Slovakia’s planned gas link to Balkans reportedly set to take Ukrainian diversion

Slovakia’s planned gas link to Balkans reportedly set to take Ukrainian diversion
Eastring was originally planned to avoid Ukraine
By bne IntelliNews March 17, 2016

Slovakia is ready to send EU gas to the Balkans via Ukraine, the latter's transmission system operator (TSO) Ukrtransgaz claimed on March 17.

The claim appears to suggest the Eastring project, announced by Slovak TSO Eustream in 2014, will take a detour. The planned route aims at linking the Balkans to European gas hubs in order to provide security to the region in the context of the Russian-Ukrainian conflict. 

Slovakia announced the project in 2014 as one of a bevvy of alternatives to supply southern Europe that emerged following the collapse of Russia's grand plan to build South Stream, a 63bn cubic metre pipeline that would have run under the Black Sea. Eastring, which would have a capacity of 20bn cm in the first phase of the project, and as much as 40bn cubic metres in the final phase, would link Slovakia to Romania and Bulgaria.

The preferred route would run to Romania and further south via Hungary. However, Ukraine was also seen as an option, Eustream told bne IntelliNews in May. With Slovakia hosting the mainline route between Ukraine and Austria's Baumgarten hub, that would plug the Balkans into Western European gas hubs. 

Ukrtransgaz President Igor Prokopiv now says Bulgaria and Turkey are ready to buy gas from other European countries with transit through Ukraine, according to RIA Novosti. Prokopiv claims talks on the project will start with Slovakia soon.

“In the beginning of April we will hold talks with Slovakia to launch the Slovakia-Ukraine-Moldova-Romania-Bulgaria-Turkey route, with the possibility to store natural gas on the territory of Ukraine, which will be then sold in Europe,” he told a press conference.

Many Central and Eastern European (CEE) countries are reliant on Russian gas. Slovakia, the Czech Republic and Hungary import close to 90% of their gas from Russia; while Bulgaria is 100% dependent. With no domestic production of its own and little in the way of storage facilities, Turkey is also highly dependent on Russian gas. Turkey imports some 55% of its gas from Russia.

The Eastring project seems one of the most viable options for Turkey to tap alternative supplies now that Turkish Stream, a proposed gas pipeline from Russia to Turkey across the Black Sea, is essentially dead following a nosedive in relations between Moscow and Ankara. Russia is pushing instead to build Nord Stream 2, a second giant pipeline that would plug it directly into Germany and allow Gazprom to reduce exports to the EU via Ukraine. That threatens huge problems in the Balkans.

It's likely little coincidence that Eastring is now reportedly looking at the Ukrainian route, which due to exisiting infrastructure, would offer lower costs than the route through Hungary. Slovakia, which has for years earned huge revenue from shipping gas flows via Ukraine to the West, has been scrambling to secure itself a central role in any future scenario. Previously, Eustream - majority owned by the Slovak government but operated by Czech-based energy holding EPH, which holds 49% - had hoped the project could play a double role by meeting Turkish Stream to carry Russian gas to EU hubs.

With that ambition now thwarted, the Slovak project has no need to take a costly detour to avoid Ukraine. Eastring could start commercial operation by the end of 2018, according to a document drafted by the Slovak Economy Ministry. The costs for the first phase of the Hungarian option are estimated at between €1.14bn and €1.52bn.  

On top of that, with Russian financing for Eastring out of the picture, Eustream is left with just one potential benefactor. The Slovak company has been pushing to have the route classed as a priority project for EU infrastructure funding, and now the flirtation with Moscow is over, likely hopes to leverage support for Ukraine in Brussels.

"Any mention of Ukraine virtually guarantees support in Brussels," one Eustream official claimed to bne IntelliNews last year. Eastring announced on February 10 that it has obtained the status Project of Common Interest (PCI) for the European Union.