405, (2015) 3005 and С(2018) 6871 final.

Funding of EUR 149 million is provided by the Bulgarian side – an additional grant of EUR 39 million from the European structural and investment funds and a EUR 110 million state guarantee from a total investment amount of EUR 240 million.

“This is an unconditional achievement that costs a lot of complex preparation and joint efforts of the project company and the EIB and BEH, as the utilization of such a resource requires the prior fulfilment of a number of serious conditions,” explained Executive Officers of the project company ICGB from Bulgarian and Greek side Teodora Georgieva and Konstantinos Karayannakos. According to them, this successful stage in the work on the project is also a sign for the financial institution’s trust in IGB.

A number of documents have been prepared and presented for the IGB project – gas transportation agreements with the capacity users; agreement for utilization of the loan and contract for establishment of a special pledge in favour of BEH EAD as a direct lender of the project company. The other collaterals have been established; the required insurance has been concluded with the necessary coverage for all risks during the construction.

The ICGB recognizes the synchronized and focused work with the EIB team and the project shareholders as an expression of the common position of the national governments of the two countries and the EC, which makes the IGB project a top priority in the energy sector for the whole region.

“The realization of the gas pipeline will increase the security of gas supplies and will lead to real diversification of sources. We are confident in the success of the project and the achieved utilization of the first installment of the loan is a serious and significant progress, which is possible thanks to the persistent efforts of all parties,” said Konstantinos Karayannakos.

According to Teodora Georgieva, the fulfilment of all conditions for the utilization of the loan is a unique project result, especially given the current complex epidemiological situation and the multinational profile of the team working on the implementation of the IGB interconnector.

“The progress in the implementation of the project proves that in the presence of a common strategic cause, such as the IGB gas pipeline, there are no obstacles that cannot be overcome,” Georgieva added.

 

CONTRACTORS INVOLVED:

Gastec was responsible for carrying out the EIA and feasibility study for the project.

The Penspen-C&M engineering consortium was responsible for providing front-end engineering design (FEED) services and carrying out the environmental impact assessment.

Consultation with authorities and permits acquisition was also handled by the consortium.

 

WELDING ACTIVITIES:

Two types of welding activities are performed for the purposes of the IGB project – manual and automatic. Over 10 km of the route is welded, and non-destructive control of the welds is being performed. The process of automatic welding of the pipes has already started, which will speed up the realization of the interconnector.

“Certification activities related to welding activities – automatic, semi-automatic are carried out on the territory of the Hellenic Republic. Manual welding certification is completed. We are awaiting 3.2 certificates according EN 10204 for the welding consumables. Upon receiving all necessary paperwork, manual welding activities could commence,” informed Georgieva.

The welding teams of DS-1 achieved a remarkable rate on the automatic welding, reaching 50 welds per day. Over 54 km of line pipes along the route of the interconnector Greece-Bulgaria have already been welded and the process continues with a steady pace. Safety, compliance and strict quality control measures ensure that all weld seams are done in accordance with the highest industry standards.

 

BENEFITS OF THIS PROJECT:

The IGB will enable gas supplies from the Southern Corridor and Greek LNG to reach Bulgaria and travel north to the rest of southeastern Europe, flowing on to Central Europe. It will also integrate the existing LNG terminal in Revythousa and potentially link up with the new LNG project in Alexandroupolis, northern Greece that has already been planned. The project will enable diversification of energy sources in a region that is particularly vulnerable to supply disruptions. This will reinforce security of supply, and ultimately provide consumers in the region with a cheaper and more stable supply of gas.

“The IGB project will bring guaranteed diversification of natural gas sources for Greece and Bulgaria. Its significance exceeds the national borders of the two countries. The gas interconnector is in synergy with key large-scale energy projects such as TAP and TANAP as part of the Southern Gas Corridor, as well as with the planned LNG terminal in Alexandroupolis, Greece, in which the Bulgarian country participates as a shareholder. It will provide increased security of gas supplies and a variety of natural gas sources”, said Teodora Georgieva. According to her, through the IGB pipeline Bulgaria can have access to natural gas from Azerbaijan, the United States, Israel, Egypt, and other countries.

 

MILESTONES:

  • In June 2011 the IGB project was declared as a National Project under the meaning of the State Property Act, receiving the support of the Bulgarian Government
  • In November 2013 IGB completed all Environmental Impact Assessment procedures in the territories of Bulgaria and Greece in accordance with applicable national and EU laws
  • On January 6th 2014 a Memorandum of Cooperation and Understanding was signed between ICGB AD and Trans Adriatic Pipeline AG
  • In December 2015 ICGB AD launched the first Market Test for the capacity of the IGB pipeline
  • The final investment decision for the IGB project was signed by the shareholders on December 10th 2015
  • In September 2016 ICGB AD signed a joint statement with Bulgarian, Greek, Romanian and Hungarian transmission operators as future operator and part of the Vertical Gas Corridor
  • In December 2016 the second phase of the Market Test was completed with 5 binding offers submitted
  • On September 12th 2017 IGB received construction permit on Bulgarian territory
  • On June 29th 2018 ICGB signed key agreements for investments and activities on construction of the gas interconnector during the fifth Meeting of CESEC, including a Memorandum of Understanding for securing preferential loan financing in connection with using the state guarantee of Bulgaria
  • On August 8th 2018 the project received a joint exemption decision by the Bulgarian and Greek regulators, reconfirmed by the European Union
  • On November 8th 2018 the European Commission issued a decision on compatible state aid in accordance with the Guidelines on State aid for environmental protection and energy for the period 2014-2020.
  • On December 21, 2018 ICGB AD signed a contract for direct grant awarding EUR 39 million for the IGB project from the Operational Program “Innovation and Competitiveness” 2014-2020
  • On February 7th 2019 IGB was granted an Installation Permit on the territory of the Hellenic Republic
  • In March 2019 ICGB AD successfully completed the procedure for selection of Owner’s engineer for the gas interconnector Greece- Bulgaria
  • On April 3rd 2019 the European Commission officially approved the allocation of EUR 39 million for the construction of the IGB project
  • ICGB AD selected a contractor for construction supervision for the construction of the gas interconnector Greece-Bulgaria on Bulgarian territory on April 24th 2019
  • In May 2019 ICGB AD finalized the public procurement for the line pipes manufacture and supply for construction of the IGB pipeline
  • The project company ICGB successfully completed the public procurement for design, procurement and construction (EPC) of the gas interconnector Greece – Bulgaria on May 14th 2019
  • The Groundbreaking ceremony for the IGB project was held on May 22nd 2019 in the presence of the Prime Minister of Bulgaria and the Prime Minister of Greece
  • On July 18th 2019 the project was granted a license for Independent Natural Gas System, receiving the right to begin construction on Greek territory
  • At the beginning of October 2019 the national energy regulatory authorities of Greece and Bulgaria came out with a joint decision for approval of a Network code and a Tariff code of the project for Greece-Bulgaria interconnector whereby ICGB comes closer to completing the procedure for certification as an independent gas transmission operator
  • On 10th October 2019 during the official ceremony in the presence of the ministers of energy of the Republic of Bulgaria and the Hellenic Republic the contract for a loan from the European Investment Bank was signed for the amount for EUR 110 million. During the event binding gas transportation agreements were also signed with the shippers which had booked capacity in the gas pipeline as well as the contracts with the selected contractors for line pipe manufacturing and supply and for construction of the gas pipeline. The shareholders in the project company, BEH and IGI Poseidon, laid their signatures on the revised shareholders agreement whereby the final business plan of the IGB project was adopted as well as the final budget for construction of the gas interconnector.
  • During the ceremony on 10th October 2019 the Bulgarian minister of energy Temenuzhka Petkova and her Greek counterpart Konstantinos Hadzidakis laid their signatures on an Intergovernmental agreement between the two countries whereby firm support is declared for the project and the tax regime of the gas pipeline is stabilized for a period of 25 years.

 

CURRENT STATUS:

The Executive Officers recently inspected on site the progress on the construction activities. The two participated in a meeting with representatives of the company AVAX, responsible for the construction of the IGB gas pipeline, which will connect Bulgaria’s gas transmission network with that of the Hellenic Republic.

During the meeting, the progress of the main activities for the implementation of the project on the territory of both countries was discussed. All activities on site are carried out under strict control for compliance with the imposed anti-epidemic measures set by the health authorities. The project company and the contractors for the main activities of the IGB project have established the necessary organization for comprehensive testing of employees and to this date there are no registered cases of coronavirus.

“All teams are actively working on the realization of the IGB project and the main activities on its implementation are making significant progress despite the complications that have occurred due to the spread of the coronavirus,” said the Executive Officers. According to them, about 100 km of line pipes with a length of 12 m and 18 m have already been produced and successfully delivered.

“The Greek company Corinth Pipeworks is operating according to schedule for the production and delivery of the pipes, as over 50% of the required quantities have already been delivered to our warehouses near Komotini, Haskovo, Dimitrovgrad and Momchilgrad. Deliveries of line pipes from the third of a total of five milestones are already in motion. These activities are progressing according to the approved terms under our signed contract,” Karayannakos explained.

Over 45 km of stringing on the route is completed, and the process continues both on Bulgarian and Greek territory.

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