Desperate Southeast Europe governments scramble for energy resources

Desperate Southeast Europe governments scramble for energy resources
By bne IntelliNews September 23, 2022

The small countries of Southeast Europe are urgently looking to new suppliers to help them though the energy crisis caused by Russia’s invasion of Ukraine and related sanctions.

Soaring electricity prices on international markets have forced states from the region to look for ways to boost domestic generation which in most cases means a return to coal power despite commitments to greening their energy sectors. 

Even so, boosting coal power generation is complicated by the sudden need to secure new coal supplies as well as ageing and unreliable coal power plants outside the EU countries. 

The government of Slovenia, which is the richest country in emerging Europe in per capita terms and also prides itself on being one of the greenest, said back in January that it had endorsed a national strategy to phase out coal for power production by 2033 at the latest.

Fast forward eight months, and Ljubljana is scrambling to import coal to feed its one remaining coal-fired power plant Sostanj (TES), as well as trying to recruit miners to boost domestic production of coal. 

TES produces as much as a third of all electricity in Slovenia. It was controversially expanded with the addition of Unit 6, despite strong opposition by environmental groups and warnings that it could become a ‘stranded asset’ as the country phases out coal power generation. 

Prime Minister Robert Golob said on September 14 that the Premogovnik Velenje coal mine, which supplies Sostanj, only has coal stocks sufficient for two weeks. His government declared a level one threat for power supply. 

“The situation at the mine is alarming, as the landfill only has supplies for just under a fortnight. This is also a reason why the government ordered the HSE to start immediately with coal import activities," Golob said in the statement.

“Slovenia must temporarily increase mining and coal imports in order to bridge the energy crisis, and on the other hand, we must be prepared for the restructuring of the region when the exit from coal will really begin,” Golob said.

Premogovnik Velenje’s general manager Janez Roser told RTV Slovenia that the management will try to maximise coal production and ensure larger stocks of coal.

Speaking about a possible expansion of the mining locations, he said that it is a demanding project, which would take at least three years, and the staffing issue also poses an additional challenge.

"We have already hired miners from Bosnia and Herzegovina, and talks are also underway on the possibility of [bringing in] additional miners from North Macedonia," Roser said.

Also in mid-September, Sostanj (TES) received the first test batch of coal from Indonesia. Along with Australia, the Southeast Asian country is becoming an increasingly important supplier of coal following disruptions to supplies from Russia and Ukraine. Golob said that if Slovenia managed to import enough coal, it would still be cheaper than importing electricity at current market prices.

Greece helps out North Macedonia

North Macedonia also needs coal for its thermal power plants (TPPs). North Macedonia is dependent on energy imports, and produces only electricity. It has no gas or oil, and has limited quantities of coal.

In August, North Macedonia’s power producer ESM called two tenders to purchase 950,000 tonnes of coal for the needs of its two TPPs 

Prime Minister Dimitar Kovacevski said on September 13 that he has secured supplies of coal and fuel oil from Greece during his meeting with Greek PM Kyriakos Mitsotakis in Athens.

“The supply of lignite and coal from the Greek mines will continue uninterrupted through the fourth quarter of this year and the first quarter of next year, so that the operation of thermal power plants REK Bitola and REK Oslomej will continue without interruption,” Kovacevski said, according to the government statement.

Kovacevski said that they had also reached an agreement on the uninterrupted supply of fuel oil through Greece for the operation of TEC Negotino TPP.

In Greece, Kovacevski and Mitsotakis also discussed major energy projects such as the construction of the gas pipeline through Greece, Evzonoi interconnector to North Macedonia, a new gas power plant and the Cebren hydropower plant. 

Serbia seeks coal, electricity, gas and oil

With ageing power plants and facing the imminent cut-off of oil supplies from Russia in November, Serbia is scrambling to import coal, electricity, gas and oil from multiple sources.

The costs will be high. Serbia is looking at spending €3bn, or 4.5% of its annual GDP, on electricity, gas and fuel oil imports between October 2022 and March 2023, Mihajlovic told Reuters. 

Serbia typically feeds its coal power plants with coal produced domestically as well as imports from Bosnia and Herzegovina, Bulgaria and Montenegro. This winter it plans to import 2.5mn tonnes of additional coal, with Energy Minister Zorana Mihajlovic naming Bulgaria, Bosnia, Romania and Greece as the main expected source countries in an interview with Reuters on September 15.

However, Serbia’s power generation capacity is limited and last December electricity supplies for thousands of people were cut off following serious snowstorms. 

Thus as well as coal from its own power plants, Belgrade also wants to import electricity, and state-owned power utility company EPS recently agreed to buy 2,600 MWh from Azerbaijan, which is growing in importance as an energy supplier to Southeast Europe. Talks with Turkey on transmitting the electricity are now in progress. Mihajlovic told Reuters that Belgrade is also in talks on electricity supplies from Hungary. 

As one of the only remaining European countries that still has friendly relations with Russia, Serbia managed to secure a new long-term gas contract with Gazprom in May on relatively favourable terms. However, this won’t cover all of its gas consumption and Serbia hopes Azerbaijan will step in again to supply gas, which will be facilitated by the Serbia-Bulgaria gas interconnector. 

From November 1, new EU sanctions mean Serbia will no longer receive Russian oil that is currently delivered by tankers through the Adriatic Sea, and then via the Adriatic Oil Pipeline (Janaf) through Croatia to Naftna Industrija Srbije (NIS). As Croatia is an EU member, it will no longer be able to receive seaborne oil from Russia. That leaves Serbia with Iraq as its main oil supplier. Again, Serbia is scrambling for new suppliers of oil, as well as gas and electricity, and officials have indicated it will consider any supplier, reportedly including Iran. 

Contacted by bne IntelliNews, Serbia’s energy ministry said: “The main goal is to ensure sufficient quantities of crude oil for the smooth operation of the refinery in Pancevo, and to ensure the security of supply to the domestic market. The sixth package of EU sanctions against the Russian Federation prescribes the deadline for the purchase of Russian crude oil, which is November 1, 2022. After that date, the purchase of crude oil of Russian origin for processing in a domestic refinery will no longer be possible.

“In the previous period, the refinery in Pancevo also processed crude oil of other origins in addition to the crude oil of Russian origin, depending on the availability and economic conditions of procurement on the world market. In the following period, the refinery will continue to process other types of crude oil that are not of Russian origin, as it is possible to obtain them on the free market,” the ministry’s emailed statement added. 

Bulgaria struggles after losing Russian gas 

Bulgaria lost its supplies of Russian gas in April when then president Kiril Petkov refused to pay in rubles. Petkov aimed to buy in liquefied natural gas (LNG) from the US and increase gas imports from Azerbaijan. 

After his government was ousted in June, the new caretaker government said it would reopen talks with Gazprom leading to accusations of trying to return Bulgaria to Russia’s sphere of influence as well as exploring other sources. 

Bulgaria, like Serbia, is looking to Azerbaijan, and in mid-September offered to export electricity to Azerbaijan in exchange for more natural gas. Azerbaijan is already supplying 1bn cubic metres of natural gas per year to Bulgaria and has said it could double that amount. Bulgaria’s Ministry of Economy and Industry by Minister Nikola Stoyanov also held talks with Iranian ambassador Syed Mohammad Jawad Rasooli on September 13, according to a ministry statement, which described the conversation as a "continuation of the search for all opportunities to ensure the diversification of our country”.

Elsewhere in the region the situation is somewhat easier, but even in Romania the government is seeking to speed up development of major gas projects. 

Long before the current crisis, Croatia took the step of setting up a floating LNG (FLNG) terminal off the island of Krk, supporting its energy independence, and also has ambitions to become an LNG hub for the region. Zagreb now intends to double the capacity of the terminal from 2.9 bcm to 6.1 bcm, Prime Minister Andrej Plenkovic said in June. Nonetheless, the government in Zagreb recently announced a sizeable package of anti-crisis measures to help the country cope with soaring energy prices. 

All countries in the region, both EU members and aspiring members, plan to invest in renewables and end their use of coal. The green transition is already underway, albeit with states in the region at very different stages, and there are numerous investments into solar, wind, hydro and even geothermal energy. While the emergency move back to coal generation is anticipated continue though the winter ahead, with worrying consequences for air pollution, in the longer term the need to have secure energy supplies and end dependence on Russia is expected to be an added impetus for investment into cleaner energy.