Currently, the level of gasification in Southeast Europe is relatively low, with combined gas demand from Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia at less than 1 billion cubic meter per year. Gas supply comes from Russia, either directly from Gazprom or through intermediaries. Increased gas competition, resulting in increased volumes traded at lower prices, would support increased gasification in Southeast Europe. There is scope for increased competition, given the possibility that Caspian and Middle East gas could be imported to the region. Turkey currently imports pipeline gas from Russia and Iran and liquefied natural gas (LNG) from Algeria and Nigeria; it will import from Azerbaijan and later (possibly) from Turkmenistan. Over time, scope is expected for significant exports of gas from Azerbaijan, Central Asia, the Islamic Republic of Iran, Iraq, and Egypt through Turkey to Southeast and Western Europe. A number of projects are being developed to support westward exports from gas sources that would be new for Europe. Given the geography of the region, it is possible that SEE countries could benefit from these projects, through either offtake of gas or transit fees (or through both). The focus of the present study was to assess the scope for increased gasification in Southeast Europe, based on the scope for gas market development in the region.
Background Two of the key initial drivers for the study were concern for the security of the region’s gas supply and interest in examining the prospects for gas supplies that would serve as alternatives to those from Russia (particularly Caspian gas). A further major interest was in finding ways to develop the gas sector in markets that had little or no current use of gas because they lacked the needed infrastructure. The study implicitly recognized that a regional perspective on gas development is necessary because of the verylarge-scale investments needed to bring gas into the region through largecapacity pipelines. Under the auspices of the Stability Pact for Southeast Europe, an EU initiative with Southeast Europe, the governments of the nine markets plus Greece and Turkey signed the 2002 Athens Memorandum. By signing, they agreed to adopt EU Directive 2003/54/EC (the Electricity Directive) and to set up a structure to monitor the operation of the electricity market. In 2003, the signatories to the memorandum decided to extend this approach to natural gas in the framework of Directive 2003/55/EC. For that reason, another Memorandum of Understanding, covering natural gas as well as electricity, was signed in Athens in 2003. This memorandum recognized the potential benefits of increased cooperation in gas market development and gas competition, and of being part of a wider movement to deepen regional integration.
Introduction
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