November 2021, Vol. 248, No. 11


New Financing for 2 Key EU Pipeline Projects

By Gordon Feller, P&GJ Correspondent 

The new focus of the European Union’s (EU’s) energy policy is decarbonization and sustainable energy. In November 2019, European Investment Bank (EIB) adopted a new energy lending policy. The result of this decision is that EIB will phase out the financing of traditional fossil fuel energy projects, including natural gas, by the end of 2021.   

EIB was one of the world’s key sources for gas pipeline financing. It had fund energy infrastructure with $70.3 billion (€60 billion) between 2016 and 2020. Among the final pipelines that EIB will finance are two notable projects.   

Serbia Project  

In May 2021, EIB made a significant financial commitment to a pipeline that intends to improve the security and diversification of the energy supply in Serbia and the Western Balkans. It will also help to reinforce the region’s growing integration with the EU energy market. This EIB loan complements a $58 million (€49.5 million) grant from the EU.  

EIB will finance the construction of the Serbian section of a 106-mile (171-km) natural gas interconnector between Serbia and Bulgaria. The $29.3 million (€25 million) loan will enable the diversification of Serbia’s energy supply and strengthen energy networks in South East Europe. It will also support faster integration of the region into the EU energy market, improve competition and ultimately attract more investment.  

The EIB loan complements the EU grant (from the Instrument for Pre-accession Assistance – IPA II) for this project, which is on the fourth list of Projects of Common Interest.  

“The European Investment Bank is supporting the energy transition in Serbia and around the world. As part of the EIB energy lending policy agreed in 2019, we committed to supporting a few select gas projects already under appraisal, before moving to renewables-only lending from the end of 2021.”  

That is why EIB is pleased to provide $29.3 million to back the construction of the Serbian side of this interconnector, a priority project for the EU and the Central and South Eastern Europe Energy Connectivity initiative, contributing to a strong, prosperous and developing Serbia, a goal shared within Team Europe.  

“With this investment we confirm the importance of supporting the energy transition in Serbia and the whole region,” said Lilyana Pavlova, the EIB vice president responsible for lending operations in Serbia.  

“Signing the loan agreement with the EIB, along with the previously approved EU grant, practically finalizes the financial framework for the construction of the Serbia-Bulgaria gas interconnection,” Serbian Minister of Energy Zorana Mihajlović said. “After the diversification of gas routes, Serbia’s goal is to also achieve the diversification of suppliers.”   

The Niš-Dimitrovgrad gas pipeline should start construction this year so the pipeline can become operational by 2023. This will enable Serbia to be supplied with natural gas from other suppliers – from liquefied natural gas (LNG) terminals in Greece, from the TAP and TANAP gas pipelines that are part of the Southern Gas Corridor and possibly from the Eastern Mediterranean gas pipeline – with gas from the Leviathan field (Cyprus and Israel).   

The construction of the Niš-Dimitrovgrad gas pipeline will significantly increase the energy security of not only Serbia, but the whole region, according to Mihajlović.  

“Investments in infrastructure are of great importance for Serbia, specifically in the energy sector because they contribute to the security of gas supply and the diversification of supply routes and suppliers,” said Serbian Minister of Finance Siniša Mali. “These kinds of projects normally contribute to higher economic growth, which is particularly important amid the fallout of the coronavirus pandemic.”  

Ambassador Sem Fabrizi, the head of the EU Delegation to Serbia, called the development “a big step forward” in realizing a high-priority project, which increases diversification and security of energy supply in Serbia.  

The project is seen to strengthen regional cooperation to contribute to a well-balanced socio-economic development and pursue energy transition and a healthier environment.   

To date, EIB has invested over $787.1 million (€672 million) in the energy sector in the Western Balkans. In combination with EU funds, the EU bank provides strong and long-term financial support to the countries in the region and facilitates a shift to more energy-efficient and diverse resources.   

This project helps decrease dependence on one supplier and creates a more competitive energy market. The project received JASPERS technical assistance during the preparation phase, which included the review of the EU grant application. JASPERS is the multibillion-dollar Joint Assistance to Support Projects in European Regions program of the EU.  

EIB has been active in Serbia since 1977. Since 2001, we have been providing finance to support key infrastructure projects, as well as small- and medium-sized enterprises, industry, services and local authorities. To date, 88 projects have been financed and more than $7.0 billion (€6.1 billion) invested in small and medium businesses, transport, education, healthcare and utility infrastructure.  

EIB is one of the leading international financiers in the Western Balkans. Since 2009, EIB has financed projects totaling almost $9.9 billion (€8.6 billion) in the region. Alongside its continued support for the reconstruction and upgrade of public infrastructure, since 2010 the EIB has expanded into many new areas, such as healthcare, research and development, education, and small- and medium-sized enterprises.  

Poland-Lithuania Project  

The Gas Interconnector Poland-Lithuania (GIPL) project will be the primary gas interconnection between Poland and Lithuania. One key objective that makes the project significant is that it helps to integrate the Baltic States gas market into the larger EU gas market, and it diversifies gas supply sources.   

The project will also increase the security and reliability of gas supplies. As the first high-pressure gas pipeline connecting Lithuania and Poland, the project improves energy security throughout the Eastern Baltic region by diversifying options for gas flows.   

It also helps by integrating the region with the EU natural gas markets and increasing market liquidity and competition in the region. The project addresses important challenges specific to this vulnerable region regarding gas supply, namely, through energy security of supply and market integration and liberalization. The project is $154.6 million (€132 million). EIB’s total financing amounts to $76.1 million (€65 million).  

The 316-mile (508-km) pipe runs from the Holowczyce compressor station located to the east of Warsaw in Poland, to the Jauniuniai compressor station located to the north of Vilnius, in the southeastern region of Lithuania.   

The project includes, on top of the gas transmission pipeline, the implementation of the 20-MW Gustorzyn compressor station and adaptation works to the 25-MW compressor station at Holowczyce, Poland. Additionally, there is a gas pressure reduction and cross-border gas metering station on the Lithuanian side of the Polish border.  

The GIPL project will include the construction of a 27.5-inch, high-pressure, bidirectional, underground gas transmission pipeline, with a maximum potential capacity of 85 Bcf (2.4 Bcm) annually.   

The portion inside Lithuania is 103 miles (165 km) long. It runs from the border with Poland in the Lazdijai District to the Jauniūnai compressor station located in the Širvintos District, north of Vilnius.  

The company behind the GIPL project, known in EU parlance as the project promoter, is Amber Grid Corp. – the operator of Lithuania’s natural gas transmission system. Amber Grid is in charge of transmission of natural gas to system users, and operation, maintenance and development of the natural gas transmission system.   

Amber Grid started its operations in 2013, when the fixed-term natural gas transmission license was issued to AB Amber Grid by the country’s National Control Commission for Prices and Energy. In 2015, Amber Grid was issued an open-ended gas transmission business license and was designated as the transmission system operator.  

Amber Grid CEO Nemunas Biknius said, “The favorable terms of the loan clearly indicate the EIB’s recognition of our commitment to the timely implementation of the GIPL project, which will create long-term value for the region’s gas market integration, benefiting consumers and gas market operators across the borders.”  

The gas transmission system operated by Amber Grid comprises gas transmission pipelines, gas compressor stations, gas metering and distribution stations, cathodic protection installations (protecting gas transmission pipelines from corrosion), as well as data transmission and telecommunications systems.  

Primary customers of Amber Grid are large companies (power plants, district heating plants and industrial companies) and medium-sized companies operating in Lithuania and gas supply companies. In all cases Amber Grid provides these customers with natural gas transmission services.   

Amber Grid belongs to EPSO-G, the Lithuanian state-owned energy transmission and exchange group. EPSO-G owns a 96.58% stake in Amber Grid with minority shareholders holding the remaining 3.42% stake. Amber Grid is a full member of ENTSOG – the European Network of Transmission System Operators for Gas.   

Amber Grid controls 100% of the authorized capital of GET Baltic Company. GET Baltic has a natural gas market operator’s license, and it organizes and conducts trading on a natural gas exchange in Lithuania, Latvia, Estonia and Finland.  

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