ICGB: No contractual grounds for extension of time for interconnector's competion

Report's exclusive interview with the Executive Officer of the ICGB project company from Bulgaria Teodora Georgieva.

- What is the current situation concerning the construction of the Gas Interconnector Greece - Bulgaria (IGB), which will transfer Azerbaijani gas to Bulgaria? Why does the company face a delay in the construction pace of IGB? When is the commissioning of the gas connector expected, given the delay?

- The overall project completion is now more than 80% as per the latest stats reported by the EPC Contractor. Most of the pipeline route has been already successfully hydrotested and the entire linear part is expected to be fully completed in February despite the heavy winter condition on site. The aboveground installations (AGIs) are making progress - GMS2 Stara Zagora is close to being mechanically completed and Gas Metering Station at Komotini is also going forward, albeit at a slower place due to delayed deliveries of equipment. Similar is the status of the block valve stations – all eight installations are suffering serious delays because of missing major valves from the Italian supplier.

There are several reasons for the accumulated delays, however the two major ones could be attributed to the Covid pandemic and global issues with the manufacturing and the transborder logistics over the past months. The EPC contractor suffered serious problems with deliveries of critical valves needed for all block valve stations as well as major equipment for the Gas Metering Station at Komotini. In turn, this has adversely impacted the construction activities on site resulting in moving further ahead the time for completion. The EPC contractor is working jointly with ICGB on the remediation measures seeking to recover the time lost through better planning, increasing the site resources as well as optimizing the time needed for all remaining activities.

- The contractor of the IGB has not fulfilled its obligations and asks for an extension of the construction pace , said the Bulgarian government. What would be the Bulgarian response to that? Which reasons caused this delay, are there any delays in the financing of the project or any technical problems? What will be the consequences: any sanctions or something else?

- The ICGB management already decided that there are no contractual grounds for extension of the Time for completion. The ICGB management decision reflects not only the Bulgarian position but also the position of the other Shareholder – IGI Poseidon. Indeed, AVAX is claiming that the delay is not caused by their default but the reasons that they are stating are not among the events that might be qualified as a Force Majeure, or other reasons which give entitlements for extension under the EPC contract.

Apart from what is said, AVAX is suffering the knock-off effect of COVID pandemics and in particular the delays in the delivery and supply chains worldwide as replied in the previous question.

There are no issues with the financing at this stage, but it must be clarified that the construction started in 2019 since the financing in the overall amount of Euro 240 mln was granted in October 2019.

In respect with the established delay ICGB has the right to activate the Liquidated damages at the amount of Euro 90 000 for each day of delay. We are targeting to imply all contractual mechanisms to procure that the IGB pipeline will be successfully completed within the first half of 2022.

- What is the possibility for Bulgaria to get additional gas from what the country receives in another way, while IGB is not ready?

- Currently, Bulgaria receives Azeri gas through the existing gas infrastructure of Greek system operator DESFA and Bulgarian operator Bulgartransgaz. Gas quantities are transferred from TAP to DESFA at the interconnection point Nea Mesemvria and from DESFA to Bulgartransgaz at the border point Sidirokastro/ Kulata. Currently, there is enough technical capacity at both IPs which could accommodate 1 bcm/y as contracted by Bulgargaz. Although DESFA offers firm conditional capacity, the probability of interruption is very low, around 3 % based on historical data. At Sidirokastro/ Kulata, both DESFA and Bulgartransgaz offer firm bundled capacity.

- Has the dismissal of Bulgargaz management had any impact on IGCB?

- Bulgargaz and ICGB are different companies in their activities. ICGB will be certified according to EU rules and will operate the interconnector as an independent gas transmission operator. For its side, Bulgargaz is a public supplier and the state gas trader, which is 100% owned by BEH EAD. Now, Bulgargaz is our most important shipper, which has reserved large capacity in IGB in the long term. Since BEH is the principal of Bulgargaz, it has the right to make changes in the management of the company, as it decides and ICGB is not in a position to comment on this. We do not expect any negative implications in relation to the interconnector and we hope for good and constructive coordination cooperation between our two companies.

- How should the new management change its attitude in regard to the IGB? Which new steps should they take to speed up the construction?

- We believe we will have effective and constructive coordination and cooperation with the new management of our main shipper – Bulgargaz. We have always tried to help and assist the Ministry of Energy and Bulgargaz to provide a temporary supply route through the interconnection point Nea Mesimvria and the Greek gas network. It should be considered that the temporary supply route through the Nea Mesimvria entry point, has sufficient capacity for transmission of the full capacity of Azerbaijan natural gas to Bulgaria.

On another note it is important to note that the completion of the construction of IGB pipeline and its entry into commercial operation on July 1^st, 2022, depends entirely on the fulfillment of the commitments made by the Greek company AVAX, which construct the interconnector. Our company and both governments of Bulgaria and Greece expect the Greek company AVAX to mobilize and complete the gas connection within agreed deadlines.

- How do you assess the importance of the SGC Advisory Council?

- The Advisory Board of the Southern Gas Corridor is an extremely important forum for the successful implementation of the Southern Gas Corridor projects. It is also an important venue for many bilateral working meetings between the energy ministers of the countries participating in the Southern Gas Corridor, Southeast and Central Europe, high-ranking representatives of the EC, the US, Britain, and others. Since the establishment of the Southern Gas Corridor Advisory Board, the Bulgarian Minister of Energy has always participated in the meetings, which is an important sign of our country's support for the South Gas Corridor and the level of bilateral strategic energy partnership between Bulgaria and Azerbaijan. I have personally participated in the delegations of the Bulgarian Minister of Energy in all meetings of the Advisory Board of the Southern Gas Corridor since 2016 to now.

- What’s the contribution of SGC to the development of European energy systems and how can this meeting promote this?

- The Southern Gas Corridor is the fourth key Gas Corridor for Europe's natural gas supply from Azerbaijan and the Caspian region. Accordingly, the Southern Gas Corridor is crucial for the security and diversification of gas supplies to South-Eastern and Southern Europe. The fact that, the IGB pipeline connects to the TAP makes it an integral part of the Southern Gas Corridor. The project provides access to Bulgaria and the SEE region to the Southern Gas Corridor and the transmission of Azerbaijan natural gas. The meetings of the Southern Gas Corridor Advisory Board contribute to the better coordination of the projects, implemented along the Southern Gas Corridor route.