Editorial comment
The Eurozone is to bail out Greece for a second time, it has just been announced, to the tune of e130 billion. The deal forged in Brussels requires Greece to reduce its debt to 120.5% of its GDP by 2020 (compared to the 160% of its GDP that it owes currently). It also stipulates that Greece accepts permanent monitoring by Eurozone experts, and that it sets up a ring-fenced account, separate from it’s main budget, in which it must keep enough money to pay its debts for the next three months. The first bailout of e110 billion in 2010 was not enough to save the country from sinking deeper into recession. This loan, and effectual financial babysitting service, will mean that Greece escapes defaulting on its loans later this month and can once again try to haul itself out of crisis.
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However, amid doubts over Greece’s ability to pay back its loans and make the necessary spending cuts moving forwards, the Interconnector Turkey-Greece-Italy (ITGI) pipeline has suffered a setback. Infrastructure projects are bound to be affected by government spending cuts, but this particular blow comes courtesy of a third party.
The Shah Deniz consortium has made a provisional decision to exclude the ITGI project as an option for its Southern Corridor gas route and, instead, to go ahead with exclusive negotiations with the Trans Adriatic Pipeline (TAP) for the part of the route that goes from the Caspian to Italy.
Europe has long sought alternative gas supplies and this Caspian line would go some way to alleviating Europe’s dependence on Russian supplies.
Shah Deniz II, a field in the Azerbaijani area of the Caspian basin, is estimated to hold 10 billion m3 of gas and is being developed by a consortium that includes energy giant BP PLC.
ITGI was originally conceived in 2005. A Memorandum of Understanding was signed between Italian utility Edison, Greek gas company DEPA and Turkey’s Botas in June 2010, which drew the framework for the transit through Turkey.
The ITGI project proposed using existing pipelines in Turkey and Greece, with a new pipeline to be built connecting Greece to Italy (IGI pipeline). A spurline from Greece to Bulgaria was also planned.
Now that ITGI has been sidelined by the Shah Deniz consortium, the remaining competitors for the Southern Corridor route are Nabucco, the South East Europe Pipeline (SEEP, BP’s proposal).
In last month’s issue, we published an in-depth report on Central Asia’s potential for pipeline projects (Central Asia’s chessboard – if you missed it, subscribers can sign in at our website www.energyglobal.com and download a PDF of the issue).
This month the regional review focuses on China (Developments in the year of the dragon).
World Pipelines’ foreign correspondent Ng Weng Hoong observes how, in 2011, China began to accelerate its swap of weakening US dollars for hard oil and gas assets. With crisis surrounding the Euro, and several individual Eurozone economies on the brink of collapse, not to mention record budget deficits in the US and Japan, China “began to view its hoard of more than US$ 3.2 trillion in foreign exchange reserves...as a source of weakness rather than strength.”
In contrast to Greece, China has a fast and growing economy, which needs oil and gas resources to support it. Energy deficits are an ongoing concern, as China imports betwen 50 and 60% of its oil and this is increasing. Turn to page 12 to find out how China is facing its challenges with a barrage of deal-making and diversification.
Meanwhile, a decision from Shah Deniz is expected by mid-2013. Either Nabucco or SEEP will compete with TAP for the export rights to the Shah Deniz II gas. At the time of going to press, it is rumoured that Greece’s DEPA may buy a stake in TAP pipeline group, indicating that Greece may not be out for the count just yet.
