Fifty-six proposals were submitted for evaluation. Four of them were beyond the geographical scope of this Task Force and were set in the annex. The remaining fifty-two proposals (Electricity 19, Oil 7, and Gas 26) comprise the inventory. One project is a Trans-European Energy Network, and has not been re-evaluated. Sixteen proposals were characterised as projects of national interest (3 in the oil sector, and 13 in the natural gas, among which 6 proposals related to national underground gas storage sites). Finally, thirty proposals (15 in the electricity sector, 11 in the natural gas sector and 4 in the oil sector) were agreed upon, supported, evaluated and prioritised as Common Interest Projects by the Task Force.

In the Electricity sector the dominant trend in the region is the interconnection of all national grids to UCPTE. This is a clear priority for all countries of the region.

According to studies performed under the PHARE programme, the electric systems of Romania, Bulgaria and Albania can be interconnected to UCPTE through Hungary after carrying out a limited number of investments for re-installing a set of 400 kV transmission lines between Romania and Hungary, for improving the substation equipment in Bulgaria, the protection and co-ordination equipment in Romania as well as the power plant control in the three countries.

In 1996 Albania, Bulgaria, FYROM, Greece, Romania and the F.R. of Yugoslavia signed an agreement according to which they operate their systems in parallel and synchronous mode. Each system regulates the load and frequency within its own area according to UCPTE standards.

This situation reflects another trend that promotes the development of new and the enhancement of existing interconnection projects with regional character.

A number of the proposed common interest projects correspond to this category and aim mainly to the improvement of the overall power system reliability of the region and the power transfer capabilities of the participating national power systems.

Inventory - Annexes

A total of 19 projects have been proposed in the electricity sector by the seven countries participating in the Task Force.

Evaluation of Common Interest Projects

The list of Common Interest Projects includes 15 projects from the inventory. The result of the evaluation is as follows:

Projects that are still in the primary development stages, and require further data, analysis, and most importantly, serious commitment of the involved parties, are considered as 3rd priority projects.

Second priority projects are the ones that could contribute to the development of regional interoperability and the development of a regional electricity market, yet they may not be considered mature. These projects will have to be further developed taking into account the power system expansion requirements both on the generation and transmission end.

Among the proposed projects, the ones that are highly mature, have been studied, and aim to the completion of the integration of the region to UCPTE, may be characterised as first priority projects:

Furthermore, the development of a telecommunications system in the Balkan electricity sector (project E7) and the installation of protection devices (project E6), will improve network reliability as well as the flexibility of systems operations.

Initiative for the creation of a Regional Electricity Market

As already mentioned, the dominant trend in the region is the interconnection of all national grids with UCPTE, while also increasing the level of technical cooperation between them, by practicing parallel and synchronous operation.

However, the construction of all these interconnections cannot be justified unless certain decisions are taken, enriching and liberalizing national energy policies in the electricity sector.

The economic viability of the proposed projects of this category can be assured only within the perspective of the formation of an appropriate technical, institutional and legislative environment where electricity transactions will be executed in a free, but still properly organized manner.

The establishment of a competitive regional electricity market that will be based on the complementation of the existing local power systems and markets emerges as a promising perspective, as concluded by a pre-feasibility study financed in the context of the SYNERGY programme.

Towards this aim, the Task Force coordinator asked Task Force members of countries already exercising parallel and synchronous operation of their power systems according to UCPTE standards whether they would be interested in offering political endorsement for the formation of a regional electricity market among them.

The requested political endorsement should cover possible financing of the appropriate studies and actions from EU programmes towards the aforementioned aim. The answers received from all requested parts were positive, encouraging an initiative towards that direction.

The Balkan region does not have an integrated natural gas market because, except for the isolated pipeline that transports gas from the Russian Federation to Turkey, crossing Romania and Bulgaria and branching towards FYROM and Greece, there are only national gas networks without any cross-border connections. Bosnia and Herzegovina was linked to the transmission system of former Yugoslavia, but this has been quite damaged during the period 1992-1996. Thus, there are no conditions to establish a market based on the gas volumes traded between the different countries in the region.

One of the most important restrictions to the development of the gas industry in this region is the almost total dependency on external gas supply sources. Indeed, except for Romania which has been exploring and producing considerable quantities of natural gas for many years, Albania, Bulgaria, Greece and Turkey, as well as some of the Former Yugoslav Republics, are small gas producers of modest volumes which they use in their own domestic markets.

Natural gas consumption in the region, compared to that of the European Union, reveals the existence of free capacity and therefore potential for investment initiatives in the gas industry. However, the situation changes when considering other factors, associated with the short and medium perspectives of some national economies and the structure of local gas markets. Gas industry in some countries in the region faces serious problems associated with the old subsidization system which forces to prices lower than costs, decapitalizing the gas companies, and thus discouraging foreign investments.

The region is a net importer, and the Russian Federation plays a dominant role as the almost exclusive supplier. This almost total dependency on one external supplier creates one of the most important restrictions to the development of the gas industry and highlights the importance of the issues of diversification and security of supply.

Inventory-Annexes

Projects on the Gas sector cover the whole spectrum of activities from Trans-Continental pipelines to isolated LNG terminals and national underground gas storage facilities. A total number of twenty-six projects have been registered in the inventory.

Eleven of the enlisted projects located within the geographic area of the mandate have been considered as projects of common interest and have been evaluated.

The evaluation of the Common Interest Projects led to the establishment of three levels of priorities:

Third priority projects are still at a preliminary stage and some of them need to be further studied in order to evaluate their feasibility. These projects concern the launching of pipelines crossing borders between different countries.

Second priority projects are oriented towards new regions without a tradition of using natural gas, some of them even with lack of infrastructures. These projects concern new interconnections between Balkan countries that can contribute to the development of a regional gas network. Additionally, these projects concern the installation of new trunklines to supply natural gas from alternative gas sources or to transport natural gas to Balkan regions still isolated from gas networks.

First priority projects concern the supply of gas to recognized markets that have demonstrated their propensity to consume higher gas quantities. Previous works have already been undertaken showing the development of activities towards further project stages. The two previous conditions denote that the risk to proceed with the investment is rather low.

The first priority group includes two projects. Transmission capacity increase of the pipeline Romania - Bulgaria - Turkey (G7) and improvement of the existing transmission network in Bulgaria (G14) for which previous works have been already undertaken and consequently they can be described as further development of existing infrastructure.

Initiative for joint exploitation of Underground Gas Storages in Balkans

Apart from long term considerations associated with transcontinental pipelines, most of the Balkan markets attempt to settle their supply problems during peak seasons using underground gas storage facilities.

A number of projects referring to UGS have been proposed by the countries as national projects and consequently could not be included in the list of common interest projects. However, if these proposals were to be considered as elements of a regional framework for storage facilities then they could cover in a more persistent and economic way undesired disturbances in the supply sector.

The formation of a regional multinational organization as a joint venture company could be more efficient in raising funds from international institutions and the private sector.

Towards this aim the Task Force coordinator asked Task Force members whose countries are interconnected to the main pipe line crossing Romania, Bulgaria and branching to FYROM, Greece, and Turkey whether they would be interested to offer political endorsement for joint exploitation of underground gas storage facilities in the region. More precisely, they were asked whether they would be willing to support the appropriate studies and projects towards the aforementioned aim.

It is important to note that four countries have expressed their support for such an initiative while one has not answered yet.

The analysis of the energy balance in the oil sector reveals that the region is a net importer of crude oil and that despite the existence of high refining capacity, especially in Romania, the existing infrastructure cannot meet the increasing demand towards the light end of the barrel.

Planning of oil interconnections in the Balkans is subject to decisions associated with national policies, concerning security of supply, and expectations related with the international routes of oil, originating both from Central Russia, and from the Caspian fields.

Inventory-Annexes

Five countries have proposed a total of nine projects in the oil sector, namely: Albania, FYROM, Bulgaria, Greece and Turkey. The Okta refinery upgrade in Skopje (O3), the Aspropyrgos - Spata pipeline (O5), and the feasibility study for the refining sector (O6), failed to meet the established criteria for being considered of common interest, and they were not evaluated.

Evaluation of Common Interest Projects

The list of Common Interest Projects includes four projects separated in two groups. Two of the projects, namely the Burgas - Alexandroupolis crude oil pipeline (O4), and the Burgas - Skopje - Vlore crude oil pipeline (O7), refer to possible transportation routes of Caspian oil from the Black Sea ports to the Mediterranean Sea while the remaining two refer to the South-North axis intending to cover regional demand.

With a utilization rate of 88% and a maximum agreed international throughput of about 50 mtpa of crude oil and refined products southbound, it seems that not much space is left for the gradually increasing volumes of early Caspian oil in the Black Sea. If this is true, then in addition to the Bosporus tanker route, the expected growth in transported volumes justifies, at least for the near future, an additional capacity of up to 40 mtpa.

Two projects, namely the two-way oil products pipeline Thessaloniki - Skopje (O2), and the crude oil pipeline Burgas - Skopje - Vlore (O7), can be grouped together at a lower priority, especially due to the very preliminary stage of planning.

In the case of the Thessaloniki-Skopje products pipeline, the need for an in-depth refinery study casts some doubt on whether both crude oil and product lines are justified.

A more considered review shows, however, that the need to improve crude oil supply economics to FYROM is obvious. Without the AMBO project a strong argument could be put forward for retaining the Skopje refinery, with a more modest upgrade in the short term. This will increase the security as well as the economics of oil supply, providing, in addition, employment and technology and reinforcing the existing oil infrastructures.

The Bourgas-Alexandroupolis pipeline is the highest priority project in the oil sector, due mainly to the growing pressures for an alternative route to the Bosphorus and Dardanelles Straights for transporting crude oil from the Black Sea to the Mediterranean.

For the reason just explained, the crude oil pipeline Thessaloniki - Skopje (O1), should also be considered as a first priority project.

Environmental International Conference Initiative

As far as international environmental impacts are concerned, the expected oil which may be shipped from the ports of Eastern Black Sea, South Turkey (Caspian oil) and the North Adriatic (Russian oil) may double or even triple the annually transported volumes. This situation may lead to environmental damages far beyond the self-regulatory capabilities of ecosystems. Taking into account that some of the ports (Ceyhan, Omisalj) offer loading capacities for tankers up to 300,000 dwt, any mishap may have catastrophic impacts not only to the marine environment but also to the tourist oriented economies of almost all coastal countries from Georgia, Turkey and Cyprus to South France and Spain.

In this context it is obvious that all precautions and measures aiming to ensure safe and smooth flow of Caspian oil to international markets should be taken in advance by all interested parties.

Towards this aim the Task Force coordinator asked all Task Force members whether they would be interested to offer political endorsement for an International Conference dealing with the environmental impacts of the expected dramatic increase of oil transportation across the Black Sea and the Mediterranean Sea.

It is important to note that five countries have expressed their support for such an initiative, one has not answered yet while another one has explained its point of view. A positive approach was also expressed by a Task Force observer country.

In conclusion, the whole exercise has driven to the following results:

• An Inventory of the existing proposals for interconnection projects in all three sectors, namely Electricity, Gas and Oil, has been prepared, reflecting the maturity of each project.
• Under common agreed procedures and methodologies a list of common interest projects has been prepared and projects in this list have been evaluated and prioritized.
• A final list of ten common interest projects from all sectors have been characterized as of first priority and have been proposed to gain political endorsement for further promotion.
• In addition to first priority projects, three proposals that were addressed to Task Force members by the coordinator, have gained considerable endorsement that may lead to certain initiatives.

More specifically the proposals refer to the issues of:

• the establishment of a Regional Electricity Market
• the joint exploitation of Underground Gas Storage facilities in the Balkans
• An International Conference dealing with the environmental impacts of the expected dramatic increase of oil transportation across the Black Sea and the Mediterranean Sea.

Most Task Force members have expressed their expectation that the whole procedure will be continued, thus offering ground for cooperation and promotion of investment initiatives. Surely the results obtained justify their expectations.

E16: This project, proposed by Romania after the second Task Force meeting, concerns the upgrading of the existing interconnection line between Romania and Hungary from the present 220 kV to 400 kV. The transmission line Sibiu-Mintia-Arad and the connected substations in Romanian territory, operating also in 220 kV, must also be upgraded to 400 kV. The project has already started with EBRD and internal funding. It is a CIP as it is recommended by the EC/Phare studies as essential for interconnection for UCPTE.

E7: Apart from Bulgaria, the original proposer, this project concerns Romania and the F.R. of Yugoslavia. A study for a data exchange system among the Bulgarian and Greek systems is already underway and is being financed by the EC programmes PHARE and INTERREG II. During the second Task Force meeting the project was also supported by Romania. This proposal concerns systems for on- and off-line data transfer inside, as well as, between parallel operating power systems, (dispatching centers, accounting and LFC centers) using dedicated communication networks, ensuring fast and efficient operation. This is a CIP as it is accepted by all countries concerned, and it is essential for the operation of the interconnected Balkan system.

E6: Originally proposed by Bulgaria and later accepted by Greece, Romania and Turkey during the second Task Force meeting, this proposal concerns the provision of equipment for protection and monitoring. It has been recommended by UCPTE and by the relevant PHARE studies. This proposal also concerns the F.R. of Yugoslavia, but its intentions are yet unknown. This is a CIP as it is accepted by all countries concerned, and it is essential for the operation of the interconnected Balkan system.

E14: This project, which has been proposed by Bosnia and Herzegovina, concerns the reconstruction of the 400 kV transmission and interconnection lines which have been damaged during the war. These lines, and especially the first one of group a (a₁) and project b, apart from their usefulness for the system of Bosnia and Herzegovina, are of major importance, as another UCPTE 400 kV connection route (Adriatic coast link). This part of the project was supported by Albania, Bulgaria, Greece and FYROM. In fact, Albania and Greece sent relevant letters of support. The projects a₁ and b are CIP as they are accepted by more than two Balkan countries and they are essential for the interconnection with UCPTE.

E15: This project was proposed by Bosnia and Herzegovina; it concerns the reconstruction of the above 220 kV transmission and interconnection lines which have been damaged during the war. This first one (a) concerns a 220 kV double line interconnection between Bosnia and Herzegovina and Croatia and UCPTE. It was accepted and supported by Albania and FYROM during TFM3, so it is a CIP.

G7: This project is intended to improve and increase the natural gas transport capacity of the main pipeline running from the Russian Federation to Turkey through Romania and Bulgaria. The project has been well studied and the respective proposal was presented by Bulgaria with the Turkish and Romanian support. This project is justified by the need to increase the Russian gas supply to Turkey due to its expected increased gas consumption. The project is scheduled in accordance with that consumption increase. As it represents the future reinforcement of an interconnection system between several countries in the region, it was considered as CIP. It should be pointed out that Turkish authorities have announced further interconnections with the Russian Federation or the implementation of a new transmission system to transport Iranian gas. However, it seems that whereas these two projects intend to contribute to the satisfaction of long term needs of the country, the project related with the duplication of the Bulgarian pipeline will serve smaller current needs of the market.

G14: The objective of this project (which is already developed to a detailed engineering phase) is the reinforcement of the Bulgarian gas network. Originally proposed by Bulgaria, this project also concerns FYROM, Greece and Turkey. Indeed, this project aims to reinforce the pipeline network transport capacity and to improve its reliability via the investment in pipelines and associated equipment. The project’s total cost is estimated at 46.9 million ECU. The first phase is already supported by the PHARE inter-regional programme. Thus, the implementation of this project will have significant advantages on the gas transmission activity in the Balkans. Specifically, since Bulgaria is a transit country for FYROM, Greece and Turkey, it will have additional benefits to the gas industry in these countries. For this reason, the project was considered as a CIP.

04: This project has been originally proposed by Greece, is also supported by Bulgaria and Russia. With the increasing production from the Caspian Sea area, the project has a strong environmental benefit in moving crude between the Black Sea and the Mediterranean without using the Bosporus and Dardanelles Straights. A recent meeting of experts from the three countries agreed to prepare draft tender documents and an agreement for establishing the "Transbalkan Pipeline Company". The cost of the pipeline, including terminal facilities, is 619.2 MECU. It will have a capacity 40 mtpa, and its length will be in the range of 242-280 km depending on the route to be chosen by Bulgaria x 42" dia (1,067 mm). Since both countries concerned are in favour, this is considered as a CIP.

01: This project has been originally proposed by FYROM and is also supported by Greece. The capacity of the pipeline 2.5/3.0 mtpa and its cost is estimated to be 47.9 MECU, The proposed pipeline length is 221 km x 14" dia (355.6 mm). It is at a first investigation stage by the Okta Refinery in Skopje. Although soon after the second Task Force meeting (TFm2) in Sofia FYROM withdrew support for this project in favour of the AMBO project (proposal O7), they asked for it to be reinstated during TFm3 in Brussels on 19 June 1997. This project is thus considered to be a CIP.

First priorty projects : Distribution per country

9 : Originally proposed, < : Accepted, 4 : Positively influenced