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The Vertical Corridor of Natural Gas, a major strategic project for the energy security of Central and South-Eastern European countries, is facing, almost three years after its inception, despite the declared political and financial support of the European Union and the USA, significant obstacles in its implementation. For those who are not familiar with this project we have to answer the question: what is this Vertical Corridor? Well, the Vertical Corridor is an integrated system of pipelines that would allow the transportation of natural gas from Greece (through LNG terminals in Alexandroupolis) via Bulgaria and Romania to Moldova, Ukraine, Hungary and Slovakia. The aim of this energy infrastructure project is to reduce Europe’s dependence on gas from the Russian Federation, in the context of geopolitical tensions heightened after the invasion of Ukraine.
At the end of 2022, the signing of a cooperation agreement between Greece, Bulgaria, Romania and Hungary was announced, launching the initiative to build an integrated pipeline system, later called the Vertical Natural Gas Corridor. In a context marked by the energy crisis exacerbated by the conflict between Russia and Ukraine and Hungary and Slovakia’s dependence on Russian gas, eliminating dependence on Russian gas has become a strategic priority for the European Union.
This so-called “Vertical Gas Corridor” is designed to stretch more than 1,000 kilometers, with the capacity to reverse the flow of natural gas – from sources in the south (Greece) to consumption points in the north (Hungary, Slovakia, Moldova and not least Ukraine). The aim is to strengthen energy security for the countries of central and south-eastern Europe. Along with Greece, Bulgaria, Romania and Hungary, Slovakia, Moldova and Ukraine are also involved in the project, which is also being funded by the United States through USAID. Although the project was initially greeted with enthusiasm and optimistic statements from officials, it is encountering major difficulties, resembling an “urban legend”, due to geopolitical uncertainties and the fact that Europe still benefits from competitively priced Russian gas supplied through Turkey and the Turkstream pipeline.
On the Greek side, DESFA SA (operator of the Greek national gas system) and Gastrade, which transports liquefied natural gas (LNG) from the FSRU station in Alexandroupoli. The ICGB consortium, which manages the Interconnector Greece-Bulgaria (IGB) pipeline, also brings together, on an equal footing, the Bulgarian state-owned company BEH and the Greek state-owned operator DEPA, in cooperation with the Italian company Edison. In Bulgaria, the state operator Bulgartransgaz is responsible for managing the national grid, while in the other countries national gas transmission operators are involved.
A few days ahead of the 2024 Thessaloniki International Fair, representatives of the Vertical Corridor operators met (in Thessaloniki) to reaffirm the need to make optimal use of the existing infrastructure and to identify solutions to overcome bottlenecks on the Vertical Corridor route. Despite a joint declaration signed by nine companies, there is no mention of the fact that the market test carried out in July for Greece generated almost no interest – potential beneficiaries have not booked capacity for the next 15 years. Critics from various regions also point to the reluctance of gas importers, which adds further uncertainty to the progress of the project.
Despite these disappointing signals, operators believe that the realization of the Vertical Corridor remains essential, describing the initiative as of major strategic importance that outweighs short-term market fluctuations. Against this backdrop, eyes are turning to the European Commission, from which operators are seeking 50% funding through the Repower EU program to reduce dependence on Russian fossil fuels and achieve the green transition. At the end of last year, in October, gas operators from the countries involved in the project met in Budapest as part of the CESEC initiative for energy interconnection in Central and Eastern Europe to discuss the details of financing the Vertical Corridor.
Costs and budget of the Vertical Corridor works
Although the exact amount for the modernization of the transmission systems has not been officially announced, estimates of the total cost of the works are around €450 million. At the same time, there have been announcements in Bulgaria of investments of more than €300 million, suggesting that the final budget could be even higher. Within this framework, gas operators expect the European Commission to make a significant contribution to financing, reducing the costs of energy transition.
Origins and evolution of the project
The first discussions on the creation of the Vertical Natural Gas Corridor were initiated as early as 2014 by three countries: Greece, Bulgaria and Romania. Since then, the initiative has gone through many difficult moments, and the 182 km-long IGB interconnector pipeline, inaugurated in 2022, is only one completed segment of the project. In this equation, the strongest supporter of the Vertical Corridor project is Bulgaria, through state operator Bulgartransgaz. Bulgartransgaz wants this route on Bulgarian territory to become an alternative to the current Russian gas route to Western Europe, using alternative sources in the US, Qatar, Egypt and other countries.
Following the agreement in the fall of 2023 (after the Thessaloniki meeting in October), the gas operators of the states involved in the project planned that in July 2024 market tests would be carried out simultaneously among gas importing and trading companies to assess their readiness to use the envisaged additional capacities. Based on the results of these tests, a decision was to be taken on additional investment to expand connections. Thus, in a contested move, Bulgartransgaz (BTG) decided to go ahead with the construction without a market test, investing around BGN 600 million (equivalent to €306 million excluding VAT) without having signed supply contracts. Bulgartransgaz argued that as the capacity is permanent, there is no need for long-term reservation.
At the same time, the ICGB consortium, responsible for the Greek-Bulgarian pipeline, showed less interest than initially expected. One explanation was that the situation could become clearer with the commissioning of the FSRU station at Alexandroupoli, but technical problems, such as leaks in the pipeline connecting the floating platform to the land area, have delayed its operation.
Romania has halted investment in the Vertical Corridor
In Romania, the market study, conducted by Transgaz (the national gas operator), yielded negative results due to the lack of commercial interest in additional gas volumes, which led to the cancellation of the investment procedure, and the future steps to be taken by the Romanian state remain unknown. In Slovakia, the project only received attention when it joined the initiative in early 2024. However, Slovak gas operators have not yet taken concrete steps to strengthen the link with Romania. In Hungary, which still relies on Russian natural gas, there have been no signs of intense mobilization from the authorities, while Moldova and Ukraine joined the project relatively recently. Although Bulgaria has indicated its intention to start supplying these countries (Ukraine, Moldova, Slovakia, Hungary, Ukraine) after the interruption of Russian gas transit through Ukraine, these plans have remained at the stage of unfulfilled wishes. In particular, Bulgaria is the only country that is putting into practice the expansion of infrastructure and increasing the capacity of the gas transportation network. Although this requires major investment, there is a risk that the results will not pay off. Analysts draw a parallel with a similar situation regarding the contract with the Turkish company BOTAS, whereby Bulgaria booked considerable gas capacity annually, but failed to capitalize on that opportunity, resulting in high costs without actual utilization. But gas operator BTG is optimistic that the situation will change once Russian gas stops transiting through Ukraine, at which point natural gas will be redirected to Western Europe from Greece and Turkey via Bulgarian infrastructure.
In Greece, the project to develop LNG regasification terminals (to feed the Vertical Corridor) is progressing, albeit at a slower pace, and concerns about profitability persist. At a conference organized by The Economist, Maria Rita Galli (Director of DESFA) pointed out that market volatility, exacerbated by the presence of low-priced Russian gas in the Mediterranean region, makes it difficult to make long-term commitments to infrastructure projects. At the same time, the Vertical Corridor project looks capable of increasing the capacity of the Greco-Bulgarian pipeline from 3 to 5 billion cubic meters per year and Gastrade, in collaboration with Bulgartransgaz, plans to develop a second floating terminal at Alexandroupoli.
In Bulgaria, work is under way to increase transport capacity by optimizing three segments of the network: two entry points taken over from Greece (the Koulata-Siderokastro and Komotini-Stara Zagora pipelines) and an exit link at the border with Romania (Kardam-Negru Voda area). Bulgaria’s most ambitious plan is to extend the pipeline to Romania, with the aim of doubling capacity to 10 billion cubic meters a year, a project involving American and Austrian partners. However, even here, interest in market tests for capacity expansion has been surprisingly low, amid an unpredictable market environment and competitive prices for gas supplied from Turkey. Moreover, Bulgaria is planning a 50% increase in gas import capacity from Greece from January 2026, which would raise annual capacity to 8 billion cubic meters.
European Commission guidance and strategic perspectives
According to the latest discussions and meetings, the European Commission and the countries participating in the Vertical Corridor project are trying to identify sustainable solutions for the resumption of the project, aiming to finalize the initiative by 2030, at a time when the European strategy is focused on reducing dependence on Russian gas by 2027. If the project is implemented, Greece could become a real energy reference point, ensuring the transmission of gas to Ukraine, Hungary and Slovakia, notably through the Alexandroupoli LNG terminal. Thus, the Vertical Corridor would open access to new markets and stimulate economic growth and the development of far-reaching geopolitical prospects.
Three years after Russia invaded Ukraine and cut off flows through Ukrainian territory, the European Commission remains convinced of the importance of the project, insisting that solutions should be based on the use of existing infrastructure and long-term development programs, which currently allow the transit of about 10 billion cubic meters of gas, which could be expanded to 20-25 billion cubic meters annually under optimal conditions. However, a major impediment is the high level of transit fees applied by Romania and the Republic of Moldova, which significantly increases transit costs and makes the whole project economically unviable. In addition, discussions have also included the possibility of extending the interconnecting pipeline from Greece to Bulgaria from 3 to 5 billion cubic meters and the ICGB is looking for investment partners to secure sustainable financing. This increase in capacity would also help diversify supply sources, including additional LNG from Greek terminals and Caspian resources, all in a global context of geopolitical instability. At the administrative level, Brussels’ efforts are focused on a series of interventions designed to make the corridor operational, in particular by harmonizing tariffs between the various countries, so that the current differences (more notable in the case of Romania and Moldova) do not hinder the project. The European Commission has reaffirmed its intention to continue with the implementation of the “Vertical Corridor”, limiting itself to the use of the already existing gas infrastructure and the integration of other facilities that will emerge in the framework of the ten-year development programs.
In conclusion, the project aims to create an alternative gas transportation route from Greece through Bulgaria and Romania to Moldova, Ukraine, Hungary and Slovakia. However, the transit tariffs imposed by Romania and Moldova, the high costs of transportation from south to north and the massive investments needed to expand the infrastructure are the main obstacles to the project’s success. The initiative brings together gas operators from seven countries – DESFA and Gastrade from Greece, Bulgartransgaz and ICGB from Bulgaria, Transgaz from Romania, FGSZ from Hungary, Eustream from Slovakia, VMTG from Moldova and GTSOU from Ukraine – with the long-term aim of turning gas traffic into up to 25 billion cubic meters of gas annually, even though only 10 billion cubic meters are currently transported at considerable cost. In the end, Romania is proving to be both a crucial link and an obstacle in the implementation of the Vertical Corridor, due to the high transit tariffs imposed, which increase costs and delay the progress of the project. This situation affects the entire route, which is to branch further: on one side to Hungary and Slovakia, and on the other to Moldova and Ukraine.