Four new developments, ranging from further reductions in gas transmission tariffs on the Greeceto Ukraine, to new projects aimed at increasing its transport capacity and doubling the volumes of LNG that the American company Venture Global will supply to the Greek firm Atlantic SEE, accompany the restart of the Vertical Corridor.
The moment of truth for the “new” Vertical Corridor is approaching, and the annual auction to be held on July 6 under the new framework agreed upon in March with the European Commission constitutes the first crash test following the changes made months ago and the new round of U.S. activity in the region.
Of course, the market has the final say, and in a few weeks it will show whether the project’s teething problems have actually been addressed or not, though some signs do justify optimism.
Such is the conservative forecast from DESFA sources for capacity commitments of at least 30% in the first annual auction via the Sidirokastro gateway, on the border with Bulgaria, where just under 100 gigawatt-hours will be made available in less than a month.
If this estimate is confirmed, it will correspond to a volume of more than 1 billion cubic meters (bcm), explain the same sources, who consider the most likely destination for these first gas shipments in the new era of the Vertical Corridor to be Bulgaria, Romania, or Hungary, though not necessarily via Ukraine.
Moreover, the new system allows traders to lock in capacity not only for a period of 3 months to 1 year, (under the old system, products were only available on a monthly basis), but also at all cross-border points in the countries situated between the starting point—namely Greece—and the end point—namely Ukraine. This means that U.S. LNG can be supplied to Bulgaria, Romania, or Moldova.
The data suggesting cautious optimism among those involved in the matter—even though there are still 23 days until the auction and memories are still fresh from the repeated failures of the past months—are summarized below.
Tariffs: Drop from 9.39 to 5.85 euros/MWh
The latest ICIS data indicate that the current outlook for natural gas transmission from Greece to Ukraine points to costs hovering around 9.39 euros/MWh. The goal of the five countries involved in the project (Greece, Bulgaria, Romania, Moldova, Ukraine) is to reduce the annual tariff to 5.85 euros/MWh.
A critical factor here is the further reduction of transit charges on the Romanian section of the route. In such a case, we would be looking at tariffs 50% lower than those in effect in March.
Greece-Bulgaria capacity increases by 50%
Infrastructure projects on the Bulgarian network have been completed, meaning that starting July 1, capacity between Greece and Bulgaria will increase by 50%, rising from 2.4 billion cubic meters (bcm) per year to 3.1 bcm.
In fact, a further upgrade of this section to 3.6 bcm per year is forthcoming.
Doubling of Bulgaria-Romania Capacity
Plans are underway to double the transmission capacity on the section connecting the two countries, from 5 to 10 bcm per year, starting in the 2027/2028 gas year. The relevant infrastructure is expected to be completed by then, while an increase in capacity between Bulgaria and North Macedonia is also planned for the same period. It should be noted that Russian gas imports into the EU will come to a definitive end in the fall of 2027.
The agreement with Venture Global
There is also the factor of Venture Global following the extension of the long-term agreement with Atlantic SEE LNG. The minimum volume that the American company will supply starting in 2030 and for a period of 20 years to the Atlantic SEE LNG consortium (60% Aktor, 40% DEPA) will double, increasing from 0.5 million metric tons per annum (MTPA) to 1 million metric tons per annum (MTPA). At the same time, Venture Global has for years committed to 25% of the total capacity of the liquefaction terminal at the Alexandroupolis FSRU.
The question that therefore arises following yesterday’s joint announcement by the two companies is whether we will see short-term natural gas sales agreements with countries in the region—that is, capacity commitments on the Vertical Corridor before 2030— in auctions such as the one on July 6.
“It is not out of the question that this move could also be accompanied by short-term contracts with off-takers from countries in the region for natural gas agreements, prior to the commencement of the 20-year contracts starting in 2030 and beyond,” according to sources within the Aktor Group. However, Atlantic SEE’s intention to enter into short-term agreements was mentioned last December during an Athens Stock Exchange event, and by Al. Exarchou himself.
In fact, in February, on the eve of Papastavrou’s meetings in the U.S., during one of K. Diadromos’s few successful auctions, Atlantic SEE had secured 98% of the available capacity for March via Revythousa (approximately 25 GWh), activating a previous agreement with Ukraine’s Naftogaz.
This picture summarizes the outlook for the Vertical Corridor, which is once again taking the lead amid a situation marked by real concerns about Europe’s energy sufficiency ahead of winter, following the removal of Qatar’s supply from the equation and as efforts to wean Europe off Russian gas are underway.
However, the prospect of long-term agreements is by no means a foregone conclusion, as competition between European and Asian buyers for U.S. LNG has intensified following the closure of the Strait of Hormuz, driving up spot prices.
These high prices are causing U.S. gas producers to prefer selling on the spot market rather than committing to 20-year long-term contracts.
“U.S. suppliers have become reluctant to commit to a price for a long period of time. This is a different situation from six months ago, when they were seeking such long-term agreements,” Al. Exarchou told Bloomberg a few days ago.