ECONOMY

Global crisis may prompt rethink about oil and gas pipeline projects

The global crisis may force a rethink of projects hooking Greece up to international energy networks, such as the Burgas-Alexandroupolis pipeline, as sliding oil prices change economic fundamentals. Constantinos Filis, director at the Russia, Eurasia and Southeast Europe Center of the Institute of International Relations, told Kathimerini English Edition that changing conditions could lead to Russia revising its moves on the energy grid. Meanwhile, countries in the region are taking steps to improve their energy positions, leaving Greece behind as it has failed to capitalize on its potential to become an energy transit point. Given that the crisis has prompted a drop in demand for power, do you see this changing national energy policies of importance to Greece? It is mainly Western industries that continue to be energy-thirsty, and we have to bear in mind that as long as oil and natural gas prices remain significantly lower than they were just this past summer, demand will remain more or less constant. On the other hand, if a US auto industry bailout plan is not approved, then demand will fall off. So we are looking at a very fluid situation; useful predictions are hard to make. Right now, Russia is the key country for Greek energy diplomacy, and the Russian economy has been hit particularly hard by recent developments because of its heavy dependence on oil and gas prices. So if forecasts that have the economic slowdown lasting two years are borne out, we may well see Moscow revise its plans or put projects like South Stream on hold due to high costs and high risks. Do you expect Greece to alter plans to hook up with energy networks? I don’t think our country has a long-term energy strategy for meeting the challenges of emerging realities. The fact is that Greece’s participation in energy projects has not been accompanied by corresponding initiatives to broaden options on suppliers or new collaborators. Nor have we seen any substantial moves aimed at capitalizing on our potential to become a transit link with the option of buying up energy networks in neighboring countries. So Greece is left with a critical dilemma: Depend on Russia as a supplier, or depend on Turkey as the principal regulator of our energy flow, given that most projects bypassing Russian soil will cross Turkish territory. The Burgas-Alexandroupolis pipeline is likely to be heading for delays despite the support of governments involved. Why? Strong political will from governments speeds things up, but when the negotiations pass on to the companies involved, the process takes on another dynamic. The resignation of the Russian president of the company that has undertaken construction of the project raises additional concerns, but my feeling is that a basic reason for delays is the involvement of Kazakhstan, which is seeking a stake in the company. Beyond that, we need to focus on two other factors: First, sliding oil prices are making projects like this – limited in scale as compared to European needs – look less attractive particularly due to fairly high operating costs. And second, there is the possibility that Turkey might gradually lift the ceiling on oil passing through the straits and this might cause Moscow to reconsider its Burgas-Alexandroupolis plans. How do you see the South Stream project moving along? Regardless of Russia’s intention to move ahead with South Stream, it is by no means certain the project will prove viable from end to end given that its cost is estimated at around 15 billion dollars. Greece’s participation would take on a substantial and strategic perspective only if the southern branch were to cross a significant portion of northern Greece, creating the necessary storage facilities and infrastructure and linking up to domestic delivery networks. However, Italy – having signed a bilateral agreement with Russia – is trying to have Albania and possibly even FYROM included, and if this comes to pass, South Stream will transit a chunk of Greek soil just large enough for Moscow to secure Athens’s commitment not to seek expansion of its energy supplies elsewhere.