In a move to reduce Eastern Europe's reliance on Russian gas, Edison SpA (EDN.MI) said Tuesday it signed an agreement to build a natural gas pipeline linking Greece to Bulgaria.
The memorandum of understanding was signed in Sofia by Edison, Italy's No. 2 utility, along with the Bulgarian Energy Holding, or BEH, and Greece's Depa, said the Milan-based company in a statement.
Earlier Tuesday, Edison Chief Executive Umberto Quadrino gave details of the agreement on the sidelines of a conference in Rome.
The pipeline, dubbed Interconnector Greece-Bulgaria, or IGB, will have an annual capacity of between 3 billion cubic meters and 5 billion cubic meters, with the supplies coming from Azerbaijan, Quadrino added.
Bulgaria is looking for alternative sources of gas to Russian supplies after a dispute in January between Moscow and Ukraine left large parts of the country shivering when the spigot was turned off. The European Union has also increasingly promoted diversification away from Russian gas in order to enhance the bloc's energy security.
IGB is expected to be completed by the end of 2012, said Edison, at a cost of EUR120 million. As part of the agreement a new company will be formed, in which BEH will own half while Edison and Depa will each hold a 25% stake.The three companies will also set up a company to market and sell the gas.
Edison's Chief Executive said he expects IGB gas supplies from the Caspian area to start from 2015.
According to Greece's Development Ministry, the IGB pipeline - a 160-kilometer link between Komotini in Greece and Stara Zagora in Bulgaria - will receive EUR45 million from E.U. funds.
Greece's Development Minister Kostis Hatzidakis said Greece and Bulgaria will also cooperate with Romania and Hungary for future natural gas pipelines and projects.
"We want to see the Greece-Bulgaria, Bulgaria-Romania and Romania-Hungary pipelines as a universal whole, as a united pipeline," Hatzidakis said in a statement after his meeting with Romania's Economy Minister Andriean Videnau.
Monday, Turkey and four E.U. countries - Austria, Hungary, Romania and Bulgaria - agreed to allow a gas pipeline, dubbed Nabucco, to transit their countries.
Nabucco is scheduled to start delivering eight billion cubic meters of gas a year in 2014, and a maximum of 31 billion cubic meters thereafter. Question marks remain over where supplies will come from for this almost EUR8 billion project, however.
At the same time Russia is changing its strategy. OAO Gazprom (GAZP.RS), together with Italy's Eni SpA (E), aim to build the South Stream gas pipeline connecting Russia to Bulgaria, via the Black Sea, bypassing Ukraine.