Bulgaria supports Gazprom, pinning hopes with revival of South Stream

Bulgaria has come out in support of Gazprom. The country’s Council of Ministers says it will accept Gazprom’s offer to settle the five-year-long anti-trust dispute with European Commission over the gas giant’s domination in eastern and central European countries. It may cost the Russian holding billions of euros. Gazprom agreed on cross-border gas flows to Baltic States, Poland and Bulgaria and promised to link gas price for those countries to spot prices with possible revision, as well as not to demand any compensation from Bulgaria for breaking the construction of South Stream pipeline. In addition, Gazprom has committed to give relevant customers in Hungary, Poland and Slovakia the possibility to ask for delivery of all or part of their contracted gas to entry points into the Baltic States and Bulgaria. EU has approved Gazprom’s offer, but it is waiting for the official response by EU members to adopt the final decision.

Poland and Lithuania have already rejected Gazprom’s offer. They consider it insufficient. Bulgaria is so far the only country to support Gazprom, though with some conditions. For instance, it demands improvement of arbitration mechanisms in case of a dispute and additional guarantees for fair prices.

Besides, Bulgaria is concerned over the suggestion to move the point of sale for Poland, Slovakia and Hungary to its borders. The country claims an opportunity to deliver gas to those countries. Besides, Bulgaria disagrees with the provision that enables Gazprom to move the gas supply point from the Romanian-Bulgarian border.

The last and the most painful issue for Bulgaria is that with change of the supply point, Gazprom may halt gas transit to Bulgaria via Ukraine and connect it to the Turkish Stream. For Sofia, it will be a shock, as it will lose the payment for gas transit to Turkey, Greece and Macedonia. Last year, 14.6 billion cu m of gas transit brought Bulgaria $160 million on Bulgartransgaz prices.

Besides, Gazprom’s refusal from transit via Ukraine and the Turkish Stream project will blow away Bulgaria’s dream to turn the country into gas hub in 2022. So far, that idea is the key gas project for Sofia. Bulgartransgaz estimates it at 2.4 billion EUR. Judging from the promising 10-year (2017-2026) development plan of the Bulgarian company, they stake on the Russian gas, first. Besides, they plan gas supply from local and Romanian offshore gas fields, from Southern Gas Corridor that will run from Azerbaijan to Greece and Italy and from future LNG terminals in Turkey and Greece.

As for the last three sources, Bulgaria will be receiving only 1 billion cu m of gas from Southern Gas Corridor for sure. The remaining gas supply can be guaranteed by Russia only. At present, according to Bulgartransgaz, the country almost fully depends on Gazprom. In 2016, Bulgaria consumed 3 billion cu m of gas, with Russian gas via Ukraine accounting for 97.7% of total. The remaining 72 million cu m of gas were recovered from Bulgarian fields, but recovery is falling dramatically, due to depletion of production fields. In 2012, it was higher six-fold – 443 million cu m. And there are no chances for restoration.

In the head of a pool of companies, Total energy producer and provider, France, launched deep offshore exploration for oil and gas in Block 1-21 Khan Asparukh. So far, they have found only oil showing. Meantime, Romanian gas fields in Neptun Deep Block can supply 1,5 billion cu m of gas to Bulgaria. However, OMV Petrom and Exxon Mobil have not decided yet to start exploration. Besides, construction of Bulgaria-Romania-Hungary-Austria gas pipeline has not been launched yet either.

Yet, Sofia admits that Russia is the key gas source for the hub. Besides, Bulgaria still hopes for restoration of South Stream project that was cancelled in 2014 over delays of Bulgarian authorities that were, in turn, pressed by U.S. and EU.

The decision of the Council of Ministers on the anti-trust dispute says that direct supplies from Russia along with the existing ones will just stiffen competition in the field.

In case given case, one can speak only about a direct gas pipeline from Russia which South Stream was to turn into. “Bulgaria did not issue a permission to construct South Stream pipeline,” says Aleksey Grivach, Deputy Director of the National Energy Security Foundation. “Now that project is implemented jointly with Turkey. Everything is ready for construction of the offshore section.” The expert says Turkey is more independent in its decisions: “Theoretically, Bulgaria could claim a second pipeline of Turkish Stream, the issue was not put on agenda given the permanent political crisis and the “previous experience” of South Stream project.”

As to Gazprom’s offer to settle the anti-trust dispute, Aleksey Grivach says EU is collecting feedback from all sides concerned and “will decide whether to take them into consideration or not.”