IGTI Redux: Sonatrach Aims at Southeastern European Gas Supply
The Algerian natural gas company Sonatrach appears to be interested in supplying significant amounts of LNG to the Southeastern European market via Greece, a move that may involved a modified ITGI pipeline project. Officials from Greece's DEPA's have unofficially indicated to local energy experts and media that Sonatrach is indeed in talks of a "nascent" nature to proceed in that direction.
The Algerian company have been supplying the Italian gas market via the Trans Mediterranean pipeline with a yearly capacity of 30 bcm. Energia, the Greek media energy affairs consultancy, has noted that gas demand in Italy has decreased by 6.5% in 2011. Similar findings were pointed out by DEPA's President in the late May Mediterranean Oil & Gas conference in Athens, where it was noted that the massive use of renewable energy resources by Italy has resulted in a drop in natural gas consumption thus making this market less attractive for future importation projects. With the Italian markets trending towards a slowdown, Sonatrach is seeking alternative and emerging markets for its gas.
On the other hand, Southeastern European markets have increasing supply needs, as well as diversification policies in order to reduce dependency on Gazprom. Sonatrach, which has long term contracts with DEPA to deliver 1 bcm of gas annually, is optimistic it will be able to use the Greek-Bulgarian Interconnector, which is due to be operational by late 2013 and will have a final capacity of 5 bcm, to open new markets. In this scenario, DEPA as a wholesale importer would manage the exportation of gas to the Bulgarian and Romanian markets. In addition, a second stage would see the construction of the necessary infrastructure to export gas to Albania and through a series of interconnectors to Montenegro, Kosovo, Bosnia and Croatia, a move that is supported by the EU as well.
Sonatrach estimates that its gas can reach the Bulgarian market with a cost of transfer around 1.4 USD per mmbtu and in the Romanian market with a cost of 1.7 USD per mmbtu, which it considers as an attractive pricing in today's market. However this scenario would see the requirement of long-term contracts between Sonatrach and DEPA and the rest of the regional companies.
DEPA has been anxious to reveal plans to revive the ITGI project since it was rejected by the Shah Deniz consortium in March 2012. Recently, DEPA announced its intentions of getting involved in the future transfer of gas from the offshore Cyprus reserves. In parallel BP's officials from the Shah Deniz met with Greek governmental representatives, signaling an acceleration of initiatives by the consortium to get the Southern Corridor project moving and pushing forward TAP's expansion into Southeastern Europe. Gazprom from its side, has stepped forward by announcing the beginning of its South Stream project by December of this year. Therefore it seems that the latest initiative by DEPA top get Sonatrach involved is perhaps the last move before the natural gas projects to supply Southeastern Europe reach their final stage.
Lastly, it should be noted that Sonatrach's intentions of playing a role in the supply of the region is also indicated in it being one of the official bidders in the impeding privatization of DEPA.