ICGB AD

Co-financed by the Europen Union, Europen Energy Programme for Recovery European Regional Development Fund Operational Program Innovation and Competitiveness

Main activities and implementation of the Gas Interconnector Greece-Bulgaria (Project IGB)

Status – Action is in progress, all pre-construction activities are finalized, the site has been assigned for construction, actual execution is in progress.

Overall Information

The gas pipeline is 182m long and has transmission capacity of 3bcm/year with the option to come to 5bcm/year, after an upgrade through a compressor station. The total investment cost is estimated to be 240mln w/o VAT of which approximately €220 mln are capital expenses and €20 mln development costs.
The project is perceived as crucial for Bulgaria and the region due to its strategic importance for providing diversification of sources and routes of natural gas supply to Bulgaria.

Key activities and progress on main procedures:

  • On 12 September 2017 - IGB acquires a construction permit for the total pipeline track on Bulgarian territory.
  • On 8 August 2018, the Project acquires a mutual resolution on exemption from regulations related to third parties’ access, tariff rules and property severance, issued by the Bulgarian and Greek regulatory bodies and confirmed by the EU.
  • On 8 November 2018, an EC Resolution for government aid in compliance with the Guidelines for Government Aid Allocation for Environment Protection and Energy for the period 2014-2020, is issued for the IGB Project.
  • On 21 December 2018, the Project company signs a contract for a direct grant of €39ml for the IGB project from the Operational Program "Innovation and Competitiveness" 2014-2020.
  • In February 2019, a Construction Permit is issued for the Greek territory.  
  • In March 2019, ICGB finalizes the procedure for selection of an owner’s engineer for the construction of the gas Interconnector Greece - Bulgaria and subsequently a public procurement contract is concluded; on 24th of April a Contractor is appointed for construction supervision on the Interconnector Greece-Bulgaria construction on Bulgarian territory.
  • On 3 April 2019, the EC formally approves the grant of € 39mln for the IGB construction.
  • In May 2019, ICGB finalizes the public procurement procedure for IGB pipeline pipe manufacture.
  • ICGB finalizes the procedure for awarding the engineering, procurement and construction of the Interconnector Greece-Bulgaria on the 14 May 2019.
  • On 18 July 2019, the project acquires the license for independent operator of gas transmission network, thus providing the right to start the construction on Greek territory.
  • In the beginning of October 2019, the National Energy Regulators of Greece and Bulgaria issues a mutual Decision approving the IGB Project Network and Tariff Codes which positions ICGB closer to finalizing the procedure for certification as an Independent Gas Transmission Operator.  
  • On 10 October 2019, during the formal ceremony, in the presence of the Ministers of Energy of Bulgaria and of Energy and Environment of Greece, a reciprocal loan agreement is signed with the European Investment Bank for € 110mln. The loan is secured by a State guarantee issued on the basis of a signed Guarantee Agreement, concluded on 14 October 2019 in Sofia and on 17 October 2019 in Luxembourg, between the EIB and the Republic of Bulgaria, which is ratified by a law adopted by the 44th National Assembly meeting on December 6, 2019, promulgated in SG no. 99 of 2019.
  • On 19 October 2019, Gas Transmission binding agreements are signed with the traders that had booked capacity, as well as agreements with awarded contractors for production and delivery of pipes and construction of the gas pipeline. The Shareholders Agreement between BEH and IGI Poseidon is updated with which the final business plan and the gas pipeline construction budget were adopted.
  • The archeological research demanded by Bulgarian legislation is finalized, full rescue archeological excavations were executed for 27 sites, archaeological drilling to determine the thickness of the cultural layers was carried out at 10 sites and 58 sites were identified for monitoring during construction. The total amount of the contract is 2 million euros.
  • On 2 July 2020, a Law on Ratification of an Inter-government Agreement between the Republic of Bulgaria and the Hellenic Republic on the Gas Interconnector Greece-Bulgaria (Project IGB), signed in Sofia on 10 October 2019, is promulgated in the State Gazette, issue 63 2020.
  • At the end of 2020 the first tranche of the loan financing from EIB, of € 30mln, is utilized and on the 18th of January 2021 the second one is disbursed, of the same amount of € 30mln. A disbursement of € 6,4mln from the European Energy Program for Recreation grant, of the total amount of € 45mln, is also approved.
  • In November 2020, € 28.5mln are claimed for disbursement from the Operational Program "Innovation and Competitiveness" 2014-2020, Priority Axis 4, the payment of which is expected in the first quarter of 2021.
  • On 9th December 2020 the application for INGS Operation License is submitted at RAE in the Hellenic Republic;
  • On 26th January 2021 the Inter-government Agreement between the Republic of Bulgaria and the Hellenic Republic on the Gas Interconnector Greece-Bulgaria (Project IGB) is ratified by the Greek Parliament
  • On the 7th of May 2021 a Resolution № 1-Пр/2021 of the Minister of Environment and Water was issued on “The change of sites size necessitated for configuration of temporary ancillary plots for the trenchless crossing under Studen Kladenetz dam”.
  • On the 20th of April 2021 - The Transmission of Natural Gas License application was submitted to the Commission for Energy and Water Regulation.
  • On April 22, 2021, a crucial agreement was signed between ICGB and TAP, which provided the necessary pressure levels for transmission from TAP through IGB to the entry point with the transmission network of Bulgartransgaz EAD.

 

Data on construction works execution:
The Interconnector track is divided into 7 main lots, the shortest being of 9.55km length and the
longest of 71.9 km. The 106 km of the track on Bulgarian territory shall be built by automatic
welding and the rest 45km by hand welding.

Execution of Contract on linear pipe manufacture and delivery – status at 23.04.2021 :
Production: Total manufactured: 187 071m, Lot №1, 2, 3, 4 и 5 - completed.
Total delivered: 187 071m

Progress on EPC Agreement  ( Engineering, Procurement and Construction) – status at 23.04.2021:
Cleared terrain, 161 km of stringing, 129 km are welded, 88 km excavated trench and 74 km are lowered.
Activities such as manual and automatic welding continue, together with preparation of joint coating and backfilling for the lowered sections. Recultivation is envisaged after the execution of the linear part.

Status of ground facilities construction  (at 23.04.2021):
Developed detailed design and finalized orders for all ground facilities basic equipment - two gas metering stations, seven block valves and a dispatch center.
The following works are in progress to ensure the dispatch center operation: construction of temporary roads providing access to the site, geodetic survey and tracing, excavation and construction of foundations.

Deadline for completion:
The initial contracted deadline for the Gas Interconnector Greece-Bulgaria construction is 18 months from the works start date. This deadline as under the initially agreed terms of execution expires in the end of April 2021.An Annex to the EPC Agreement (Engineering, Procurement and Construction) was signed between the Contracting Entity – the Project company ICGB and the Contractor and after the respective decisions of the management body of the company and by virtue of the Annex the execution deadline is extended by 8 months and shall expire in the end of 2021.

The change in the construction deadline is justified by the measures and restrictions imposed due to the Co-VID 19 pandemic spread and their impact on the movement of personnel and equipment to carry out the construction works, as well as due to additional assessment procedure for environmental impact under the Environmental Protection Act for the crossing of the "Studen Kladenets" dam.

The extension of the public procurement contract term is necessitated by the circumstances which the parties could not have foreseen within the due diligence procedure, as well as due to legislative amendments of the definition of Construction Contract, whereas the amendment doesn’t provide for a change in other terms and conditions, including, but not limited to, its subject matter. 

The commissioning is expected to take place several months after the handover of the construction by the Contractor to the Contracting Entity, due to compliance with mandatory legal procedures on Use Permit issuance and start of gas transmission operation. Pursuant to the updated construction completion schedule and taking into account the statutory deadlines for commissioning, the latter is expected to take place no later than July 1, 2022. To set the term for commissioning the following has been taken into consideration: Construction Use Permit issuance procedure under the Spatial Planning Act, acquisition of licenses under the Energy Act, as well as some other mandatory activities as cadastral surveying, registrations, initial technical inspection and others.

For the expected new Commercial Operation Date (COD), a notification has been served to the shippers that have already booked capacity, for Force majeure within the meaning of the Gas Transmission Agreement and the approved Grid/Network Code.

 

Other challenges and difficulties faced by IGB project:

  • The Force majeure notification was delivered on March 23, 2021, and after all shippers confirmed its receipt, an application was submitted to the EWRC and the National Energy Regulator in Greece on April 13, 2021 to amend the Joint Decision to exempt the IGB project from the liability of regulated access, with which application the respective request for change of the Commercial Operation Date has been made;
  • Crossings done using the method of Horizontal Directional Drilling: While the activities on the completion of the linear part are in serious progress, the realization of the project depends also on some more complicated tasks as the HDD which should be applied at the crossing under Studen Kladenetz dam and Maritza river which is one of the most difficult process of the Project execution.  
  • Severe mountain terrain: the specific topography of the terrain, at some points, create further difficulties for the welding. Thus, due to the complexity of the terrain in the Rhodopi mountain, in some places the activities are slower, as only manual welding seams can be carried out. In the mountainous region near Makaza, on the Greek side, there is a similar need, again due to the nature of the terrain. This does not allow the use of automatic welds on these parts of the route, which requires the application of a slower manual welding process.
  • Procurement of equipment: Another challenge faced by the project is the finalization of the detailed design and the order of equipment with long lead time of delivery (valves, heaters, gas-chromatographs, measuring devices ets.) In a global pandemic, this is extremely difficult and inevitably leads to delays on the part of manufacturers and logistics companies responsible for transport.
  • Finalization of the procedure for certification as a Transmission Network Operator with the National Regulatory bodies of both countries-Bulgaria and Greece, and acquisition of a consequent EC statement.
  • A new socio-ecological management system (ESMS) elaborated especially for IGB is applied in the realization of the pipeline. The system is closely related to the project company's commitments for sustainability, environmental protection, recultivation of the interconnector route, as well as preservation of cultural and historical heritage. The first independent audit of the system has already been successfully completed, and within the project another 9 audits are planned in the various stages of implementation and operation of the pipeline.

 

The Project company and its shareholders focused their efforts on overcoming the adverse consequences as a result of the cumulative delays whereas the specific actions to be taken shall be:

  • Making a decision to change the financial conditions under the Contract for engineering, procurement and construction, respectively concluding an additional agreement, which provides more working capital to the contractor in order to meet due advance payments to equipment manufacturers and speed up deliveries;
  • Active involvement of the team of the Contracting Entity in the activities to alleviate the environmental restrictions applicable to the crossings of large water bodies, conducting the procedures under the Environmental Protection Act with resources of the Assigner in order to obtain the final statements of the competent authority.
  • Introducing procedures on renewal of necessary permits and synchronizations using the Contracting Entity’s resources;
  • Introducing policy and procedures for control on the construction site to prevent or minimize the risk of COVID-19 spread among personnel, directly involved with construction.
  • Full Contracting Entity’s commitment to the process of compensating the agricultural land owners aiming at provision of easy and quick access of the Contractor to the affected plots of lands and avoiding compensation disputes.

Despite the reduced pace of construction activities and the cumulative delay due to a combination of factors, the Greece-Bulgaria Gas Interconnection project is in an irreversible phase and according to the Contractor's forecast, the site should be handed over to the Contracting Entity by the end of 2021.

For more information:
Diana Zaykova
Action Global Communications Bulgaria
Tel.: +359 2 9803018
Mobile: +359 885 074422

Date 27/04/2021