EU Regulatory Agency Reports on PCI Slippages

Europe’s Agency for the Cooperation of Energy Regulators (Acer) has found that many of the projects intended to improve security of supply and gas diversification are suffering from neglect by their sponsors. Its second consolidated annual report on the progress of the Projects of Common Interest (PCIs) adopted in November 2015, for the 12-month period from January 2015 to January 2016, finds that no work of any kind has been done on many projects for over a year, while their optimistic sponsors say they remain “on schedule."

Acer says PCIs "are the most important hardware links and provide a significant contribution to the objectives of European energy policy. Within this framework, projects included in the Union list of PCIs benefit from accelerated and streamlined permit granting procedures, an improved regulatory regime and – where appropriate – may obtain financial support under the Connecting Europe Facility."

Acer, which reports to the European Commission, is threatening the laggards with de-selection from the list of PCIs as defined by the EC – a complete, current list of all PCIs is on the agency's website – but the problem might lie equally with the notion of PCIs, many of which reside in a policy-maker's wish-list somewhere but have little commercial rationale in an oversupplied European gas market.

Acer's task with monitoring progress is complicated by inconsistent, inadequate or contradictory reporting, forcing it to try to eliminate double or treble counting of similar/duplicate projects. Acer also notes that there are inconsistencies with the definition of what is a project, and what is the interplay between PCIs and Ten-Year National Development Plans (TYNDP).

Acer says it is vital to define properly the interdependent, potentially competing, and competing projects, since these attributes are vital for the national regulators and Acer when assessing the consistent application of the criteria and the cost-benefit analysis across regions and the justification and the merits of future investment requests.

The lack of public financing to cover all the projects, such as funding from the Connecting Europe Facility (CEF), will also weed some PCIs out and Acer recommends that project promoters and national regulatory agencies should first try to raise cash from investors. 

Almost half of the promoters of transmission and underground gas storage (UGS) projects are undecided whether to apply for funding outside the CEF, while the other half do not plan to apply for other funding programmes. Almost a quarter of pipeline and liquefied natural gas (LNG) projects have received some kind of financial support other than from CEF. Meanwhile, no UGS project was reported to have received any kind of additional funding apart from CEF, a reflection of the fact that European gas traders and observers alike see the market as long for some years to come.

Acer's finds that “the vast majority” of the PCIs are being “pushed into the future by a year every year and the rate of project implementation is slow. In the light of the numbers of rescheduled and delayed projects, the commissioning dates indicated by many promoters appear overly optimistic."

Acer believes that the absence of any development activity for a PCI in two consecutive years – during the validity of the PCI list – should serve as an important consideration in the upcoming PCI selection procedures, and that such a project should not be considered for retaining its PCI status.

The 2015 PCI list includes 77 projects in gas, down by a quarter compared with the PCI list of 2013. Transmission continues to dominate the PCI list with 64 projects, while LNG facilities account for seven projects and UGS has six projects.

The most frequently reported reason for rescheduling is linked to the uncertain or postponed implementation of another project, to which the PCI is complementary.

Slightly more than half of the PCIs are in the priority corridor of the North-South Gas Interconnections in central eastern and southeastern Europe (“NSI East”), followed by the PCIs in the North-South Gas Interconnections in western Europe (“NSI West”). Greece hosts the highest number of PCIs with 14, followed by Romania (9), and Bulgaria, Hungary, and Poland with 8 each. This is because central and southeast Europe lack adequate infrastructure, secure gas supply and basic market integration, one of the justifications for the Southern Gas Corridor projects such as the Trans-Adriatic and Trans-Anatolian pipelines, which actually are being built on time. 

At the same time, there are projects that significantly impact 10 to 20 different countries according to the promoters’ reports, such as the improbable – or at least lengthily-delayed – Trans-Caspian Gas Pipeline (TCP), which impacts 12 EU states and six non-EU countries. The promoter is identified as W-Stream Caspian Pipeline Company and it is included in the development plan of Greece. Its status is delayed but 2020 is shown as implementation date.

William Powell    |    www.naturalgaseurope.com