An opportunity to improve energy policy

The new energy law, coming into effect this month, is a step in the right direction in revitalizing the Greek economy. It will harmonize national energy policies with European Union-wide directives and bring Greece on a par with many of its European neighbors by encouraging greater private investment in the energy sector. But it also presents an opportunity to make an important strategic shift when it comes to the country?s energy geopolitics. In short, the time has come for Greece to be a dynamic player in the quest to bolster European energy security through the Southern Energy Corridor.

While it has been high on Europe?s energy and foreign policy agenda for a long time, the disastrous events at Japan?s Fukushima nuclear power plant this year have catapulted the Southern Energy Corridor to the top of the priority list. Without a European ?nuclear renaissance? on the cards, the need for alternative routes to alternative sources of natural gas in Europe?s neighborhood is all the more acute. This need is only compounded by increasing European skepticism about the environmental sustainability of intra-EU shale gas development.

Thus, the almost mythical Nabucco natural gas pipeline project is back on Brussels?s map. It would snake from Austria to eastern Turkey, connecting to other theoretical pipelines that would fill it with gas from Turkmenistan and Iraq. However, it would not pass through Greece, and is predicated on volumes of gas that are not necessarily available and have certainly not been promised to any European consumers.

Greek companies and the current and previous governments in Athens have been wise so far in cultivating a relationship with Azerbaijan, the one alternative gas producer that has promised 10 billion cubic meters a year will go to Europe. But, unfortunately, they have boxed themselves in when it comes to transit of that gas through and beyond Greek territory.

Beyond Nabucco, the two more realistic Southern Energy Corridor projects on the drawing board are TAP, the Trans-Adriatic Pipeline, and IGI, Interconnector Greece-Italy. On the face of it, these two look very similar, but upon closer inspection we find that although their capacities are comparable (TAP at 10 bcm and IGI at 8-10 bcm), TAP holds the option of expanding to 20 bcm should more gas become available. TAP would also pass through Albania, instead of going straight to Italy, potentially opening up markets in the Western Balkans and farther north.

Increasingly, the smart bet in the industry is that TAP will get the nod from the Shah Deniz consortium that controls the 10 bcm of gas in Azerbaijan. This is mainly because, unlike Nabucco and IGI, TAP would be project financed by its three strong shareholders (EGL, E.ON Ruhrgas and Statoil). It also doesn?t hurt that Norway?s Statoil also has a large share in the Shah Deniz consortium.

Greece?s hitherto national gas company DEPA, and its pipeline operator subsidiary DESFA, is a shareholder in IGI, however. This has hindered Athens?s ability to play one project against the other and ultimately end up supporting (and investing in) that which will be favored by the holders of the gas. But with the new energy law, this could all change. The partial privatization and unbundling of DEPA and DESFA should allow for new investors to seek out new opportunities, including hedging their bets against commitment to a pipeline that may never be built. The powers of the Regulatory Authority for Energy will also be strengthened, hopefully allowing for decisions to be based more on commercial rather than political considerations.

The pipeline politics surrounding the Southern Energy Corridor are still fluid, but the all-important holders of the gas are set to make their preference clear before the end of the year. The new energy law, rushed through Parliament, is fortuitous in that it can allow Greece the flexibility to end up with the right project. Here?s hoping that private investors will see the light where successive governments did not.

* Alexandros Petersen is adviser to the European Energy Security Initiative at the Woodrow Wilson International Center for Scholars in Washington DC.