North-south gas interconnection moves closer

Slovak gas projects will receive finances from the European Union.

The gas pipeline operator Eustream operates pipelines with the capacity 90 billion m3.The gas pipeline operator Eustream operates pipelines with the capacity 90 billion m3. (Source: SME)

Slovakia is getting closer to reducing its dependence on Russian natural gas. Two projects of the country's gas transmission system operator Eustream are among the latest 18 projects chosen as priority European energy infrastructure projects. The European Commission plans to invest a total of €444 million into them. Approximately one quarter of this money should go for the two Slovak projects. These will help Slovakia and other countries in central Europe to diversify gas supplies. The European Commission still has to formally okay the support. "This is good news for Slovakia and central Europe, either from the viewpoint of energy security or for further development of the natural gas market," Pavol Kubík, spokesperson of Eustream told The Slovak Spectator.

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The European Union will contribute €107.7 million or 40 percent of planned costs for building the Slovak-Polish gas pipeline. Semi state-owned Eustream, in which the Czech energy group Energetický a Prumyslový Holding (EPH) holds managerial control, will build it with the Polish partner Gaz-System. Total costs should be almost €270 million. The pipeline will be approximately 164 kilometres long. Of it, 106 kilometres should be built in Slovakia and 58 kilometres in Poland.
Construction of the Slovak part of the pipeline connecting the existing gas transmission pipeline near Vel'ké Kapušany in eastern Slovakia will cost approximately €138 million. The project also includes construction of the Strachocina compressor station in Poland and modification of the existing compressor station in Veľké Kapušany.

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Based on the latest plans, construction work of the inter-connector should be complete in 2020.

"The launch of the pipeline into commercial operation is planned for 2021 after a trial operation," said Kubík.

The new inter-connector should connect the Slovak and Polish gas markets in both directions and it will be accessible to anyone interested in gas transmission.

"Thanks to the new inter-connector countries of central and eastern Europe will have access to sources of natural gas from the North," specified Kubík. "During the time being this is especially access to the Polish LNG terminal. The planned Baltic Pipe will bring additional opportunities."

The capacity of the pipeline is planned at 4.7 billion cubic metres of gas annually in the direction from Poland to Slovakia. In the opposite direction the annual capacity will be 5.7 billion cubic metres.
This means that the latter capacity is bigger that the average gas consumption in Slovakia. For example, in 2014 Slovakia consumed almost 4.3 billion cubic metres of gas and imported 98 percent of that.

Slovakia mostly imports gas from Russia via Ukraine. After the gas crisis in 2009 when Russia stopped transmitting gas via Ukraine and Slovakia was without gas for about two weeks, Slovakia enabled reverse gas flows. The new Slovak-Polish inter-connector will allow for importing Russian gas while bypassing Ukraine.

Eustream sees the main advantages of the project in the fundamental strengthening of Slovakia's energy security and the region of central and eastern Europe.

It will enable access to alternative sources of natural gas and will create new opportunities for trading with a positive impact on gas prices.

Energy analyst Karel Hirman recalled that the Slovak-Polish inter-connector has been part of the plan to interconnect the Baltic, Black and Adriatic seas in the north-southern direction by gas pipelines for a long period of time.

"Its importance lays in facilitating cross-border flows of gas in case of fluctuations in gas supplies within the Visegrad group," Hirman told The Slovak Spectator, adding that in the future it can also create technical conditions for development of trade also with Ukraine. If Eustream's second project, Eastring, is also carried out, the Slovak-Polish inter-connector could connect southern gas sources.
Hirman specified that gas to be transported via the Slovak-Polish pipe may come from various sources, when Russian gas flows already via the Polish LNG terminal Swinoujscie to Germany. There is an opportunity for cross-border trades with Ukraine.

"If the transit of Russian gas via Ukraine and Veľké Kapušany is preserved after 2019, Veľké Kapušany may become an interesting hub for swap operations," said Hirman.

Low interest?

A survey among gas traders last summer revealed rather lukewarm commercial interest in transporting gas via the Slovak-Polish pipeline. But gas experts believe this may be only temporary.

"The currently low commercial interest may also be linked with waiting to see how the plans for the new Polish-Ukrainian and Slovak-Polish inter-connectors will really turn out and what concrete transmission opportunities these new routes will bring," said Hirman.

Kubík specified that this survey reflected a low interest in long-term reservation of transmission capacities and that after the pipeline is put into operation, also short and mid-term reservation of capacities may bring relevant market potential.

Eastring pipeline, in the pipeline

The second of Slovakia's projects to be supported by funding from the EU is Eustream's Eastring, with the aim to interconnect Slovakia's gas transmission infrastructure with the Balkans. The gas transmission operator will receive €1 million of the expected costs of €2 million for elaboration of a feasibility study. Its results should be used for setting the final route of the pipeline as well as other technical details of the project.

The Eastring project is currently being considered with more variants, deviations in routing options and level of usage of existing infrastructure. It should start at the current compressor station in Veľké Kapušany, where it should connect with Eustream's existing gas transit pipes serving to supply mainly western Europe as well as Ukraine in reverse flow, the website of the project reads. From there, Eastring will flow to the southern border with Hungary, crossing the north-east territory of Hungary in a Ushape towards the Romanian border.

From the Veľké Kapušany compressor station to the Romanian border an existing Ukrainian pipeline could also be used as an alternative routing option, but with limited capacity available.

In this initial phase there are two routing options suggested in Romania and Bulgaria. According to initial estimates, Eastring should be from 832 to 1,015 kilometres in length, depending on the chosen route. In the past construction costs were estimated to be from €1.14 to €1.52 billion but now it is about €2 billion, the Sme daily wrote.

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