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SOFIA IS A STEP BEHIND THE GAS EVENTS

Italy is ready to buy natural gas from Middle Asia and it will be transited along the conduits of Greece and Turkey, the website RusEnergy announced, quoting Vasilius Tsimbanopoulos, Director General for strategic planning of the national Greek gas company DEPA. The statement was made last weekend at the international exhibition and conference titled Caspian Oil and Gas 2003, held in Baku, the capital of Azerbaijan. There has been no official confirmation from Italy yet. However, Mr. Tsimbanopoulos pointed out that the transit would be effected on the basis of the already signed agreement with the Italian private company Edisson Gas. The document projects that Southern Italy would be getting during the first stage 2 billion cubic meters of gas annually, and the deliveries are projected to increase later on from 4 to 8 billion cubic meters. It became known as well that the feasilibility studies for the project are yet to be carried out, but according to DEPA's initial plans, Southern Italy should receive the first deliveries of natural gas in 2007. A year earlier the connecting pipeline will be supplying 2-3 billion cubic meters annually to Greece itself. Athens' transeuropean gas map projects annual transiting of 30 billion cubic meters of Caspian gas, the Greek Ambassador in Baku H.E. Merkurius Karafotias said. There will be one pipeline which will be a continuation of the track, connecting the gas transiting systems of Greece and Turkey. But still on Greek territory the fuel will be divided in two directions. The first one will include France and Italy, and the second one will lead to Central Europe, passing through Slovenia, Bosnia, Herzegovina, and Croatia. No gas transiting and conduits via Bulgaria has been projected. Thus, everything concerning the access of Caspian gas to the European markets seems settled, including the distribution of huge financial flows for transiting.Sofia dropped out of the rating. In its ambition to occupy the place of a single regional gas map-maker Greece relies basically on the fact that it is a member of the European Union (EU) and on its rich experience when lobbying for a dominant part in the transnational infrastructural projects in the region. Just a year ago Greece succeeded to obtain from Brussels a grant aid of EUR45MN for linking its own gas transiting network with that of Turkey. Thus, Athens ensured 25% of the EUR180MN, necessary for the construction of the 85-km-long section of the gas conduit on Greek territory. The capacity of the linking pipeline is only 600,000 cu m annually, and its total length is 285 km. 200 km of it are on Turkey's territory and their construction will be financed by the Cabinet in Ankara (more specificly - by the national gas monopoly BOTAS). However, much more than EUR180MN will be necessary for the construction of gas conduits to Southern and Central Europe, whose aggregate capacity will be 30 billion cubic meters. If all the routs, planned by the Greek are realized, the necessary amount might even exceed EUR7-8BN. It is certain that not a single country from the EU would set aside easily such amounts of money. Neither any of the big multinational energy companies would do that. That is why the construction of such large-scale infrastructural projects is regulated by somewhat different rules. Before the virtual route of the transnational gas conduit is laid out on the maps at least three main factors should be present. The first one is the availability of gas deposits, sufficient to fill the entire capacity of the pipeline for at least 20 years. Moreover, the respective deposits should have legal owners and legislative grounds should exist for signing long-term trade contracts for deliveries. The second factor are the countries through which the gas is transited. Two elements are of major importance here: the political risk and the fees for transiting, to be paid by each of the countries. The assessment of the political risk needs huge information and circumstantial economic and geopolitical analyses. And the fees for transiting should be agreed with the authorities in each of the transiting countries (and with the respective transiting company). The third factor are the markets where the natural gas will be sold. The usual practice is that before starting construction, the operator of the transiting pipeline (in the majority of cases in Europe it is also the owner of the transited natural gas) should sign a contract for the future deliveries. One of the mandatory clauses in these contracts is the so-called take or pay, under which the country to which the gas is delivered pays the ordered annual quantities in advance, regardless if it uses them or not. Most of the above-mentioned parameters are not known regarding the Turkey - Greece - Southern and Central Europe track. But its is clear that very soon the extracted quantities of Caspian natural gas would exceed the demand in the region and will be redirected to the markets of the Old Continent. It is clear also that all possible routes will pass through Anatolia and that Turkey's European part will map the transeuropean corridors. Two routes have been discussed so far. For one of them Athens activated not only its gas experts, but its diplomatic potential as well. The source for it is said to be the Shah Deniz gas field in Azerbaijan, whose extractable deposits are preestimated at 16 billion cubic meters in 2010. The gas will reach Turkey in 2006 along the south Caspian pipeline Baku - Tbilisi - Erzurum. The first contract for its construction were signed in the end of last week.The other route of the south Caspian natural gas has at least a 6-year-long history and passes Bulgaria's territory. This route was proposed by Shell. In the the 1997-1998 period the multinational company signed agreements with the governments and national gas companies of Teheran, Ankara, and Sofia, for transiting Iranian fuel to Central and Western Europe. According to the Iranian information agency INA, Teheran has invested more than USD3BN in the conduit, relying to transit through it 20 billion cubic meters of gas annually to the European markets. Currently, however, the expensive pipeline delivers natural gas to the Asian part of Turkey only. The quantitiess are less than projected, and the prices are lower than the initially agreed. Nevertheless, Teheran and Ankara do not conceal their ambitions to bring the Iranian gas to Central Europe. The gas companies of Austria and Hugary also have similar intentions. All of them include Sofia in their plans. In mid-2002 the gas companies of Turkey, Bulgaria, Hungary, and Austria, closed and agreement for conducting feasibility studies of that route.Few people nowadays doubt that the south Caspian natural gas would reach the markets of Southern and Central Europe. The questions rather concern the directions of the future transit. Polemics are about if the routes through Greece and Bulgaria compete with each other? According to most of the analysts, there is no rivalry between the two routes. However, economic estimates and analyses are needed in order to prove which of them would be more advantageous and effeicient. They should be accompanied as well by an explicitely declared interest in the purchase of the transited natural gas (i.e. binding documents, signed by authorized bodies of the countries or companies for which the deliveries are intended).

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