Gas demand in the Vertical Corridor countries and higher transit costs from Greece call into question the need for and competitiveness of the plan
Existing FSRUs (Floating Storage and Regasification Units) in Greece are sufficient to meet fossil gas demand in the wider region through 2040, while even under a scenario of increased gas use, only one of the four proposed new LNG terminals would be needed. At the same time, gas transit to Ukraine via the Vertical Corridor is up to 76% more expensive than alternative routes, according to a new analysis by The Green Tank.
The Vertical Corridor is a plan to interconnect the fossil gas systems of Southeastern and Central European countries, including the Western Balkans, starting from Greece. Its aim is to strengthen the capacity to transport fossil gas from Greek LNG terminals to markets across the wider region, including Ukraine and Hungary.
A new analysis by The Green Tank, titled “Vertical Corridor: Gas Demand and Economic Viability,” examines whether existing and planned LNG infrastructure in Greece is needed to meet future fossil gas demand in the region through 2040. It also assesses the economic competitiveness of gas transit via the Vertical Corridor compared with routes from other entry points to Ukraine and Hungary.
The analysis is based on two scenarios for fossil gas demand through 2040: an increased gas use scenario and a faster fossil gas phase-out scenario. The scenarios are based primarily on the National Energy and Climate Plans (NECPs) of the countries participating in the Vertical Corridor. Demand was then compared with the capacity of existing and planned LNG terminals in Greece under the hypothetical assumption that the needs of the Vertical Corridor countries are met entirely by Greek LNG terminals.
The analysis highlights the following key findings:
- No new LNG terminal is needed under the faster fossil gas phase-out scenario, while even the second existing terminal would no longer be needed by 2035.
- Even under the increased gas use scenario, only one of the four proposed new LNG terminals would be sufficient to meet regional demand through 2040.
To assess the competitiveness of the Vertical Corridor, the analysis then calculated the cost of gas transit to the two largest gas consumers in the region, Ukraine and Hungary, based on the entry and exit tariffs charged by national network operators. These costs were compared with those of routes from alternative entry points. The analysis found that:
- For Ukraine, gas transit costs via the Vertical Corridor amount to €11.2–13.1/MWh, making them 21–76% higher than the cost of alternative routes starting from Poland, Croatia, Germany and Lithuania.
- For Hungary, gas transit costs via the Vertical Corridor amount to €7.6–9.5/MWh. They are comparable only to the route via Germany and the Czech Republic, while routes via Austria and Croatia remain 26–45% less expensive.
- Based on an indicative LNG supply price of €45/MWh, transit costs via the Vertical Corridor account for 25–29% of the total delivered gas cost in Ukraine and 16.5–21% in Hungary. For alternative routes, the corresponding share ranges from 7% to 20.5%.
“The entire Vertical Corridor plan is based on an assumption of growing gas demand that is contradicted by the National Energy and Climate Plans of the countries in the region. Committing hundreds of millions of euros to new infrastructure in a shrinking market risks creating stranded assets, the cost of which consumers will ultimately have to bear,” said Stavros Gennitsaris, Industrial Policy Associate at The Green Tank.
NOTES TO EDITORS:
