March 2021, Vol. 248, No. 3
Features
Cash Infusion Provides Push for New Central European Gas Pipe
By Gordon Feller, P&GJ Contributor
In August, the European Bank for Reconstruction and Development (EBRD) acquired a 25% stake in Vestmoldtransgaz. As Moldova’s state-owned pipelines operator, the company is responsible for Moldova’s newly built 74.5-mile (120-km) Ungheni-Chisinau gas pipeline.
EBRD acquired their new stake from Transgaz, the parent company of Vestmoldtransgaz, for $24.2 million (€20 million).
Established in 2014, Vestmoldtransgaz offers natural gas transport services because it owns and manages a gas pipeline network in Moldova. In 2018, the company was acquired by Eurotransgaz, a subsidiary of SNTGN Transgaz, a company that operates the Romanian natural gas transmission system.
The infusion of $109 million (€90 million) will be critical to the future success of this Ungheni-to-Chisinau natural gas pipeline in Moldova, with a planned capacity of 53 Bcf/d (1.5 Bcm/d).
This new pipeline is one critical part of the transnational energy initiatives that the European Union (EU) has been promoting: a gas connection aimed at linking the transmission systems of Romania and Moldova.
This new pipe links Chisinau, Moldova, the capital city, and a major area of gas consumption, to the interconnector between the Romania’s eastern city of Iasi and Ungheni, a Moldovan town on the Romanian border.
If successful, this pipeline will have the effect of enhancing Moldova’s energy security by diversifying its gas supply sources. National government leaders consider this to be a prerequisite for the country’s economic development.
The EU’s Trans-European Networks for Energy (TEN-E) is a long-standing policy focused on linking the energy infrastructure of EU countries. As part of this EU strategy, nine priority corridors and three priority thematic areas have been identified.
Through the various parts of the TEN-E, the EU helps countries work together to develop better connected energy networks and provides funding for new energy infrastructure.
The nine priority corridors cover different geographic regions in the field of electricity, gas and oil infrastructure. EU support for development in these corridors will connect regions currently isolated from European energy markets, strengthen existing cross-border interconnections, and help to integrate renewable energy.
TEN-E has designated four priority gas corridors:
- North-south gas interconnections in western Europe (NSI West Gas): Gas infrastructure for north-south gas flows in western Europe to further diversify routes of supply and for increasing short-term gas deliverability.
- North-south gas interconnections in central eastern and southeastern Europe (NSI East Gas): Gas infrastructure for regional connections between and within the Baltic Sea region, Adriatic and Aegean Seas, eastern Mediterranean Sea and Black Sea, and for enhancing diversification and security of gas supply.
- Southern Gas Corridor (SGC): Infrastructure for the transmission of gas from the Caspian Basin, Central Asia, Middle East and eastern Mediterranean Basin to the EU to enhance diversification of gas supply.
- Baltic Energy Market Interconnection Plan in gas (BEMIP Gas): Gas infrastructure to end the isolation of the three Baltic States and Finland and their dependency on a single supplier, to reinforce internal grid infrastructures and to increase diversification and security of supplies in the Baltic Sea region.
TEN-E has designated one priority oil corridor, specifically the oil supply connections in central eastern Europe (OSC): interoperability of the oil pipeline network in central eastern Europe to increase security of supply and reduce environmental risks.
It is notable that the first adoption of the TEN-E Regulation by the EU took place in 2013. It was reviewed and modified in 2020 to ensure consistency with the climate neutrality objective of the European Green Deal.
The decision to become financially involved with the Ungheni-Chisinau gas pipeline is not the first time that EBRD has become involved with a pipeline in this part of eastern/central Europe.
In 2018, EBRD provided a $73 million (€60 million) loan for the construction of a new gas pipeline linking Bulgaria, Romania, Hungary and Austria. With a total length of 820 miles (1,318 km), this “BRUA gas corridor” will offer better interconnections between the four countries along its route.
It had the effect of boosting the energy market by enabling new links with major gas infrastructure projects, such as the Southern Gas Corridor, through TAP and TANAP, other central European gas hubs and future offshore production sites in the Black Sea.
Key players on this project include the following four organizations:
- SNTGN Transgaz SA Romania – Transgaz was established in May 2000 as a joint stock company. It is the sole transmission system operator of the National Gas Transmission System in Romania. Transgaz is 58.5% owned by the Romanian state with the rest of shares on free float on the Bucharest Stock Exchange.
- Vestmoldtransgaz srl, R. Moldova – Founded in 2015 and privatized in 2018, VMTG owns and manages the gas pipeline network and provides natural gas transport services in Moldova. It operates as a subsidiary of Eurotransgaz srl, which is fully owned by Transgaz.
- EBRD – Based in London, EBRD was founded in 1991 to create a new post-Cold War era in central and eastern Europe. It is now doing more than ever – across three continents – to further progress toward “market-oriented economies and the promotion of private and entrepreneurial initiative.”
EBRD has participated in numerous pipeline deals, and they have been large ones. Here is a short list:
- Uzen-Atyrau-Samara Pipeline
- South Caucasus Pipeline
- Baku-Tbilisi-Ceyhan (BTC) Pipeline
- Trans Adriatic Pipeline Project
- Thessaloniki-Skopje Crude Oil Pipeline Project
The European Investment Bank (EIB), based in Luxembourg, is the lending arm of the EU. EIB is the biggest multilateral financial institution in the world and one of the largest providers of climate finance. Since its establishment in 1958, the EU bank has invested more than a trillion euros. EIB has financed other pipeline projects in the recent past.
For example, in February 2018, EIB loaned $1.82 billion (€1.5 billion) for the Trans-Adriatic Pipeline, part of a $40 billion project to bring new gas supplies to Europe. The EU is trying to reduce its dependence on Russian gas by developing the Southern Gas Corridor, a system of pipelines, which is expected to bring approximately 525 Bcf (16 Bcm) of gas per year to Europe by 2020.
The gas flows from Azerbaijan’s Shah Deniz 2 field, via several routes, including the Trans-Adriatic Pipeline to Greece, Albania and Italy.
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