Download Regional Gasification Study Draft Final Report: Macedonia Market

South East Europe:
Regional Gasification Study
Draft Final Report:
Macedonia Market Report
October 2007
submitted to
The World Bank, KfW,
PPIAF and ESMAP by:
Economic Consulting Associates
Penspen
Energy Institute Hrvoje Požar
Economic Consulting Associates Limited
41 Lonsdale Road, London NW6 6RA, UK
tel: +44 20 7604 4545, fax: +44 20 7604 4547
www.eca-uk.com
DFR-Macedonia 17/10/07
Contents
Contents
Acknowledgements
iii
Contacts details for further information on the study
iii
1
Physical, Demographic and Political Profile
1
2
Economy
2
3
Energy Sector
3
3.1
Energy Resources
3
3.2
Energy Usage
3
3.3
Energy Development Plans
5
4
Gas Sector
6
4.1
Policy and Legal Framework
6
4.2
Regulatory Bodies
7
4.3
Institutional Framework
7
4.4
Fuel Prices
8
4.5
EC Gas Commitments
9
4.6
City Distribution Demand Studies
9
4.7
Overall Demand for Gas
13
4.8
Current Gas Supplies
14
4.9
Anchor Loads
15
4.10
Future Gas Supply Options
16
5
Conclusion
19
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
F:\Projects\SEE Gas 244+234+222\Docs\2.DraftFinalReport\COUNTRY REPORTS\DFR-Macedonia.doc 17/10/07
i
Contents
Tables
Table 1 Potential demand
10
Table 2 Estimated capital costs
11
Table 3 Potential demand
12
Table 4 Estimated capital costs
13
Table 5 Gas transit volumes
15
Table 6 Supply options of immediate interest to Macedonia
18
Figures
Figure 1 Macedonia map
2
Figure 2 Skopje distribution map
10
Figure 3 Tetovo distribution map
12
Figure 4 Gas demand
14
Figure 5 Macedonia gas transmission
15
Figure 6 EC Ring – Macedonia
17
SEE Regional Gasification Study –Macedonia Market, October 2007
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ii
Physical, Demographic and Political Profile
Acknowledgements
This study was made possible by the generous contributions of funds from ESMAP,
PPIAF and KfW, and was overseen by staff from The World Bank and KfW.
The Public-Private Infrastructure Advisory Facility (PPIAF) is a
multi-donor technical assistance facility aimed at helping developing
countries improve the quality of their infrastructure through private
involvement. For more information on the facility see the website:
www.ppiaf.org
The Energy Sector Management Assistance Program (ESMAP) is a
global technical assistance partnership administered by the World
Bank and sponsored by bi-lateral official donors. ESMAP's mission is
to promote the of energy in poverty reduction and economic growth
in an responsible manner. For more information see the website:
www.esmap.org
KfW Entwicklungsbank (KfW development bank), on behalf of the
German government, provides funds and expertise for projects and
programmes within the scope of Financial Cooperation. The objective
of Germany’s development cooperation is to improve the economic
and social situation of people in developing countries and economies
in transition. For more information see the website:
www.kfw-entwicklungsbank.de
Contacts details for further information on the study
Franz Gerner, Senior Energy Economist
Sustainable Development, Europe and Central Asia Region
The World Bank
1818 H Street, NW
Washington, DC 20433, USA
T +1-202-473-5019
[email protected]
www.worldbank.org
Rolf Seifried, Principal Project Manager, Europe
KfW Entwicklungsbank
Palmengartenstr 5-9
60325 Frankfurt, Germany
T +49-69-7431-3755
[email protected]
www.kfw-entwicklungsbank.de
Alfred Schuch, Senior Gas Expert
Energy Community Secretariat
Am Hof 4, Level 6
Vienna 1010, Austria
T +43-1-535-2222-00
F +43-1-535-2222-11
[email protected]
www. energy-community.org
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
iii
Physical, Demographic and Political Profile
1
Physical, Demographic and Political Profile
The Republic of Macedonia, often referred to as Macedonia, is a landlocked country
on the Balkan peninsula in southeastern Europe. It is bordered by Serbia to the
north, Albania to the west, Greece to the south, and Bulgaria to the east. It was
admitted to the United Nations in 1993; however, the UN and many other
international institutions and countries use the provisional reference the former
Yugoslav Republic of Macedonia (FYROM), pending resolution of a naming dispute
with Greece.
The capital is Skopje, with 500,000 inhabitants, and there are a number of smaller
cities, notably Bitola, Kumanovo, Prilep, Tetovo, Ohrid, Veles, Štip, Kočani,
Gostivar and Strumica. It has more than 50 natural and artificial lakes and sixteen
mountains higher than 2,000 meters (6,550 ft) above sea level.
In 1991 the Former Yugoslav Republic (FYR) of Macedonia (Macedonia – hereafter)
gained independence from Yugoslavia and founded itself as a new state based on
the principles of democracy and an open market economy. These principles are
expressed in the country’s Constitution, adopted in the same year.
Macedonia is a landlocked country located in the Balkan Peninsula in south-eastern
Europe. It borders Albania to the west, Bulgaria to the east, Greece to the south and
Serbia to the north. It covers an area of 25,333 sq km and its population is around
2.05 million.
In December 2005, the country received the status of official EU candidate. In
February 2006, the country joined the Central-European Free Trade Agreement
(CEFTA) and this may have a positive impact on trade performance. The stable
growth performance at around 4 per cent per year should be sustained in the
medium term, supported by progress in EU accession process and further structural
reforms1.
1
EBRD Country Strategy for Macedonia, 2006
SEE Regional Gasification Study –Macedonia Market, October 2007
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Economy
Figure 1 Macedonia map
Source: CIA World Factbook
The Republic of Macedonia has an estimated population of 2,055,915 citizens, (July
2007) with 58% of the population living in urban areas.
2
Economy
Macedonia scores well on indices of international freedom (71 in the world in the
2007 Index of Economic Freedom). GDP is growing at a steady 4% per annum, with
GDP in 2006 at US$ 15.7 billion in current prices equating to a GDP per capita of
US$ 3,059. This is combined with a very low inflation rate of 3.2% for 2006, forecast
to fall to 2.5% during 2007.
Looking back, the country together with Montenegro, Bosnia and Herzegovina and
Kosovo belonged to the less developed regions in the former Yugoslavia. It suffered
severe economic difficulties after independence, when the Yugoslav internal market
collapsed and subsidies from Belgrade ended. In addition, it faced many of the
same problems faced by other former socialist East European countries during the
transition to a market economy. Its main land and rail exports route, through Serbia,
remains unreliable with high transit costs, thereby affecting the export of its
formerly highly profitable, early vegetables market to Germany.
The outbreak of the Yugoslav wars and the imposition of sanctions on Serbia and
Montenegro caused great damage to the Republic's economy, with Serbia
constituting 60% of its markets prior to the disintegration of Yugoslavia. When
Greece imposed a trade embargo on the Republic in 1994–95, the economy was also
affected. Some relief was afforded by the end of the Bosnian war in November 1995
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Energy Sector
and the lifting of the Greek embargo, but the Kosovo War of 1999 and the 2001
Albanian crisis caused further destabilization. Since the end of the Greek embargo,
Greece has become the most important business partner of the Republic of
Macedonia. Many Greek companies have bought former state companies in the
country, such as the oil refinery Okta, the baking company Zhito Luks, a marble
mine in Prilep, textile facilities in Bitola etc. Other key partners are Germany, Italy
and Slovenia.
3
3.1
Energy Sector
Energy Resources
The total reserves of coal in Macedonia are 941 million tons most of which (about
80 %) are proven reserves. Additionally, exploration reserves comprise about 60 %
of the total balance, approximately 82 % of existing reserves are suitable for surface
exploitation, while 18 % are strictly explored underground. Current production is at
7.2 Mt.
There are no oil and no gas resources in Macedonia. The country’s domestic
demand for petroleum products is relatively stable at around 800 000-1 000 000 tons
per year.
The possibility for the theoretical production of hydro-potential into electric energy
is estimated to be much higher than its annual exploitation. The total hydroelectric
potential in Macedonia, which is technically suitable for exploration, is
6,436 GWh/yr. This energy can be best utilized by building hydropower plants with
a total capacity of 1,620 MW installed plants.
3.2
Energy Usage
Macedonia produces no natural gas, importing all its requirements. Total primary
energy consumption in Macedonia in 2006 was 115.78 TJ. Almost fifty percent of the
country’s primary energy demand is covered by imports of, mostly, oil and coal (oil
38 %, coal 3 %, gas 2 %, electrical energy 6 %)1.
Coal: The total reserves of coal are estimated at 941 million tons, and it is mostly
lignite. Macedonia has two power plants operating on lignite.2
Oil. There is no oil resource in Macedonia. At present, natural gas competes only
against heavy fuel oil in the industrial sector. The refinery OKTA, under the
management of Hellenic Petroleum, has the capacity to process 2.5m tons of crude
oil per year. Currently the processing rate of crude oil is about 0.8m tons per year.
1
http://www.eva.ac.at/enercee/mk/demand.htm
2
B. Donevsky: A survey of Energy Situation in Macedonia
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Energy Sector
The production rate is dictated by the domestic demand (plus small amounts of
exports) for heavy fuel oil. High penetration rates of natural gas would reduce the
share of heavy fuel oil in the domestic market and undermine the position of OKTA
Hydropower: The possibility for hydropower production in the country is
estimated as much higher (6.4 TWh per annum) than its annual production (24%) by
12 hydropower stations. Consumption from hydropower currently amounts to 1.4
TWh per annum.
Of domestic consumption, 46.7% of residential demand for energy was met with
electricity. This reflects heavy reliance on electricity based heating.
According to the expansion plans, natural gas is to be introduced in the residential
and commercial sectors. In this case natural gas will compete mainly against diesel,
firewood and electricity in the residential sector and against electricity and diesel in
the commercial sector. Expansion of the natural gas distribution system in areas of
Skopje covered by district heating is not considered a priority for the time being.
ERC has adopted a tariff methodology for the natural gas sector, applying the
incentive method (price caps/revenue caps) in price and tariff design for:
Natural gas transmission: revenue caps; sliding scale for the initial
period of price control to decrease the risk of high profit/loss due to
inadequate data;
Natural gas distribution: price caps, additional encouragement to reduce
technical loss.
The natural gas prices are varying and the only consumers are the companies from
industrial sector. These prices are not publicly available because the small use of the
gas line system is a result of the undefined ownership rights between the
Government of Macedonia and Makpetrol.
There are claims that the low consumption rate of natural gas is explained by the
fact that consumers in Macedonia paid for the most expensive gas in the regionaround $300 per thousand cubic meters.1
The main reason is however that the existing gas pipeline is used at only 10% of its
capacity (annual capacity is 800,000 million cubic meters of gas, while annual gas
consumption is only 80,000 million cubic meters). This situation is the result of the
unsolved- ownership dispute between the state and Makpetrol. The long lasting
dispute seems to be entering its final stage: the legal assessors declared the state as a
dominant owner. Now the final decision of the court is to be made. Many hope that
finally the main obstacle on the way of the realisation of the ambitious expansion
plan that has been proposed by the public gas utility GAMA.
1
http://www.invest-in-macedonia.com; M. Mihajloska “Mass gasification ahead for Macedonia”, 2006
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Energy Sector
Those informed about the situation in this ownership dispute, say that powerful
Makpetrol will not easily give up majority ownership. In the field, however, there is
a different story1. Besides the construction of industrial gas-supplying ring around
the city (Skopje) that is under way, several pilot projects are promoted for
gasification of appropriate urban settlements. The companies simply can’t wait any
longer for this bureaucratic procedure to finish, they are starting gas businesses,
actually preparing to introduce it as a dominant energy substance in production
plants. So businessmen from the region of Tetovo and Gostivar have already
revealed that they are interested in installing gas rings in this region. The local
government of Kumanovo has gone furthest with these intentions, as they have
already started construction of gas infrastructure, and during the first year of the
realisation of the project they invested a million euros. The owner of the gas
pipeline network will be Kumanovo-Gas Company.
Allegedly, Gazprom, together with Russian electric power giant RAO UES, is ready
to buy Negotino thermal power plant, which is the spare capacity of electric power
company of Macedonia, because it works on expensive fuel oil, and to turn it into a
gas energy plant. According to unofficial sources, Gazprom has already registered a
firm in Macedonia. The serious investment plans of this company are also
confirmed by the Russian ambassador to Skopje, Agaron Asatur.
3.3
Energy Development Plans
Gas is used only in industry, and for District Heating (Skopje). A gasification project
to supply industry around Skopje is under way. The national action plan related to
Macedonia’s obligations in the framework of the UN FCCC foresees the gasification
of urban residential areas in Skopje in order to replace electricity as an energy
source for heating.
Introduction of natural gas was among the first priorities of the Government after
the establishment of the new state. The policy objectives were to diversify the
energy supply system and to provide a clean and efficient form of energy for
consumers. Priority was given to gas supply to industrial consumers in the Skopje
area.
In 2004, the government adopted the “Energy Efficiency Strategy until 2020”. It
focuses on the implementation of technologies to provide for efficient energy use,
and provides guidance for the energy efficiency policy in the Republic of
Macedonia.
In the residential sector, the following measures should be implemented:
consumption based billing, extension of district heating systems, insulation of
windows, reflection shields for radiators, and thermostatic valves. Where possible,
the shift from electricity to natural gas for heating should be achieved, or otherwise
insulation of the building shell implemented.
1
http://www.invest-in-macedonia.com; M. Mihajloska “Mass gasification ahead for Macedonia”, 2006
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Gas Sector
Industry with an energy intensity 5 times higher than industry in England or
France, the measures target at substitution of electric engines and drives, avoiding
the conversion of electricity to heat, saving measures at ligthing systems, air
compressors, thermal insulation and improved capacity factor.
Reforms and National Development Strategy have focused on the following
objectives:
Speed up privatization, restructure the economy and the energy sector
and open up to foreign investment
Accelerate growth approx. 5.7 % p.a.
Shift from heavy to light industry
Promote energy conservation and efficiency
Shift from electricity to gas heating
Energy subsidies to be eliminated and prices to reflect costs.
4
4.1
Gas Sector
Policy and Legal Framework
Macedonia made some progress in developing the regulatory field for natural gas.
Energy Law (adopted in 1997, with amendments in 2000), saw new amendments in
2005.It is now better suited to regulate the natural gas sector in Macedonia. A
framework is now provided for the establishment of gas market in line with the EU
Gas Directive. The amendment stipulates:
Obligation for legal and account unbundling of transmission from
distribution and supply activities;
threshold for eligible customers (TPP - gas fired and customers with
consumption of 5 or 10 mcm);
third party access and public service obligations rights, obligations and
relations for participants in the gas market.
Reforms in the gas sector include:
Separation of public services from the commercial activities;
Separation of the ownership of the transport infrastructure from the
transport operation and transport;
system operation of natural gas as a public service;
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Gas Sector
Formation of an independent company for transport services under
regulated conditions;
Granting concessions for gasification, distribution and supply of tariff
consumers for a specified territory and determined period for investors.
The new Energy Law was published in the Official Gazette and entered into force in
May 2006. It replaces the Law on Energy of 1997 which had been amended several
times, the last time in 2005.
4.2
Regulatory Bodies
Energy Regulatory Commission of the Republic of Macedonia (ERC)1 was
established in July 2003. In the natural gas sector it is responsible for licensing,
tariffs, grid codes, security of supply, monitoring and developing secondary
legislation.
4.3
Institutional Framework
The Ministry of Economy is a key player in the running of reform of Macedonia’s
energy sector and institutional framework.
One of the bodies of the Ministry of Economy is the Sector for Energy and Energy
Efficiency. Its main obligations are:
to conduct energy policy of the state through the programs, measures
and other activities,
to create and develop laws, sub-laws, and other legal documents on
energy,
to initiate, join and implement the policy for energy sector restructuring,
to create and develop concession acts, licences, approvals and
agreements for any energy activity and exploitation,
to establish tariff system and other acts as the regulator of the energy
prices.
In July 2005, the Law of the Republic of Macedonia was adopted in order to
establish an Energy Agency. The Agency will be independent in its work, and
financially accountable to the Ministry of Economy. The defined role of the Agency
is to initiate, coordinate, study and prepare appropriate documents, together with
domestic and foreign specialized companies and experts, and to suggest concrete
solutions and activities to the Government, through the Ministry of Economy.
1
http://www.erc.org.mk/ (under construction)
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Gas Sector
The import, transport and gas supply activities are carried out by a private trade
company Makpetrol- Skopje. Makpetrol is the largest distributor of oil products in
Macedonia. It is a joint stock company with almost 100% of its shares under private
ownership. As mentioned above, Makpetrol used to be a public company and the
Government assigned to it the realisation of the gas transmission line project.
During the construction of the transmission line, Makpetrol was privatised. The
majority of shares were given to the personnel and the management. Since then,
Makpetrol has operated as a private company. It is a key player in the oil and gas
market with significant political influence.
GAMA is Macedonia’s public gas utility. It was established in 1997 to represent the
state in the gas sector after the privatisation of Makpetrol. It is staffed by about 20
people but its activities are limited. Due to a lack of financial resources, GAMA is
not involved in gas trading and supply to consumers. Makpetrol carries out all
these activities.
Other market actors are:
The power company Electrostopanstvo na Makedonija (ESM) - not a
natural gas consumer but it could be a significant potential client in the
future.
The Skopje District Heating Company Toplificacija, currently operating
one gas-fired plant (HOB) while all other plants consume heavy fuel oil.
The DH Company is expected to become one of the most significant
natural gas consumers. Besides use of gas in the rest of the DH plants,
Toplificacija plans to invest in a gas-fired CHP plant in Skopje.
The Skopje Refinery OKTA, which could be considered a competitor for
the natural gas market. In 1999, the Greek consortium EL.P.ET, which
also undertook the management of the refinery, bought 54% of OKTA.
4.4
Fuel Prices
The latest fuel prices available are for the end of 2006.
Prices for oil products, December 2006 (incl. VAT, in euro/liter)
Lead-free motor gasoline – LFMG 95
Diesel fuel – DF EURO
0,83
Extra light fuel oil - LUEL
0,65
0,99
The natural gas prices for industrial sector are varying. These prices are not
available for public purpose because the small use of the gas line system is a result
of the undefined ownership rights between the Government of Macedonia and
MAKPETROL.
The biggest consumers of natural gas in 2006 were:
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Gas Sector
AD ELEM ENERGETIKA (14 mmcm/yr),
CELICANA (12 mmcm/yr),
MITAL STILL-Skopje (12 mmcm/yr),
MAKSTIL AD Skopje (14 mmcm/yr), TOPLIFIKACIJA-Skopje (7.8
Mmn³/yr),
PIVARA-Skopje (4 mmcm/yr).
The price of propane gas and butane gas is 0.94 euro/kg as the bottle,
and 0.46 euro/litre as the vehicle fuel.
Heat Prices
According to the methodology for heat price determination the Independent
Regulation Commission is announcing heat prices depending to the movement of
crude oil price on world market. The price for production, transportation and
distribution of heating energy in December 2006 were: 39 EURO/MWh for
householders paying on the basis of measurement of consumption, 0.46 Euro/m²
for flat rate households (12 months payments), 1.58 euro/m² for services sector and
72 Euro/kW for industrial facilities and spaces.
4.5
EC Gas Commitments
Macedonia is a Party to the Treaty Establishing the Energy Community and will
cover the following:
Macedonia has started to develop a detailed energy framework. In
parallel, a new Energy Law has been recently approved. However, both
primary and secondary legislation still needs development
The Regulator plays a substantial role in the market relations in the
energy sector. In fact, most of the concrete demands as indicated in the
energy acquis, are not to be found in legislative acts, but in rulings of the
Regulator
Macedonia has implemented partially the acquis on environment
4.6
City Distribution Demand Studies
Skopje
Skopje is a city with a population of approximately 467,257. It is made up of a
residential and commercial area of around 8.55 km2 and 0.45 km2 Industrial. This
gives a population density of 54,650per km2. Figure 2 shows a map of Skopje.
SEE Regional Gasification Study –Macedonia Market, October 2007
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Gas Sector
Figure 2 Skopje distribution map
Data provided shows the total number of households to be 137,367 estimated to
comprise 103,025 apartments and 34,342 houses. Based upon an annual estimated
consumption of 15,240 kWh and peak consumption of 3m3/hr per residential
customer, residential demand is estimated at 2,093,473 MWh per annum, with a
peak hour demand of 309,076 m3/hr.
Using the sectoral demand assumptions set out above results in the following
potential demand estimates as shown in Table 1.
Table 1 Potential demand
Sector
Annual demand
Peak hour demand
MWh
Cu.m/hr
Residential
2,093,473
309,076
Commercial
872,280
38,493
Industrial
523,368
19,247
Total
3,489,122
366,816
The EC Ring is routed to pass in close proximity to the outskirts of Skopje. It is
suggested that gas would be supplied to the city from an off-take station supplying
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Gas Sector
gas directly into a City Gate Station located to the east of the city. Gas would be
metered and the pressure reduced to 16bar for supply to a HP steel distribution
system comprising 13.9 km of 30in diameter and 5 km of 12in diameter pipelines.
The high-pressure distribution system would supply the 4 bar medium pressure
network, which would in turn supply customers.
Estimated capital costs for the gas supply system are shown in Table 2.
Table 2 Estimated capital costs
Item
Total Cost
US$ million
EC Ring Connection
5.0
Spur Line
0
City Gate Station
5.0
HP Distribution System (16bar Steel)
14.8
MP Distribution System (4bar PE)
27.5
Residential Connections
111.5
Residential Installations
32.6
Industrial and Commercial Connections
15.4
Total
211.8
Tetovo
Tetovo is a city with a population of approximately 50,376. It is made up of a
Residential and Commercial area of around 4.0 km2 and 0.5 km2 Industrial. This
gives a population density of 12,439 per km2. Figure 3 shows a map of Tetovo.
SEE Regional Gasification Study –Macedonia Market, October 2007
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Gas Sector
Figure 3 Tetovo distribution map
Data provided shows a total number of households to be 10,967 estimated to
comprise 8,225 apartments and 2,742 houses. Based upon an annual estimated
consumption of 15,240 kWh and peak consumption of 3m3/hr per residential
customer, residential demand is estimated at 167,137 MWh per annum, with a peak
hour demand of 24,676m3/hr.
Using the sectoral demand assumptions set out above results in the following
potential demand estimates as shown in Table 3.
Table 3 Potential demand
Sector
Annual demand
Peak hour demand
MWh
Cu.m/hr
Residential
167,137
24,676
Commercial
69,640
3,073
Industrial
41,784
1,537
Total
278,562
29,286
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Gas Sector
It is suggested that gas would be supplied to the city from the proposed EC Ring via
a 20 / 8in. diameter spur line, which will transport gas to a City Gate Station located
to the south east of the city. Gas would be metered and the pressure reduced to
16bar for supply to a 4.8 km / 8in diameter high-pressure steel distribution system.
The high-pressure distribution system would supply the 4 bar medium pressure
network, which would in turn supply customers.
Estimated capital costs for the gas supply system are shown in Table 4.
Table 4 Estimated capital costs
Item
Total Cost
US$ million
EC Ring Connection
5.0
Spur Line
4.1
City Gate Station
3.0
HP Distribution System (16bar Steel)
1.2
MP Distribution System (4bar PE)
3.2
Residential Connections
8.9
Residential Installations
2.6
Industrial and Commercial Connections
1.2
Total
29.2
4.7
Overall Demand for Gas
Figure 4 shows historical trends in gas natural gas consumption (same as import for
2005) in Macedonia and projections of the future gas demand potential.
SEE Regional Gasification Study –Macedonia Market, October 2007
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Gas Sector
Figure 4 Gas demand
Bcm/y
Total demand for
Macedonia
1.4
1.2
1.0
0.8
1.2
0.6
1.1
0.4
0.8
0.7
0.2
0.0
0.1
2005
4.8
2010
2015
2020
2025
Current Gas Supplies
With no gas production facilities all of Macedonia’s gas is imported. Currently,
MakPetrol (a private Macedonian company) transits gas from Bulgaria, via Kriva
Palanka to Skopje. The pipeline approximately has a capacity of 0.8 bcm. The
diameter of the pipeline is 20 inches, and it has a maximum operational pressure of
40bar. The average age of the pipeline system is 13 years.
In addition, gas may also be supplied to Skopje via the Pristina - Skopje pipeline.
The Kosovan side of the pipeline is damaged, but investigations1 have shown
Macedonian side to be in full working order up to its rated pressure of 25 bar.
Figure 5 shows a diagram of the main transmission pipeline network.
1
Energy Sector Technical Assistance Project (ESTAP) Kosovo
SEE Regional Gasification Study –Macedonia Market, October 2007
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Gas Sector
Figure 5 Macedonia gas transmission
Table 5 shows the transit volumes for the consumers as well as the maximum
capacity.
Table 5 Gas transit volumes
Country
Volume (bcm/y)
Capacity (bcm/y)
Kosovo (Import)
0
0.21
Bulgaria (Import)
0.081
0.82
4.9
Anchor Loads
The major anchor load is a 500 MW plant in Macedonia. A new gas fired power
station is planned in Skopje. Consequently, gas uptake in Macedonia is expected to
increase considerably3.
1
Source: www.bulgargaz.com/content.php?show=pages&id=24
2
Energy Regulatory Commission Macedonia
3
http://www.nbuv.gov.ua/new/2005/makedon/about.html
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Gas Sector
4.10
Future Gas Supply Options
In 1999, Macedonia's state oil and gas company MAKPETROL agreed to finance a
new import gas pipeline from nearby Bulgaria. Regionally, the new TransMacedonian gas pipeline may be extended to Albania in due course. Expected to
cost over US$100 million by the time it reaches full capacity, this is potentially the
largest energy infrastructure project in Macedonia to date.
There have also been investments announced in a gas pipeline network towards
Negotino and Bitolj, the western part of Macedonia. This is a joint project by
Russian Itera and Toplifikacija of Skopje, which is worth about 120 million euros.
The construction of the gas plant is of multifunctional importance for the country,
because it will lead to a significant increase in gas consumption. Henceforth, they
expect that the other municipalities and companies will also start gasification
sooner, following the positive example. Gas is becoming a more and more desirable
energy substance, because of the expected growth in the price of electricity after the
privatization of Macedonia Electric Distribution to Austrian company EVN.1.
A number of activities are planed with regard to the gas infrastructure within
Macedonia. These include:
Additional Import Capacity - In order to secure the supply of gas to the
power generation plant in Bitola an additional import pipeline from
Bulgaria is planned. In addition to serving the power plant, the pipeline
would also transit gas to Greece and Albania. The capacity of the
pipeline is 2bcm/y.
Extension of the Kriva Palanka - Skopje pipeline: The extension of this
pipeline will allow gasification of towns in Western Macedonia and will
also provide additional transit capacity to Albania. The capacity of the
pipeline is 0.3bcm/y.
Additionally, a new gas fired power station is planned in Skopje. Consequently, gas
uptake in Macedonia is expected to increase considerably.
It should be noted that the Government of Macedonia and Makpetrol are currently
in dispute over the ownership of the Kriva Palanka - Skopje pipeline. This is
expected to delay any development of the gas infrastructure in Macedonia.
Figure 6 shows the EC Ring from the perspective of Macedonia. Skopje,
Macedonia’s main city is well placed along the main EC Ring route.
1
: Energy Observer, 2006
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
16
Gas Sector
Figure 6 EC Ring – Macedonia
The transmission connections options for Macedonia include a connection to the
Greek system in the south, reinforcement of the connection with the Bulgarian
system in the east, a connection with Albania in the west and a connection via
Kosovo in the north. A pipeline providing connections with Albania and Kosovo
should be sized at constant diameter along its length with a view to it subsequently
being connected from Pristina to Nis and being extended from Albania northwards
through Montenegro, forming the Energy Community gas transmission ring
described in detail elsewhere in this report.
The supply possibilities are summarised in Table 6.
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
17
Gas Sector
Table 6 Supply options of immediate interest to Macedonia
Transmission
connection
Contract
source/s
Delivery and physical
flows
Physical source and swaps
Bulgarian
border
Contract for
increased
Russian gas
supplies
Via Bulgaria as with
present contracts.1
Swap LNG at Revithoussa for
Russian gas contracted to
Greece on the Bulgarian
system and pay Bulgarian exit
fees and Macedonia
transmission fees. Yields
transmission cost savings in
Greece and Bulgaria.
Bulgarian
border
Contract for
LNG via
Revithoussa
Backhaul through Greek
system. Physical
molecules flow to
Athens. Russian gas
flows to FYR of
Macedonia via Bulgaria.
Swap LNG at Revithoussa for
Russian gas contracted to
Greece on the Bulgarian
system and pay Bulgarian exit
fees and Macedonia
transmission fees. Yields
transmission cost savings in
Greece and Bulgaria.
Greek border
Contract for
LNG via
Revithoussa
Backhaul through Greek
system. Physical
molecules flow to
Athens. Russian gas
flows to FYR of
Macedonia through the
Greek transmission
system.
Swap LNG delivered at
Revithoussa for Russian gas
contracted to Greece at the
Greece-Bulgaria border and
pay Greek transmission fees.
Yields transmission cost
savings in Greece.
Greek border
Contract for
Algerian gas
via TransMed
Backhaul through
Greece-Italy Poseidon
pipeline or TAP and the
Greek system. Physical
molecules flow up into
Italian system. Russian
and/or Caspian gas
flows though the Greek
system. Reduces GreeceItaly flows.
Swap Algerian gas at Mazara
del Vallo for Caspian gas at
the Greece-FYR of Macedonia
border (or at the TurkeyGreece border and pay Greek
transmission fees). Yields
transmission cost savings on
Poseidon and maybe some
transmission cost savings in
Greece.
Unusually in the region, Macedonia contracts for Russian gas at the Bulgarian-Macedonian border,
not at Ukraine’s western border, so Gazexport pays the transmission fees to the Macedonian border.
1
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
18
Conclusion
Transmission
connection
Contract
source/s
Delivery and physical
flows
Physical source and swaps
Albanian and
Bulgarian or
Greek borders
Contract for
Algerian gas
via TransMed
Backhaul as above.
Russian and/or Caspian
gas flows to Macedonia
either though the Greek
system or via Bulgaria
reducing Greece-Italy
flows on Poseidon or
TAP.
Swap Algerian gas at Mazara
del Vallo for Caspian gas at
the Greek border (or at the
Turkey-Greece border and
pay the Greek transmission
fees) or for Russian gas at the
Bulgarian border. Yields
transmission cost savings on
Poseidon. Maybe some
transmission cost savings in
Greece or Bulgaria.
UNMiK
border
Transit gas
delivered via
the Greek
system to
Kosovo
Via Skopje or via Nis
Direct contracting for offtake
of Russian or Caspian gas or
backhaul LNG or Algerian gas
through Greece and swapped
for Caspian or Russian gas.
5
Conclusion
A Development of the natural gas sector has been a common policy objective for all
governments of Macedonia since the country’s establishment in 1991. This is
expressed in various official documents. Indicatively the National Environmental
Action Plan foresees a “long term plan for expansion of the natural gas system and
substitution of oil with natural gas in thermal power generation and district
heating”.
The gas expansion plans elaborated cover all major cities of the country and foresee
interconnections with the existing or future gas systems of the neighbouring
countries.
The ownership problem of the existing gas system will, hopefully, be de-jure,
resolved soon. However, market penetration of natural gas in the FYR of
Macedonia depends on the economic development and participation of the whole
energy sector. Viability improves under the scenario in which:
energy industry and in particular district heating and a new CHP plant
become gas consumers;
prices being set at a sufficiently high level to recover the investment
costs.
The main reform themes in the Macedonian energy market continue to be:
Continued harmonisation of the energy policy according to the
European Union Directives
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
19
Conclusion
Series of additional policy measures for the development of a complete
legislative and regulatory framework and for the promotion of natural
gas use.
Development of regional market. To realise the ambitious expansion
that covers all major cities and power plants of the country and foresees
interconnections with all neighbouring countries, considerably higher
gas prices would be necessary to cover the costs of the investment.
In the event that the expansion plan is realised, the capacity of the
existing transmission line would not be adequate to cover future
demand. In this case, additional interconnections would be required.
The specific regulatory framework for the gas sector needs to be
developed, and policy measures for the promotion of natural gas
penetration in the energy system are needed, but the State resources to
support these measures are very limited.
SEE Regional Gasification Study –Macedonia Market, October 2007
Economic Consulting Associates, Penspen, EIHP
20