May 25, 2020 (01:29)

Prospects for strengthening Slovakia’s position at the natural gas markets of Central and Eastern Europe

The new government of Slovakia, headed by Prime Minister Igor Matovič, follows the energy policy of the previous government of Peter Pellegrini, which is aimed at increasing the role of the Slovak Republic as a transit country by increasing the level of interconnection of the Slovak gas transportation system (GTS) with regional gas European markets. Such a policy of Slovakia aims to make the most of its geopolitical position and is characterized by attempts to establish pragmatic relations with all key players at the European gas market, primarily with Russia, which remains the main supplier of natural gas to the countries of Central and Eastern Europe.


According to government officials and representatives of the national gas transportation company of Slovakia, Eustream a.s., Slovakia justifies implementation of gas interconnection projects with Poland and Hungary, noting that their expediency will improve energy security of the region by creating alternative routes for hydrocarbon supply, and is supported in this regard by the European Commission. Financial assistance from EU funds can reach 40% of the cost of such projects. At the same time, Slovakia pursues a consistent policy of deepening cooperation with Russia to provide alternative routes for transporting Russian gas to European consumers, primarily using Russian gas transportation projects that directly connect Russia and the EU without the involvement of third countries.


On February 26, 2020, during visit of P. Pellegrini to Moscow, at a meeting with Russian Prime Minister Mikhail Mishustin, the Slovak side reaffirmed its readiness to transport Russian gas from Nord Stream 2 through Baumgarten, the CEGH Austrian gas hub, to Hungary and Italy, as well as surplus gas from the Turkish Stream from Hungary towards Austria and the Czech Republic. Previously, such opportunities were discussed by P. Pellegrini during the visit of the Slovak delegation to the Russian Federation in early June 2019.


On May 11, 2020, the representative of the new government of Slovakia Richard Sulík, Minister of Economy, after a meeting with Péter Szijjárto, Minister of Foreign Affairs and Trade of Hungary, confirmed the continuation of the project on expansion of transport capacity of Slovak-Hungarian Gas Interconnector. According to the memorandum signed on February 21, 2020 by Peter Žiga, former Minister of Economy of the Slovak Republic and Péter Szijjárto, the surplus gas to be received by Hungary from the southern gas direction (Turkish Stream, South Stream, Trans-Balkan Gas Pipeline) can be transported through Slovak gas transportation system in the western (towards Austria, the Czech Republic) or eastern (towards Ukraine) directions.


The project on expansion of the transport capabilities of the Slovak-Hungarian Gas Interconnector envisages an increase in the volume of transportation of 110.7 km through gas pipeline between the Slovak township, Veľké Zlievce, bordering with Hungary and township of Vecsés near Budapest, from 4.5 billion cubic meters of gas to 5.3 billion cubic meters of gas per year from Slovakia to Hungary and from 1.8 billion cubic meters of gas to 5.3 billion cubic meters of gas per year in direction from Hungary to Slovakia. The Slovak-Hungarian Gas Interconnector was put into operation in 2015. The cost of its construction amounted to EUR 170 million, EUR 30 million of which were provided by the European Commission, EUR 21 million were invested by the Slovak Republic.

Eustream, the Slovak gas transmission system operator, is the main player in the implementation of the gas transportation strategy of the government of the Slovak Republic. According to Pavol Kubík, the company’s spokesman, in the future, the Slovak-Hungarian Gas Interconnector can transport natural gas coming from the Turkish Stream, the Caspian and Black Sea regions in the western direction.


Eustream, the largest taxpayer in Slovakia, is 49% owned by Daniel Křetínský, the Czech businessman, who, in addition to the Slovak GTS operator (51% of which is owned by the Slovak Ministry of Energy), occupies the position of CEO and is majority owner of EPH, an international energy holding company, and owns a number of other important assets of energy sector of the Slovak Republic and other countries of Central and Eastern Europe.


Energeticky a Prumyslovy Holding a.s. (EPH) owns 66% of shares of the Slovak energy company, Slovenské elektrárne a.s. – operator of Slovak NPPs, HPPs, TPPs; 49% of shares of Slovensky plynarensky priemysel Infrastructure a.s. through which Daniel Křetínský has an influence on the system of underground gas storage and gas distribution networks in Slovakia. He is the Chairman of the Supervisory Board of Nafta a.s., which is 69% owned by EPH and is engaged in oil and gas exploration, oil and gas production in Eastern Europe, and is the operator of  Slovak UGS. Nafta plays a key role in ensuring the security of Russian gas supplies to Central and Eastern European countries through its 30 TW (2.74 billion cubic meters) underground storage facilities.


Another important issue in the context of Slovakia’s strategic interests as a transit country is the gas interconnector project with Poland, which is scheduled to be commissioned in 2021. The project has been actively implemented on behalf of Slovakia since 2018, and the Polish state company GAS-SYSTEM S.A. began its part of construction works in September 2019.


The Poland-Slovakia gas interconnector project provides for transportation of 5.7 billion cubic meters of gas per year to Poland and 4.7 billion cubic meters of gas per year to Slovakia. The route of the gas pipeline runs between the Slovak township of Veľké Kapušany, with 106 km on Slovak territory and Polish township of Strachocina, with 58 km on Polish territory. The cost of the project is estimated at EUR 270 million, 40% of which (EUR 107.7 million) was invested by the European Commission, and EUR 138 million  are planned to be spent by Slovakia.


In the result of implementation of this project, the Slovak side expects to gain access to the Norwegian natural gas market with a proposal to transport it in the southern direction in the interests of countries of Central and Eastern Europe from October 2022 through the Baltic Pipe gas pipeline (which is being constructed between Poland and Denmark, with a capacity of 10 billion cubic meters per year). An alternative source of loading of transport capacities of the Slovak GTS is the Polish LNG terminal in township of Świnoujście, which can be accessed in 2021.


At present, Slovakia continues to play a key role in ensuring the transit of Russian gas to countries of Central and Western Europe. The transit contract signed in 2009 between Slovakia’s Eustream and Russia’s Gazprom Export expires in 2028. The long-standing cooperation between Gazprom and Eustream helps to find new options for cooperation, one of which, despite the delay in the implementation of Russia’s gas transmission projects Nord Stream 2 and Turkish Stream, remains the use of the Slovak GTS to transport Russian gas from the northern and southern direction to countries of Central and Eastern Europe.

Slovakia is interested in making the most of its transit capacity and diversifying its sources of revenue from natural gas transportation. To this end, Slovakia seeks to increase integration into regional European gas markets, implementing joint projects with neighboring EU member states. In the medium term, having achieved a high level of interconnection of the national GTS with neighboring countries and natural gas supply lines, Slovakia can offer gas transportation services in all directions (northern-southern-eastern-western) through its territory, while diversifying its sources of origin.



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